What are the best ways for scaling your options trading? Naresh Reddy from New Jersey, USA, worked for 20 years in IT before he took the big leap to become a professional options trader. Today, he manages a $10M options trading hedge fund. In this video, he walks us through how he did it.

Watch Naresh’ tips for scaling your options trading

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From engineer to hedge fund manager

In the interview, Naresh Reddy details his remarkable journey from a tech career to running a successful hedge fund. Starting as a buy-and-hold investor, he discovered options trading in 2017, initially losing six figures over the first couple of years. A pivotal moment came when he accidentally sold a call option, revealing the power of the sell side. This mistake shifted his approach, leading to consistent profits and the confidence to eventually quit his job and launch his fund.

• You may also like this video: What it takes to trade options full-time

Key lessons for scaling your options trading

1. Start with conviction and consistency

Naresh emphasizes that scaling begins with self-belief and a proven track record. Before increasing position sizes, traders must demonstrate consistent profitability with a single strategy. He considers his early losses (over six figures) as “tuition” for mastering the market.

2. Master one strategy before expanding

Many traders jump between strategies, but Naresh advises deep specialization:
“Focus on one strategy—whether it’s iron condors, put selling, or butterflies—and understand every nuance before adding others.”
He spent years refining his approach, tracking performance, and adjusting variables like expiration dates and stop-loss rules.

3. Risk management: The 2% daily rule

One of Naresh’s strictest rules is never risking more than 2% of capital in a single day. This prevents emotional decisions and catastrophic losses. He compares trading discipline to poker:
“If you can’t fold a strong hand when the odds turn, you’re not a disciplined player.”

4. Scale gradually to avoid psychological pitfalls

A common mistake is rapidly increasing position sizes after a few wins. Naresh warns:
“Trading 5 lots vs. 50 lots is psychologically different. Scale slowly to train your brain for bigger swings.”
He suggests preset thresholds (e.g., “After earning $X, I’ll add one more contract”).

5. Track and analyze every trade

Naresh maintains detailed logs of his trades, including:

• Entry/exit reasoning
• Profit/loss outcomes
• Market conditions
  This data helps refine strategies and avoid repeating mistakes.

6. Mentorship accelerates growth

Having mentors shortened Naresh’s learning curve. He recommends:

• Finding traders with proven long-term success
• Discussing trades weekly to identify blind spots
• Prioritizing psychology over strategy (e.g., handling losses)

How Naresh built his hedge fund

After two years of consistent returns, Naresh took the leap:

• Proved profitability with personal capital.
• Raised funds from trusted networks (many were poker friends who understood risk).
• Automated strategies to remove emotional bias.
  His fund now runs eight systematic strategies, primarily short-term option selling with strict stop-losses.

Final tips for scaling your options trading

• Think in percentages, not dollars (e.g., a 10% loss on 30Khurtsmorethanon30Khurtsmorethanon1M).
• Develop a non-trading hobby (Naresh plays poker daily to reset mentally).
• Read trading psychology books (Trading in the Zone by Mark Douglas is his top pick).

Books recommended in this video

Mark Douglas: Trading in the Zone

Morgan Housel: The Psychology of Money