Position Limit

A position limit is a cap on how many options contracts on the same underlying stock or index a single trader (or group of accounts working together) is allowed to hold at once. It applies to options — puts and calls — not to shares of stock.

The key idea is "same side of the market." Some option positions behave similarly even though they look different: being long calls (you bought the right to buy the stock) and being short puts (you sold the right for someone else to sell you the stock) both profit if the stock rises, so they count together toward one limit. Likewise, long puts and short calls both benefit from the stock falling, so they're grouped on the other side. Exchanges add up your contracts on each side separately and check that neither total exceeds the allowed limit for that underlying.

The limit itself is set per underlying by the options exchanges (and reviewed by regulators), and it varies a lot from one stock to another — a heavily traded, large-cap name will typically allow far more contracts than a thinly traded small-cap. These numbers are adjusted periodically, so a figure that was correct a year ago may not be correct today.

What trips people up is thinking the limit is about risk exposure in dollars, or about one specific option strategy. It isn't. It's a raw contract count based on market direction exposure, aggregated across every account the exchange considers related to you — including accounts at different brokers if they're deemed to be acting together. A trader can be well within limits on a single strategy but breach them once related accounts or offsetting-looking positions are combined.