#47 - How Much Money Do You Need To Start Trading Options?
Hey everyone, Kirk here again from optionalpha.com and welcome back to the daily call. On today’s daily call, we’re going to answer the question – “How much money do you need to start trading options?” This is actually very simple, so I’ll simply answer the question right now and then we’ll talk about it. I think to start trading options, you should at least start with somewhere between $3,000 and $5,000. I do not believe that you can really successfully do anything with under that. If you have less than $3,000 or $5,000, then I think you should sell some stuff around your house, get a part-time job, do some online work for somebody. There’s a bunch of different places where you can just like do this project-based work with whatever skills that you have, generate a little bit of extra cash to really start. Now, even with like $3,000 to $5,000… I always give that range because look, it just means you should have a little bit more than a couple of thousand dollars. But even with like $3,000 to $5,000, I think that you obviously have to just be realistic with what you can generate with that account. With $3,000 to $5,000, you’re still only going to be able to make a couple of trades a month. You’re not going to be able to trade every single day and that’s okay. You have to get the ball rolling someplace. That just means that your timeline is going to be longer to grow your account because you don’t have the ability to basically turn more trades through your system and your process. Now, it doesn’t mean that you shouldn’t do it by any stretch. You definitely should start doing it now versus just blindly throwing $3,000 to $5,000 into the market, especially at the insane high valuations that we see in the stock market right now. But I think that you can definitely start with that amount of money and start very slowly growing your account. Obviously, some of the best strategies that you want to use are things like credit spreads, iron condors, iron butterflies. All really good strategies for a small account, though you do want to limit the number of trades that you do because you want to reduce that commission exposure that you might have in your account as you get started. One way that you can reduce commissions by the way, either negotiate with broker. You can just call them up and reduce them down. I think everyone can easily get to about a dollar per contract overall with no ticket charge. If you’re paying more than that, then you definitely want to check out a different broker. One that we suggest for newbies and a broker that will be over too in the future here once I get some new portfolio Beta-weighting stuff added to the website is going to be Tastyworks. You can go to optionalpha.com/tastyworks and they do have $1 standard commissions with $0 closing commissions which is really good stuff. Again, hopefully that answers the question of how much money do you need to start trading options. Like I said, I think you can start with $3,000 to $5,000. You’re not going to quit your job overnight on that, so be realistic about it, but it is a place that you can start trading and start slowly generating those numbers of trades that you need to make to eventually see success. As always, hopefully you guys enjoy this. Until next time, happy trading!
