lystn

Hey everyone, Kirk here again and welcome back to the daily call. On today’s call, we’re going to talk about option strategies for small accounts. Again, this is a big topic that a lot of people have I guess challenges with, is choosing the right option strategies or the best option strategies for small accounts. I can tell you that I think the standard here is that it has to be for a small account, it has to be a defined risk strategy. Most of the time, if you’re trading under $25,000 which I consider to be a small account, then you want to start trading with defined-risk positions, meaning credit spreads, iron condors, iron butterflies. You can also trade debit spreads if you want to. That’s a directional option-buying strategy. But when we’re talking purely about option selling, it’s credit spreads, iron condors and iron butterflies which effectively are one in the same. They’re all basically cousins or related to one another. An iron condor is just two credit spreads. An iron butterfly is just two credit spreads. If you master those credit spreads, you should do very well with a small account. Now, the thing I’ll just mention about small accounts and briefly talk about this… You don’t need to really hit this over the head anymore. But with small accounts, you have to realize that your account is going to grow small, a little bit slower than what you might typically see with a larger account. I’m not talking about percentagewise. I’m talking about total dollar wise. A lot of people when they get started, they want to make say $500, but making $500 may not be realistic with your account size. If you’re starting with say $3,000, $500 in a single year is a pretty big return. What you don’t want to do is you don’t want to get pigeonholed into always thinking about the total dollar return that you’re going to generate with a small account. You want to kind of get your feet wet and get started and get consistent with your trading before you really start focusing on the total dollar amount. Again, $500 is a 16% return on a $3,000 account. You may not hit that the first year. You may be at $300 or $400. But if you’re always shooting for like say… I always get people for some weird reason that say like they want to make $500 a month with a $3,000 account. I’m like, “$500 a month ends up being $6,000 a year.” You’re saying you want to basically double your account in one year. That’s totally unrealistic. If you have a small account, stick to the numbers, stick to the math, realize that you’re not going to quit your job with a small account right away, but it does set the foundation for being able to trade successfully later. I’ve always said, “If you can’t successfully trade a small account, adding more zeros to your account balance does you no good.” In fact, it probably is going to do you harm because if you can’t get a consistent framework down with a small account and you can’t be consistent and persistent enough to make trades actively and high probability and manage your trades, you can’t do that with a small account. Adding more zeros to your account balance just means that you might end up losing more money. It’s okay to start with a small account. In fact, I suggest that for a lot of people. But you have to start active with these credit spreads, iron condors and iron butterflies. That’s really what you want to do to continuously start actively trading your account and growing your account balance. Hopefully that helps answer the question. As always, if you guys have anything or need any help, let me know. Until next time, happy trading!