- October 16, 2015
- Posted by: CoachMike
- Categories: Options Trading, Stock Trading, Swing Trading, Trading Article
One of the biggest issues facing newer traders interested in options trading, is the lack of trading capital.
We sent a survey to traders and asked why they were for not registering for one of our upcoming Options training webinars.
Towards the top of that list of responses was the feeling that their account size isn’t big enough to trade options.
In fact, during a recent live stream, one user commented they didn’t have $25K and left the room.
Let me be clear – if you want to trade options, you do not need a large account size.
Check Your Non-Essential Spending
People are programmed to think trading options requires a large account size. This couldn’t be any further from the truth.
To show an example of this, I will cover 5 option trades that we have taken over the last month that have required less than $300 of capital per trade.
Before we get to those trades, I want you to think about something while you read the rest of this article.
Think about what your budget looks like and about your spending habits to compare what else you spend $300 on throughout the month. I’m not talking about the energy bills or the mortgage here. I’m talking about money that is spent on extras.
For example, looking at my own budget I know I spend $300 on TV/internet and one date night with the wife (not to mention a few rounds of golf and the new University of Michigan football gear that I had to have for this season).
This list could go on and on. Think about your own situation and we will revisit this in a bit.
Small Trading Accounts Welcome
After seeing the results of the survey we sent out to traders, I decided to take a look back at my trade journal to see how many option trades were taken in the last month with less than $300 of risk per trade.
The list is actually quite long!
While I won’t take a ton of your time walking you through all of them, let’s take a quick peek at 5 examples. I think you will notice that these trades are on very popular markets that most traders look at on a daily basis.
5 Option Trades for Under $300
SPY Long Trade 10/1
SPY is an ETF that tracks the S&P 500. I love trading this product because it has a ton of volume each day and it’s also a fraction of the price of SPX. This means I can get in and out easily and with far less capital.
- On 10/1 we had a long trade setup on our Active Swing Trader chart (see below)
- once it triggered in we decided to buy the October 193.5 call option for $2.56 or $256 per contract.
- This gave us control of 100 shares of SPY at $193.50 until October expiration.
We needed this trade to go to the upside and that’s exactly what happened. Once our target was hit we sold our call options for $4.44. This gave us $188 of profit or a 73% return.
Not too shabby for a trade that we are in and out off in less than a week.
QQQ Long Trade 10/2
QQQ is an ETF that tracks the Nasdaq. Like SPY this ETF is very active, making it very easy to get in and out of trades. The options are also inexpensive as well.
- On 10/2 we had a long trade setup on our Active Swing Trader chart (See below).
- When it hit our entry point we went in and bought the October 101.5 call option for $2.51 or $251 per contract.
Once the trade hit our target on the chart we sold out of our long calls for $4.10. This gave us $159 of profit or a 63% return. Again, not too bad for a trade that we were in for only 2 days.
XLE Long Trade 10/2
XLE is an energy ETF that we have traded for all of 2015. It’s a great product because it’s a slower moving ETF. This makes it ideal for us to trade when we don’t have all day to look at charts. It also gives us exposure to the volatile world of energy trading.
- On 10/2 we triggered into a long trade on our Active Swing Trader chart (see below).
- We bought the October 61.5 call option for $2.05 or $205 per contract.
Once we hit full target on our chart we sold out of our calls for $3.70 which gave us $165 of profit or an 80% return.
C Short trade 9/18
The financial stocks are often times big market leaders and one of the names that we trade is Citigroup. Back in September we actually had a short trade setup on our Active Swing Trader chart, which had us looking to play a move to the downside (see below).
- Bought the October 52.5 put option for $1.98 or $198 per contract.
- We hit the target on our chart 6 days later and sold out of our put options for $3.90.
- This gave us $192 of profit or a 97% return.
I’ll take that return from holding a trade 6 days anytime.
EWZ Short trade 9/18
EWZ is an ETF that tracks the markets in Brazil. With all the activity in global markets these days, I think it’s important to have some stocks/ETF’s that allow you to take advantage of those markets. EWZ is a name that we have traded for the last few years with really nice results.
- Back in late September we had a short setup print on our Active Swing Trader chart which had us looking to play a move to the downside (see below).
- We bought the October 24 put option for $1.78 or $178 per contract.
- We hit full target on our charts a few days later and sold our put options for $4.00.
This gave us a $222 profit or a 125% return. Not a bad return for being in the trade for less than 5 days.
Do You Have $300 You Can Use For Trading
So those were 5 trades taken in the last month that required less than $300 of capital per trade. In fact, a few of those trades took less than $200 of capital per trade!
I want you to think back to our budget exercise earlier.
Did you think of things that you spend money on each month that added up to $300? I’m sure it didn’t take long. Now think about taking that $300 and putting it to work for you.
Instead of spending that $300 on golf or a dinner date, you are giving yourself the potential for a nice little bonus each month. You start taking some of that capital and putting it to work for you by trading options and after a few months you will have a nice bonus to spend on those other budget items.
Key To Wealth Building
The key to building wealth is to have ways where your money is working for you. Most people think that in order to do this it requires a large sum of money.
I just showed you 5 examples of trades that took less than $300 to take and resulted in between 60-125% profits.
This is potentially hundreds of dollars of profit that you can continue to build on over time. Start to add up some of the profits listed above over a few months or even years and it gets exciting.
What if you get to the point 6 months down the road where you are taking these trades with 2-3 contracts?
I think you can do the math.
That is an impressive bump in your monthly income.
Bottom line is this, don’t get fooled into thinking options take a ton of money and time to be successful with. Sure, it’s like anything else that is new. It will have a learning curve.
However, when you start talking about ways that you can get your money working for you, this is a perfect place to start.
In fact I’ll make it a no brainer.
I’ll give you free access to one of our favorite systems.
Just click on the link below and you will have access to our custom indicators that give us exact entry and exit points.
Hey Coach Mike..thanks for the post..I’ve recently been interested in trading options and I think I could do well. I want to get started with a small account like you mention but the only thing holding me back is….don’t I need enough capital to cover the cost if the contract I sell gets exercised by the buyer?
Hello, is this “Mastery System” still valid/up to date?
What exchange or site can I trade options where it won’t inhibit me to have only 300 dollars to play with? I thought I needed at least 25k in an account in order to be a day trader? Thank you in advance for clarification.
Mike – how about just selling puts, and if you are assigned – then covered calls? doesn’t take a ton of money – you can do this with some of good low priced but dependable stocks and generate consistent monthly income.
Great and informative post! Ironically I want to start trading options with $300 to start, this post gave me the confidence to do so now. Going to slowly 100x my account. All it’s going to take is discipline
I would like to speak with Mike, or whoever can answer some questions for me about Options trading. I have a $5K account with TOS.