I recently got back into options trading and decided to open a small account just for learning and experimenting. Threw in $1,000 to start, not with the goal of making big money, but to really focus on understanding execution, risk, and strategy.
I’ve been studying options for about three years now, and I want to use this account to work on scalping simple call and put setups. The idea is to grow it to $2,500 through discipline and smart plays, not chasing gains.
If you were starting fresh with just $1,000 and only trading options, how would you approach it? What strategies or tools helped you the most when starting small?
Posted by eher271
4 Comments
Do you know what kind of options you’re planning to work with?
I can tell you one thing, chasing premiums on volatile/trendy/non-fundamentally sound stocks will maybe work a couple of times, but it won’t work forever. I’ve made that mistake and ended up bag holding.
Slow and steady with boring names and moderate premiums is the way to grow overtime.
That’s too small to wheel your way to success. You limit yourself to $9 stocks or just yolo on long calls. Options for accounts under $100k can’t wait out market shifts and limits stocks you can pick from.
I BTO/STC options as day trades. Things I’d say that will stand you in good stead and will scale:
At $1k you’ll have to play a very specific game:
Buy into momentum so you cover your fees at least. Wait for the dip, get in there, that’s support, and from the moment you open a position get ready to sell it. It’s predatory out there right now.
Literally be ready to do a limit sell at your current price if it stalls before you hit 15-20%. Making 20% per trade accumulates fast, and the old days of every trade running 100%+ are long gone.
If you make it to 20% and your trade is running but looks like it’s going higher, stick a market stop in at say 20%, then track your trade and get ready to limit sell as it starts to slow. If you have more than one contract consider selling one at 20% profit so you’ve already banked some profit if it turns.
If it’s running and you’re comfortable then let it run. You’ll already know that once it stalls then premiums can deflate fast. You can take yourself out of the loop a little if watching for an exit point fries you by moving that stop up as the price rises.
The big one with $1k: Don’t take a loss, don’t let it go negative. I see so many ‘strategies’ where people buy and sit there with contracts going -30% and more, on the notion that it’ll turn around. Sometimes it does. Equally often these days it doesn’t. The 20% market stop plus slippage should get you out positive or flat at worst.
This market has been tired of late (tho they just turned the QE tap back on) and even though the macro trend is up the micro trend intraday isn’t always, often quite the opposite.
$1k means you don’t have the luxury of enough capital to wait and find out. Once your trade goes negative you’re a passenger. -10% comes up fast, and you don’t get many goes at that. So better to get out without taking a loss and wait for the next opportunity than to hold into deep red on a hope.
Finally…There’s always another trade. Wait and be selective with what you pick.
Good luck.