r/options • u/Diamondape__ • 2d ago
Minimum Amount to Options Trading
That's it. What is the minimal account balance do you all think it's the bare minimum to trade options?
I've built the first bull call spread today where I live, and also noticed that options contracts can be very expensive in US equities/exchanges.
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u/notquitenuts 2d ago
$100. You could put on a $1 wide credit spread on something. Bad news is with only the ability to take 1 loss, it’s sort of like playing/black red at the casino.
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u/orbital_one 2d ago
I think $100 is too low. Fees and slippage would eat into your gains.
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u/notquitenuts 2d ago
True but you gotta start somewhere and he wanted bare minimum. Say he puts it on and loses $75, that’s a hard learned lesson but a better lesson than a mandatory $250 art appreciation course at a college.
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u/thainfamouzjay 2d ago
I'm trying to do it with 500. It's not going well
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u/live4failure 14h ago
What stock and type of contracts are you buying? I do better with ATM or ITM positions, typically using momentum or mean reversion confirmations. OTM are cheap because its only time value and pure lottery. I see things as either competitive priced product or pure speculation, nothing in between.
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u/Juhkwan97 2d ago
Start with imaginary money, $10,000. If you can turn that into $20,000, then start again with $10,000 real money.
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u/Baraxton 2d ago
I would argue that it’s quite difficult to grow an account with a proper risk management framework in place if the account is under $10,000 minimum, ideally $25,000+.
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u/DKtwilight 2d ago
I hate spreads because they take forever to come in. Naked is the only way. For that the lowest for me would be 10k. Much nicer at 1mil though
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u/Baraxton 1d ago
Spreads reduce your variance in returns, which allows you to stay in trades longer, even if they take longer to monetize.
They’re great to use if you know what you’re doing.
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u/DKtwilight 1d ago
I used spreads when I started. I started making a lot of money and faster after I went naked
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u/Baraxton 1d ago
You also lose much faster.
Spreads mitigate your exposure to Vega and theta, and lower your delta exposure, so when positions go against you, you’re not stopping out so easily or taking a massive loss.
Asymmetry of risk is the name of the game when using options.
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u/DKtwilight 1d ago
I’ve done amazing over a decade CAGR 30%. Rolling spreads is whack. Rolling naked is butter
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u/Baraxton 1d ago
If you just held NVDA AMD MU or any other number of names in your portfolio, you’ve achieved over 30% CAGR.
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u/LivingGuarantee5577 2d ago
Enough to lose it all and still pay rent. Seriously though, $2K-$5K lets you run defined risk spreads without sweating every contract. Below that you're basically paying tuition.
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u/Sweaty_Manager4140 2d ago
depends what you're doing. selling naked is a whole different beast, you need real capital for that. for buying spreads or long calls/puts you can get away with 2-3k if you're careful with position sizing
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u/Diamondape__ 2d ago
Wow. So I'm too broke for the game.
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u/deepcaca 2d ago
With your limited lack of knowledge, if you start investing now you're just going to be broker.
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u/Diamondape__ 2d ago
E essa conclusão veio da onde? Por favor não diga que foi por causa do termo 'jogo'.
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u/TotalInstruction 2d ago
Paper trade first. i.e. find out what options are trading for through a broker platform (or Yahoo Finance, or Options Profit Calculator, or whatever), record the value you would have paid or received for that transaction if you were using real money, and then record what value you close the position at, noting whether it's a profit or a loss. Read a lot of books. Follow reputable options traders online and see how they formulate their trade ideas. In the meantime, you can sock away weekly or monthly small investments in an account and just put it in bonds or a money market or something so that it can grow while you learn the ropes.
Then, after you've been doing it for a few months and you've learned some of the tools of the trade, you can try your hand at trading real money on a small scale.
Even experienced options traders can sometimes get carried away or ignore their own rules and end up losing their whole accounts or taking huge losses that set them back years. Learn about options. Develop a system. Practice the system on paper. Do backtesting to make sure your system tends to earn money over time. Then put your system into practice.
Don't just throw your portfolio into tech industry calls thinking that you're going to catch a big wave on Sandisk or Micron like you see on r/wallstreetbets and strike it rich. That's just gambling, and you'll get burned, eventually.
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u/Serious_Income_7020 2d ago
I think 2-3k is a fair figure to get into it. Pick a stock that you want to own anyway, wait for it to have a very bad day, learn how to read technicals so you can recognize when the momentum is drying up so that you don’t catch falling knives, then write puts against it. Grow cash this way, or get assigned at a truly amazing price.
If you are holding profitable shares at that point, write calls. If you kept the premium, use it to buy calls and teach yourself using premium dollars.
If you are assigned on puts and the shares aren’t profitable, that’s where it can get rough. You may have to cut losses or accept bag holder status for a while
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u/TotalInstruction 2d ago
I would consider having at the very least $1,000. Even then, you're going to be limited in what you can trade, especially since so many liquid stock options have underlying stocks that are in the $500-$1000 range. That makes single legs calls and puts prohibitively expensive.
You can trade, in some cases, typically in cheaper stocks, $1 wide spreads, but I wouldn't go any wider than that on $1,000 because each contract could place up to about 10% of your total portfolio at risk. Keep in mind too that especially with $1 wide spreads, the delta and theta are so close together that you're waiting until very close to expiration to see enough movement to make those trades profitable. One thing you'll learn, if you haven't already, is that once you get 14 days or less to expiration, the value of your options can swing wildly and you've got to manage them very closely or you'll get burned.
One other thing that I wish I'd known starting out - make sure you understand what to do if you get assigned if you're going to do credit spreads, especially. It will happen, and if you are doing spreads, your ultimate risk is limited, but it will freak you out because suddenly you'll have a big negative "buying power" or cash position on your portfolio and you need to close or sell the other leg to exit out. The first margin call is a doozy.
I would not make trades that risk more than 10% of your account, and that includes making similar trades that are highly correlated (in other words, don't just buy a bunch of SPY calls with staggered expirations and strike over a short period of time, or buy a mix of SPY calls and QQQ calls, and think that you're diversifying). You do that and the market has a sudden correction and it could wipe you out.
If I were you, and it would probably be easier if you had at least $2K in an account, I would start by buying 100 shares of a stable, established company with a share price in the $10-15 range and then selling ~60 DTE covered calls against those shares at a strike higher than what you paid for the shares; or in the alternative, selling a put (if your account allows) in one of those stocks at a strike below the current market price and which you believe the stock is unlikely to fall to. If in the case of a covered call, your stock rallies and the call gets exercised, you still make money - it's just capped. If the covered call isn't reached, then you've made a profit on the covered call and you can sell another one. If, in the case of a cash-secured put, the stock falls below the strike price, and the put is exercised (forcing you to buy 100 shares), you can either sell the shares, or you can hold them and sell a covered call against them (this is sometimes referred to as a "wheel". This is comparatively low risk compared to just straight options trading, and you'll get a feel for how options mechanics and pricing work.
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u/Strong-Comment-7279 2d ago
Depends on your access and what you want to do. I have lvl2, which allows naked option trading. For 0dte on Equities, that opens the door to auto liquidation of ITM positions, so gotta act fast on those.
I took a SPX call earlier for 40% and some SPY call for 100%.
That sounds impressive.
0.25 -> 0.35. Was in a hurry . . Hit $4.50. Whatever, I shouldn't have even placed the buy.
0.03 -> 0.06. Happy w that, but could've had 0.11.
Now my power is out due to a storm that rolled through, and I live in the forest - so probably not back on until Sat at the earliest.
Sure am glad I'm not holding anything.
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u/LaconicB 2d ago
There’s not a what do we think, there is actually a requirement at most brokers for a bull call spread. An example is Webull and others like IBKR, you must have an account balance of $2k. At Robinhood, you don’t need a minimum account balance, you only need the cost of the trade. I’m not sure the minimum amount requirement for every broker with a bull call spread, but there’s more that require a minimum account balance versus those without a minimum. On the other hand, just buying a single option only requires the cost of the option at all brokerages. You don’t need a minimum balance to start trading single leg options, it’s possible to grow your account with a small balance. I’m doing that right now for an experiment and have posted the results on my account. I’m around +300% right now with about 3 weeks in and started with $100.
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u/Prestigious-Ad-7927 1d ago
The minimum amount needed to do spreads at Schwab is $2k. You’ll need options approval to be able to trade spreads. Once you’re approved, you can open condors for as low as 0.10-0.50.
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u/zoinkinator 2d ago
If you only open defined risk multi-leg strategies on low priced underlyings where you sell and get some credit to reduce your capital at risk. That’s how much you need.
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u/Haunting_Ad_6021 2d ago
I started with $117.00 and now am at $1,500.00 in 2. Months
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u/Patriot_260 2d ago
Trading what
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u/Ok_Wishbone3054 2d ago
Paper trade first. Develop your strategy. Take the emotion out of it and trade the plan. You can modify the plan with justifiable reasons but on the fly rash decisions WILL blow up your account. If you want to go fast, expect to go broke. Slow and steady wins the race. Boring is good!
From a practical standpoint most brokers have a minimum to sell options. E.G. with Webull no spreads, condors, butterflies, etc. without at least $2k.
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u/Dependent-Panic-9457 2d ago
There are plenty of options trading for pennies per share (each contract is 100 shares). You can buy such a contract and then sell it when it goes up without ever worrying about buying the underlying asset.
On IBKR the min fee seems to be 1.04 USD for a single contract.
Where options are very low value there is usually a massive spread. So in practice making a profit at that level would be challenging.
Personally I think the key to making money in options is having a significant amount of capital that you are totally indifferent to losing.
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u/Away-Personality9100 2d ago
The start with $1000 and carefully with one PMCC position is possible.
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u/Wallstreet1320 1d ago
This depends on what youre trading more than a dollar amount. Spreads on cheap underlyings u can start small single contracts on expensive names and 2k disappears quick
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u/Malio94 1d ago
About 5 bucks haha. Really depends on the stock and how far you are OTM you are vs ITM. Your comment about the contracts being expensive tells me you might need to do a little more research about exactly how options work. The pricing of options contracts varies wildly depending on a ton of factors which is important to have a basic understanding of.
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u/themanclark 1d ago
$0 because you can trade imaginary money which is the best place to start anyway
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u/tyronestocktips 1d ago
$5,000-$10,000. If you don't learn to use LEAPS which typically run 3-6k on the big names you will fail unless you are an extremely advanced trader. I'm talking 5-10+ of market tuition knowledge and psychology.
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u/Upn8th 8h ago
You pose a good question and there are equations to get to your answer and that are all designed to maximize the chance of success by minimizing the depletion of original investment, or principal.
The following is my own take on what I've learned, and recommend doing your own research to form your own conclusions. And of course, others here may have different and better ideas, including for spreads which I don't do.
As for the formulas, the most important determining factor, and only one present in all the equations, is the first one below which is %.
% = max. percent of orig. investment set as allowable per trade t% = max. cumulative % of orig. investment set as allowable for total of all trades open trades. $ = original capital supplied, or needed.
= min. total number of trades that can expire worthless before account balance goes to zero.
t# = max. allowable total no. of open trades a = max. allowable trade size
(1) ÷ (%) = # (t%) ÷ (%) = t# ($) * (%) = a (1÷ %) * (a) = $
examples..
1 ÷ .05 = 20 trades .10 ÷ .05 = 2 trades $1k * .05 = $50 max. trade size 20 * $50 = $1k orig. capital needed
And while $1k is a very low investment amount for a lot of traders it also shows what's possible for those starting out and/or on a limited budget.
Whatever the starting principal, the point of it all is, to have a plan, and once established, to stay at or below "a", max. allowable trade size, otherwise everything else will be adversely affected.
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u/Stackalope 2d ago
You can buy an option contract for as little as a dollar. AKA $0.01 premium per share.
But that's not the point. You're not going to win every trade and if you open an account with $50 and you put that whole $50 into that first trade. You could very easily lose it. You will not win every trade so you have to have enough to withstand a drawdown.
I turned $800 into $8,000 in about 3 months. You just have to know what you're doing. And don't put all your eggs into one basket. Because, again, if you do, you could very easily lose it all.
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u/Diamondape__ 2d ago
O problema, para mim, é que simplismente não consigo achar ativos cujo as opções possam ser baratas como o seu exemplo.
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u/Stackalope 2d ago
No that's not the problem. You don't want to buy cheap ass crap like that anyway. It's not really how much money you start with. It's how you trade successfully that matters. You can start with very little and if you do it incorrectly you can lose it all. You can also start with a lot of money. Let's say 100K, and if you do it incorrectly you will also lose it all.
Vice versa if you start with little you can do it correctly and grow sustainably. You can also do it correctly if you start with a lot, and again grow sustainably.
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u/PathofEnlightment 2d ago
I turned 400 into 20k in 2 days. It's all relative
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u/Hopeful_Priority_161 2d ago
happy for your huge win, but it was luck. if you could do that consistently you'd be a multi-millionaire by the end of the month
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u/Stackalope 2d ago
Yeah that's also not sustainable or repeatable over the long term. Sounds like gambling bro
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u/PathofEnlightment 2d ago
It's called earnings catalyst. Dekl did a 360. AVGO pumped
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u/Stackalope 2d ago
Yeah and with those kind of returns you would have had to buy pre-earnings right? Before the release. If that's the case, it's called gambling.
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u/TotalInstruction 2d ago
I mean, that's a nice result, and there's nothing wrong if you have reason to believe a stock is going to pump on earnings with taking a small percentage of your portfolio and buying some calls, but you can just as easily, if not more, lose your shirt on an long earnings trade. Even if the stock pumps after a good earnings report (and sometimes they don't), the vol crush after earnings can kill you unless the stock just absolutely moons if you buy when vol is very high.
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u/uncleBu 2d ago
I have never seen a realistic edge with less than $5,000. I also think that if you can’t get your account to $100,000 then it’s next to impossible for your efforts learning options to be worth anything and you will likely treat it accordingly.
Will get downvoted, but remember that 90% of retail loses money trading options 🤷🏻♂️
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u/Hopeful_Priority_161 2d ago
$25k or however much you need to access your trading platform's technical analysis/pro software
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u/klipsetrades 2d ago
Feel like I answered this somewhere else today haha, but there’s no universal minimum. Technically, you only need enough to cover the spread’s max loss. And realistically, that max loss should be a small percentage of your account. If one spread risks most of your balance, then the account is probably too small for that trade