Options Trading For Beginners 2022: 3 Books In 1: Crash Course On Day Trading, Swing Trading And Short Selling Options by Will Weiser

Options Trading For Beginners 2022: 3 Books In 1: Crash Course On Day Trading, Swing Trading And Short Selling Options by Will Weiser

Chapter 1 Small Account Options Trading Tips &
Considerations
In this chapter I’m going to be talking about trading Options
and smaller Options trading accounts and when I say
smaller Options trading accounts, typically I’m going to be
referring to an account with 2500 to 5000 dollars in the
account. Keep in mind that you'll need at least 2000 dollars
at any brokerage firm to open a margin account and if you
don't have a margin account you're going to be severely
limited with the Option strategies that you can trade in the
first place and since we are limited in a small Options
trading account as it is, it's going to be even more difficult
without a margin account so I would recommend having at
least 2 000 dollars in a margin account so that you can have
full access to Options trading privileges. I trade with tasty
works and with a two thousand dollar deposit you can apply
for a margin account with full Options trading privileges but
at other brokerage firms you may have tiered access -
meaning that depending on the tier of privileges that you
have, you'll have access to a small basket of Option
strategies and once you unlock the next tier you'll unlock
more Option strategies and finally with the highest tier you'll
have the ability to trade basically any Option strategy that
you want so long as you have the appropriate amount of
money in your account to cover the margin requirement.
Trading Options in a small trading account is very difficult
because since you have a limited amount of money it's very
difficult to trade a small portion of your account since you
can only really get so small with the Option strategies that
you're trading. For example if you have twenty five hundred
dollars in a margin account if you put on a position with five
hundred dollars of lost potential, that represents twenty
percent of your account in risk and obviously that's a very
large position, given that you could potentially lose twenty
percent of your account if that trade were to realize the
maximum loss potential of five hundred dollars.
Unfortunately it's very difficult to risk just five to ten percent
of a small Options trading account because if you do have
let's say twenty five hundred dollars in an account and you
wanted to risk five percent of that Option trading account,
that would be risking one hundred and twenty five dollars.
Entering an Option strategy with just a hundred and twenty
five dollars of risk is going to be very difficult because you're
going to trade very low price stocks and or you're going to
have to trade Option spreads with very narrow spreads and
in that case, the maximum profit potential is going to be
very low and in most cases the Commission's require to
enter those positions is going to eat into a decent chunk of
your maximum profit potential. We all want that homerun
trade that can earn us a significant amount of money or
earn us a significant return on our total account in a very
short period of time and that urge is even stronger in a
small Options trading account because you thinking if you
could just have one big win, then you'll have much more
money to work with and everything will be easier, but
unfortunately it's not that easy. Before getting to these
small account Options strategies and back tests and my
other tips and tricks I need to talk about the difficulties of
trading in a small Options trading account so that when we
move forward, we can understand these difficulties and try
to figure out ways to work with them. The first problem with
trading in a small Options trading account is the risk
problem. When you're trading Options you can only really
get so small and when you have a small Options trading
account, that means you're going to be risking a high
percentage of your account in every trade or at least you're
going to be tying up a significant amount of margin in one
position, because with a small Options trading account if
you put on a trade with only two or three hundred dollars of
risk, that could represent a high percentage of your account.

Options Trading For Beginners 2022: 3 Books In 1: Crash Course On Day Trading, Swing Trading And Short Selling Options by Will Weiser