Options Trading With a Small Account | Option Strategies

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Trading A Small Account | Part One

 

A lot of new traders start with relatively small trading accounts. Some might be testing this or some are just trying to trade as a side hustle. Whatever it is we are here to tell you that, yes, it can be done!

Options trading with a small account is achievable for many reasons and we’re going to cover that here in this blog post. This is part of a multiple series blog post so you can start learning. 

We’re going to start with this idea of cash flow. 

 

Cash Flow is King

 

When most new traders come into trading stocks they are after one thing: a home run stock. Ya, you’ve probably heard it many times – a stock tip from a friend or some friend who made $XXXX amount on stock. 

Cash flow is king when trading a small trading account. We’re not here to go after a home run, sure, it’s nice but what tends to be the issue with that? You either swing and hit that thing or you miss and walk back to your wife and tell her you blew, yet again, another trading account. 

The key to trading a small options account is grinding it out and producing cash flow. Whether that is $2,000 a month or $5,000 there needs to be some definitive amount so that you can grow some capital. 

 

 

Have Realistic Expectations


When you’re trading a small options account you want to try to come into it with realistic expectations. Just like any business you want to have a Pro-forma, or maybe not that much with this, but something that gives you a baseline. 

So what I mean is having targets of profits. Having an idea of what to expect when you do this because a lot of traders, especially new ones, get tied to this idea of always winning. 

It’s much easier to go for big trade and chill for a bit than to grind it out and produce cash flow. The issue with that is that the big trades can be tough and if you miss a big trade when trading a small account it can wipe out a lot of your trading capital. 

This is something that we preach in the S.A.T Options Course

 

As you can see above that is a preview of part of the course – Psychology: Trading Expectations.

Interesting right? Most people want to learn a trading strategy off of the bat. They want to learn the technicals or the Fibs or MACD, whatever it is. But, they skip the most important part; how to actually trade a small options account. 

Ya, look, the strategies matter but you have to come into it with realistic expectations. Take one of those above: Small wins. 

Small wins add up and what they do for new options traders is more than just getting you cash flow in your trading account. The small wins get you involved in the game and the more involved in the game you are the easier it tends to be to start learning not only about how options move but how to apply the strategies we teach you. 

 This is a big deal for new traders. Everyone wants the big win, literally, everyone. But accepting that you have to grind it out is a big deal in this, is that something you are ready to do? 

Focus on A Few Stocks

 

What is the one thing you hear people always say that struggle in trading? Usually, and there are many, it’s – ” I need to focus more”. We all do. Today the amount of social media and technology in our faces can make it seriously hard to focus. 

What makes it harder is that trading stocks and the way Wall Street seems to operate make it hard to focus. Most people want to chase things over and over and never focus on say 4 or 5 stocks. 

When you are trading options in a small account it tends to be easier to become a pro at a few names. Some of those names can even be stock index ETFS.

 

  • SPY
  • QQQ
  • IWM
  • XLF

These are just some ideas to help you start to look at this differently. But the key is you want to focus on a few names and do what? Cash flow. 

Cash flow is king. 

The idea is to do this over and over and over. Your small account will start to grow then you can learn and then start taking money out. 

Now again, some of you might start to think ahead and say? “What if I want to grow my account?” 

Yea, that is possible but the first stage in all of this is learning how to navigate the options markets and learning to trade a small account. 

We talk about this in detail in our S.A.T Course.

Wrapping it Up

 

This is part one in a series on trading a small account. You can follow our YouTube and learn about trading small accounts through videos.

You can also come back here and read the next piece we put out. Until then, thanks for reading. 

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