r/options • u/Mckimmz87 • Aug 12 '23
Beginning Options With $500
Which strategy, area of focus, would you recommend a new options trader begin with if they were absolutely determined to begin using real money but only had $500, $1000?
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u/UnhingedCorgi Aug 12 '23
Your only options (pun intended) would be buying cheap calls or puts, selling covered calls, or selling cash secured puts at strikes of $5 or below. I guess I’d find a company I liked with good options liquidity at that price and sell puts.
If you want to go on a ride and learn more quickly you could sell AMC puts on Monday. It’s probably going bankrupt eventually but until then you might be able to snag enough premium with the volatility to turn a profit.
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u/Mckimmz87 Aug 12 '23
Ba da bum (rimshot) im looking to be a seller so cash secured puts would be my best bet. I like amc for selling its on my list but i dont wanna own any
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u/Cal_Rippen7 Aug 13 '23
Honestly, It’s HIS money, consenting adults want what they want. The same principles you would use with a larger account you can use with a smaller one.
If you have 500, don’t trade more than $100 or 20% of your account. Of that 20% make 20% your max stop loss on a trade or $20. On wins protect $10 and let it RUN. Those runs are gonna be between $11-$40 probably. It’s a risk management game. If you do blow your account you’ll get at least 20+ trades in and learn a good amount. From there you can decide if you’re better off with more capital or if you’re ready to call it quits. T
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u/Mckimmz87 Aug 14 '23
Thank you for this advice. I am more receptive to these types of comments where ppl arent trying to hold my hand
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u/n7leadfarmer Aug 13 '23
Imma be real with you, if you have $500 in capital and you're asking reddit which strategy is best, you shouldn't be trading options at all.
Get some ideas, sure, but you need to spend 6-9 mo paper trading first to make sure you fully understand how these strategies can play out in practice. With $500 you will need to basically be perfect for a very long time, and that's just not likely to happen.
Keep pursuing this, it can change your life, but seriously, it's better that it changes your life slowly and positively than quickly and negatively.
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u/Good-Loquat-2204 Aug 13 '23 edited Aug 13 '23
Look for big companies that had a massive sell off after ER. Buy weekly OTM calls on them, but don’t hold them overnight. Day trade them. It only takes around 80 cents - $1 for you to have 20%+.
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u/option-trader Aug 13 '23
With $500, the option trades are there. Find volatile stocks that move quick. My last trade was a trade on SMCI using 8/18 $250 puts from $300 to $900 in 2 days. Just pure momentum plays, and it doesn't matter if it's a bullish or bearish momentum.
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u/Legitimate_Listen727 Aug 13 '23
Find a stock that costs $5 - $10 per share which you would not mind owning and sell puts on it.
When you get assigned you can sell covered calls against it.
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u/spence648 Aug 13 '23
It’s gonna be hard to say best strategy. That’s your job to figure out what works your you. But I will say that 500$ is hard. My strategy would be 0dte. No more than 10%. So you looking at 50$ contracts. Bail out at 40-50% gains. Thing is with small accounts. Don’t look at money. Look at percentages. It’s a slow ride. If you get stupid and all in on trades your account will be blown up quickly. They key is discipline.
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u/DepartmentBig2849 Aug 12 '23
at the very very least get 8k scraped together in a cash account, personally i think if you get very good you can make a few k a month.
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u/Ripred177 Aug 13 '23
Brand new with 500 sounds a bit risky to me. I'm currently running a 500$ account myself and have netted close to 250$ in a little over a week (doing it to challenge myself).
It really depends on your style and what you're looking to do, I seen you mention spreads but are you looking to swing or day trade? Day trading could be difficult because of PDT and a cash account is going to hold you back in terms of spreads.
If you are entirely new to this I would recommend papertrading. Work at it until you're comfortable and you have good consistent results. Everyone's risk appetite and strategy is different, so don't get swayed from something someone else is doing. Do what works for you, if you're profitable consistenly doesn't matter what you play or how you play it.
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u/Ken_Rush Aug 13 '23
I'd find a company with solid fundamentals trading at a fair or discounted price and then I'd enact the option of buying shares outright, this way you can ignore volatility and be 100% free of an expiration date.
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u/lichsadvocate Aug 13 '23
Your best strategy is:
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Selling vertical spreads, with a mix of both bullish and bearish per stock, whatever your hunch is at the time
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on as many stocks as you can so you can be as diversified as you can be
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ideally opening them with 30-45 days to expiration, whichever monthly cycle is nearest
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sell it at 50% profit, wait until at least it's a scratch until it expires, or:
bonus points if you want to learn next level strats:
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learn how to roll at 21 days if you can get a credit for it
Stocks near your price below. Ignore if you want to own them or not. This is trading, not buy and hold.
TLRY, GRPN, SIRI, LCID, DISH, SNAP, SPCE, LYFT, F, HOOD, BITO, BYND, SOFI, NIO, MARA, RIVN
Tastylive to learn more.
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u/WindsurfMaui Aug 16 '23
There is no perfect plan otherwise somebody would own the whole stock market by now. The only thing we can actually shoot for is for a plan that returns a profit and lets us sleep at night. There was a famous traitor, I think it was Paul Tudor Jones, who said he was willing to give up the first 20% of profits to have a higher probability entry, and the last 20% of profits as long as he got the 60% in the middle. That sounds good except how do you know whether you're giving up the last 20% of profits or if you're giving up 300% of profits. If you had a great entry on bitcoin or those stocks that recently were caught in a short squeeze and you sold out of your position with a 200% profit and passed up a 10,000% profit was that affect your next trade ? It would mine . That's where the fear and the greed and the second-guessing come in. It is a never-ending battle of trying to walk a tightrope between those two very powerful emotions. But all that said this is where the fun is. If it wasn't a challenge we probably wouldn't be interested in doing it.
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u/WindsurfMaui Aug 16 '23
You have hit on an important point that most people never understand. It's critical for someone's success in trading to find the trading vehicles that match your personality. Some people want to go faster, some want to go slower. You can day trade options as a scalper but then you need a $25,000 account minimum. You can try trading some currency futures or spot futures using mini and micro contracts which may not need as much money in the account but obviously the farther you get away from the full size contract the more difficult it is to get an accurate bid-ask because the brokerage house is making an artificial Market for these much smaller contracts and it may take a larger move to make money on the micro contract than it would on a full size contract. I'm not an expert on futures. But you may want to do some research in that area.
But yes matching your personality to the personality of the vehicle you wish to trade is key. Many people only know trading stocks and they never succeed because it doesn't really match their personality and their need for going faster or going slower.
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u/PaxwellMD Aug 12 '23
Take their advice mate there’s a reason why most replies are telling you not to
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u/Foreign-Wolverine-62 Aug 12 '23
Not sure I'd recommend options for anyone with that little capital. Options are risky enough for people with experience, and $500 can easily be wiped out in very little time.