Someone asked, “…to be making money trading options, how much capital do you need?” I answered, “It depends on what type of options you want to trade.” It’s true. Some types of options trading requires a decent sized mound of capital, some requires $100 to start. I predominantly feature the low capital ways to invest in options because:
- Options are the way to make the best returns
- Most small cap investors are excluded from the big gains that come from options trading
- Low cap investing allows new comers to walk before they run
People new to trading on the stock market, or who are new to trading options shouldn’t be risking huge wads of cash until they’ve made some small trades first.
To Do Is to Know, Not to Do Is Not to Know
Understanding the basic mechanics of actual trade transactions comes from doing them, not from reading about them. Understanding the risks associated with trading higher risk markets comes from actually getting some gains and losses. The problem with most of the really good ways to make real money trading in the market is that they are exclusionary by means of high initial capital requirements. Frankly, I think that sucks. I had to wait quite awhile to build enough capital to begin trading options, and I’m glad to have found a couple of ways other low cap investors can participate in the market without having to wait as long as I did.
Day Traders Making Money in Any New Trading Market Takes Time
One problem with high capital requirement trading is that even when a small trader does scrape together enough scratch to be able to open an account with a traditional broker, they typically only have enough money for a couple of trades at best. That is a major problem because the first trade is bound to be a loser simply because the trader is usually completely unfamiliar with the ‘fine print’ associated with the new transaction. This is true of any first time trade – odds are the first few trades are going to go poorly until you get the hang of it. If you only have enough money for a few trades… you’ll probably run out of money before you really get the hang of it.
The Solution to Start Making Money Trading Options – Give Them House Money to Use First
One solution that my low cap options brokerage has come up with is to offer bonus cash to new accounts. I saw one offer (a forex broker if memory serves) the other day offering 100% bonus cash up to $1000. This means a new investor puts in $1000 and the broker gives the new trader $1000. How cool is that? The brokers aren’t stupid after all, they need traders and transactions to make money, and they know new traders are going to be afraid to try out something new – and rightfully so!
Making Money Trading Options Comes with Experience and Persistence
The obvious solution is to let newbie traders play with someone else’s REAL money first. If they make a few bucks for themselves, great! If not, then the broker has given the trader the opportunity to make some mistakes on the house. If the trader doesn’t like the outcome, they withdraw their funds and call it a day. Many a binary options broker offer additional bonus cash on new deposits (on already established accounts). Traders can re-ante some of there own cash (and receive MORE bonus cash) if you will several times until they start making money trading options. Someone tell me where else the house gives small guys game chips to play with without being a high-roller to begin with. Giving the low cap investor’s account a bit of priming gives them enough scratch to get up the learning curve. That’s smart business on the part of those brokers if you ask me. Really smart.