You see, ever since I started OptionSIZZLE.com back in 2008, a week doesn’t pass by where I receive emails from small investors who want to get involved with options…hoping to have their own TRGP success story. Now, I understand that we all have to start somewhere, however, trading is very difficult and there is a learning curve involved.

1. How Much
Money Do You
Need To Get
Started Trading
Options?

2. Last week, a trader came in and bought 128
Targa Resources Corporation (TRGP) $130 June
calls for an average price of 27 cents apiece
when the stock was trading at $126.59 a share
(options expiring in one day).
What made this order so amazing… was a
minute later, a story came out that Energy
Transfer Equity (ETE) was near a deal to
purchase the company. TRGP popped to as high
as $160.97 a share off the story.

3. Oh yeah, I forgot to mention, this all happened
less than two minutes before the closing bell.
The trader spent a little more than $3,500 on
the trade… and if they sold stock on the
spike…let’s say at $155, they would have made
over $320,000 in profits in about one minute!

4. …On June 19, the day of this trade, TRGP had
3.8 times usual options volume. Just another
reason why you should be following unusual
options activity—because you never know
when the next explosive stock move will
happen.
However, there is some downside to sharing
these types of stories with you.
.

5. You see, ever since I started OptionSIZZLE.com
back in 2008, a week doesn’t pass by where I
receive emails from small investors who want
to get involved with options…hoping to have
their own TRGP success story.
Now, I understand that we all have to start
somewhere, however, trading is very difficult
and there is a learning curve involved.

6. Heck, I lost over $2,000 on my first option trade
(which was a lot of money for me at the time).
With that said, you need to have a proper
“bankroll” to be able to absorb losses, identify
what works and what doesn’t.
For many new traders, your goal in the
beginning should be not losing money…forget
about being profitable off the bat.

7. This is where you pay your dues.
For most, figuring out what makes you
comfortable…requires trial and error. In
addition, you’ll need to gain experience in how
to execute orders while limiting slippage costs.
Again, this is all part of the tuition costs for
participating in the markets.
If you’ve got a small account, these costs can
really burn through your cash.

8. Not only that, but according to FINRA rules, if
you execute four or more option day trades
within a rolling five business-day period (on a
margin account), you’re labeled as a “pattern
day trader.”
If you’re a “pattern day trader” you must have
at least $25,000 in your account and can only
trade in a margin account.

9. Now, trading unusual options activity is a numbers
game. On any given day, there might 1-5 good
looking opportunities.
However, if you’re limited to only a couple of
trades per week, trading the strategy is very tough.
There is no way to figure out which trades will be a
“home-run” and which ones will be an absolute
dud. After all, if I knew, I would only take winning
trades. Unfortunately, it doesn’t work that way.

10. And you know what else?
Some brokers don’t want to hassle with new
traders with small accounts. They’ll restrict
certain types of tiers or levels.
For example, a relative of mine with two years
of stock trading experience wanted to open a
tier 2 options account with $70,000.

11. A tier 2 option account allows you to create
spreads, purchase options, write covered
calls, write covered puts and write cash-
secured puts.
If you ask me, none of the above option
strategies are reckless.
In fact, they’re pretty standard in my book.

12. Basically, you’re not “approved” to execute
some of the strategies that offer great risk to
reward… like butterflies and credit spreads.
Really strange because in many cases these can
be high probability trades.
The brokerage house will claim it’s their
fiduciary responsibility and it’s for your best
interest not to have access to these higher
levels of trading.

13. If you ask me, a small trader doesn’t generate
enough commissions for them and they don’t
want to increase their risk management staff.
A big account just means you can lose more
money if you don’t know what you’re doing.
But I guess that’s OK, if that big account
generates commissions and can “afford” to
lose.
Of course, all of this sucks for the trader who
has a small account.

14. Can You Still Make It Work If You Have A Small
Account?
The answer, yes!
However, the odds are heavily stacked against
you.
For example, let’s say you had $5,000 trading
account and you employed proper risk
management…you’re average position size
might be $100.

15. Most people wouldn’t get overly excited if they
made $30 on a position (30%) because it’s not
a lot of money. Too many of them want the fast
money…and because of that, they might take
on too much risk for their account size.
Trading a small account requires a great deal of
discipline and a level head.

16. Many small traders blow out their account
because they try to push it too hard, which I
think is necessary.
You need to learn how to lose, before you can
win
What about the psychology factor?
The new trader with a small account might not
be able to keep their emotions in check—
causing them to churn their account.

17. Possible Solutions
One way to get around the “pattern day trader”
rule and gain high “level” options trading
clearance is to join a proprietary trading firm.
Some of these firms have the proper risk
management in place to accept all option
strategy types.

18. In addition, they offer some of the most
competitive commission rates in the
industry…and you might be able to trade
remote as well. The only downside is that you’ll
have to register with a prop firm, pass an exam
and get licensed (series 7 or 56).
Another possible solution is to use that small
amount of capital and create a business that
will give you cash flow today and in the future.

19. I actually invested into a business opportunity
last year to create another avenue of income
for myself… because I believe to gain wealth,
you need more than one stream of revenue
working.
Don’t get me wrong…I love the financial
markets and will always be active in them, but
solely depending on the market to create a
living can be a risky proposition.

20. The opportunity involved selling a product on
Amazon and it creates me passive income (with
less than an hour per week of my time).
I took a $1,000 investment…which has grossed
over $60,000 in sales…and this year we are on
pace to beat last year’s sales numbers by 100%
and exceed over $120,000 in sales.

21. Pretty exciting right?
You don’t find consistent trades like that in the
market every day.
And what else?
I’ve actually created a course that is in beta… and
have had 25 people go through the material.

22. If you have a small account, I would suggest maybe
trying to build something like I did on Amazon–to
create revenue and capital for the future—so you
can build a large of “bankroll” to give yourself and
honest and fair shot at being successful trading
and investing.
Bottom line, the odds are stacked against you if
you have a small account. As much as I would love
for you to have the next TRGP type trade…it’s not a
realistic expectation.

23. However, I do believe you have some viable
alternatives to get you into a position to
succeed.
If you’d like to share your two cents on this
topic…I’ll be hanging out in the comments
section below.

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