This is a big question I get asked pretty regularly, so I figured this would be a good day to answer it for my readers.
How much money or capital do you need to start trading options?
First off, it makes sense when you start off that you would want your risk on the smaller side. Starting off with a large account could end in disaster quickly if you don’t know what you are doing.
Big wins out of gates for new traders tend to have an adverse affect on their risk tolerance. When traders win early, they just assume it’s easy and wins will come often.
Nothing could be further from the truth.
More often than not, that kind of irrational exuberance will lead to their accounts being blown up.
You need to understand how to take the appropriate level of risk before you swing for the fence.
So my advice for new traders, it is much better to start with a small account size.
Even if you have $100,000 available for trading options, just start with $5,000 and get your feet underneath you before jumping into the deep end.
After you’ve been trading for a year or so, you should SLOWLY build your account from there.
You don’t want to jump from $50,000 to $100,000 overnight.
The psychological aspect of trading a $100k account is much different to a $5k account.
All of a sudden a 1% loss has gone from $50 to $1,000.
So, the big question is how much do you need to get started trading options?
I believe there is no real minimum.
You can start trading with $500.
The experience you gain will be with you for a lifetime, so the earlier you get started the better.
That being said, there are certain strategies that will not be available to you with only a small amount of capital.
Iron condors, for example, will be hard to trade with less than $5,000.
Also, and this is very important, on a smaller account, commissions and fees are going to have a much larger impact than on a larger account.
In a perfect world, you would want around $5,000 to $10,000 at a minimum to start trading options.
— The Option Specialist
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