Happy Friday, traders…
Jeff here.
Most people trade stocks before trying the options market.
No surprise there. The options market is complex with far more factors to consider than the stock market … while the potential rewards are extraordinary.
But here’s what many don’t realize…
How you start your options trading journey can make or break you.
One early mistake could ruin you … while making great opening trades can potentially set you up for many more.
This is true for stocks too, but far more exaggerated with options…
If you want to grow a small account, options are the fastest way. But you need to be careful.
Options can bring big wins, but also brutal losses.
If you start strong, the sky’s the limit. However, if you don’t make a few simple (but overlooked) moves, you could doom yourself to failure.
And a lot of this comes down to how you set your accounts up.
With that in mind, let me show you how to prepare your accounts for long-term success in the options market…
Open Separate Accounts
If you’re trading stocks or have long-term holds, you should set up a new account just for trading options.
The idea is to have different pools of money at work simultaneously. Each pool should have a completely different objective.
That way, if this speculative market bubble bursts and your long-term holds stop performing well, you can use options to hedge your other accounts.
It’s much simpler to buy a few put contracts (as insurance against your stock holdings) than to turn on a dime and short-sell an index fund.
I recommend having one account for long-term holds, one for the short-term trading of common shares, and a third just for options trading.
This will help you keep things clear and avoid mix-ups. It can also simplify your performance evaluation.
If everything is in one account, it can be hard to tell what you’re doing right (or wrong).
But if you put your money in different accounts (for other types of trading), it’ll be easy to see how much you’re profiting (or losing) in each arena.
You may find that you’re absolutely crushing it with your short-term options trading but struggling to make profits with long-term holds, or vice versa.
Identifying these trends can help you eliminate bad habits and emphasize good ones. But that’s hard to do if everything is in one place.
Also, when you do your taxes, your bookkeeping will be much simpler if you keep separate accounts.
Don’t Overfund Your Options Account
One of the best parts about trading options is that you don’t need a bunch of money to start.
Options contracts provide leverage, giving you control over 100 shares of the underlying stock for every contract you purchase.
Meanwhile, contract prices swing wildly — sometimes by 100%, 200, or even 500% in a single trading day.*
This means you can make much more money faster with options than regular stock trading.
So, don’t put a lot of money into options trading right away before you’re sure you can do it well.
If you initially put too much capital into options trading, you risk losing more money than you’re comfortable with.
This could put a bad taste in your mouth and turn you off to options for good, which would be a shame…
I recommend not putting more than a couple thousand dollars into your options account at first.
It feels way better to think “I should’ve put more money in” than “I wish I had lost less.”
Take it from me. I don’t have millions of dollars in my options trading account. That’s too much risk, and I know I can still make juicy profits with $30,000 (or less).
Your First Trades Can Make (or Break) You
If you’re extremely discerning with your initial plays — and find some strong winners early on — your account could multiply several times in a very short period.
Again, this has to do with the massive upside (and downside) that’s possible with options.
But the opposite is true as well…
If you get trigger-happy and make subpar trades in the beginning, your capital will disappear faster than a speeding bullet.
With a small account, you have limited rounds in the chamber, so to speak.
This means you must be extra cutthroat about the trades you make (and don’t) when you’re trying to build it up.
The leverage in options trading magnifies both gains and losses, so it’s crucial to be disciplined in your decision-making.
Avoid making impulsive decisions based on short-term market movements or emotions.
If you’re panic selling every time you see a tiny candle in the wrong direction, you’re doomed.
You need to have a mid-to-long-term vision, even when you’re engaging in short-term trades.
Don’t trade contracts 50% out-of-the-money on stocks already up 3x this year…
Focus on developing a disciplined approach to trading, with a clear game plan and strategy for each trade.
This will help you build a solid foundation for your options trading journey and increase your chances of long-term success.
Fail to profit on your initial trades and you’ll be re-funding your account in no time…
But if you nail your first few plays, you’ll have cleared one of the biggest hurdles in the game…
Happy trading,
Jeff Zananiri
P.S. You’re probably wondering how to find the best trades in the options market.
Well, there’s only one place to start…
TODAY, May 31 at 8:30 a.m. EST, I’m hosting a LIVE WEBINAR for the Daily Strike Alliance where I’ll be breaking down the most promising trade ideas I’m seeing in the options market right now, like…
170% on CVNA in ~2.5 hours
1,080% on PANW in ~24 minutes
336% on LYFT in ~4 hours
191% on UBER in ~6 hours
265% on CME in ~20 minutes
466% on SHOP ~40 minutes
955% on PLTR in ~5 hours
Stop missing great opportunities — CLICK HERE NOW TO RESERVE YOUR
*Past performance does not indicate future results
