Good morning, traders…
Jeff here.
Most newbie traders dream of hitting it big right from the start, managing massive accounts, and bagging some serious cash.
I was no different…
Earlier this week, I shared a story about my early days on Wall Street, when my boss fired my colleague for failing to make trades and told me to keep “breaking some eggs.”
I’ll tell you a secret — starting with a small account can actually be your golden ticket to long-term trading success.
Today, I’m going to show you why your small account isn’t holding you back, but rather setting you up for some big wins down the line.
Drawing from years of experience on Wall Street, I’ve got the lowdown on how to grow a small account quickly.
With that in mind, let’s break down how you can make big moves with a small account…
Start Small, Dream BIG…
I’ve met tons of new traders who can’t wait to play in the big leagues.
You might hear them saying something like, “I just can’t wait to have a big account so I can make massive trades like Roaring Kitty!”
And to that, I always say, “Start small, but dream BIG…”
I get it, it’s super exciting to imagine having a seven-figure account when you’re just starting.
And with some grit and a solid game plan, you just might nail those huge wins one day…
But here’s the truth: a big account isn’t just a ticket to bigger wins … it also opens you up to the possibility of bigger losses.
The more you put on the line, the more you stand to lose. It’s that simple.
Starting with a small account is actually a good thing.
It forces you to size your trades conservatively and pick your plays meticulously, which will help stop you from making an account-ruining mistake.
But if you’re really trying to grow a small account quickly — it’s all about options trading…
5 Ways Options Can Help Small-Account Traders
Here’s why traders with small accounts should be trading options…
- Lower Cost to Trade
When you buy a stock option, it often costs less money upfront than buying the stock outright. You’re not risking as much. This is a bit like putting a small deposit down to hold your place in line for something you might decide to buy later.
- Leverage
Each options contract represents 100 shares of the underlying stock, causing the % moves to be amplified compared to the moves in common shares. Make no mistake — this leverage is why one big options trade could exponentially increase your entire account value.
- Variety of Strategies
Strategically, trading common shares gives you only two choices: buy or sell (long or short). Conversely, the derivatives market is like an ‘all-you-can-eat’ buffet of potential trading strategies.
- Protection and Hedging
Sometimes, stock options can be used to hedge another position. For example, if you’re long a stock and it starts to show signs of weakness (yet you don’t want to cut the position entirely), you could choose to buy put contracts to offset the potential downside (more on that later)…
- Defined Risk
When buying options, you can never lose more than the amount of premium you spent to enter the trade. This allows you to create a defined-risk strategy around options contracts.
And speaking of defined risk…
Shorting Stocks vs. Trading Put Options
Your risk/reward profile is particularly important to consider when attempting to short a stock.
Tim Sykes has been warning traders about the risks of shorting stocks for years. And he’s right to do so.
I agree with Sykes — shorting common shares is just too risky.
In fact, the risk is infinite, because stocks have no limit on how high they can go (theoretically).
And this is where options come into play…
If I want to bet on the downside of a stock, I use put options as opposed to shorting common shares.
Because I’m able to define my risk.
I can sleep like a baby holding puts overnight because I’ll never lose more than my principal investment in the position.
On the other hand, if I hold a common-share short position overnight, I can potentially lose more than I initially bet on the trade.
Traditional short selling isn’t a great option (excuse the pun) for small-account traders.
My advice? Use put contracts to bet against stocks (without risking your entire account on it)…
My 4 Recent Put Winners
Speaking of puts, I’ve been absolutely nailing the downside over the past two weeks…
Let’s look at a few big winners we’ve recently crushed in the Burn Notice Alliance…
Alcoa Corp (NYSE: AA)
May 30: Entered AA 6/7/24 $45 Puts at $1.34
May 31: Exited AA 6/7/24 $45 Puts at $1.97
+47.01% in 24 hours*
Gap Inc. (NYSE: GPS)
June 3: Entered GPS 6/7/24 $30 Puts at $1.12
June 4: Exited GPS 6/7/24 $30 Puts at $1.75
+56.25% in 24 hours*
Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH)
June 5: Entered NCLH 6/14/24 $18 Puts at $0.29
June 6: Exited NCLH 6/14/24 $18 Puts at $0.40
+37.93% in 24 hours*
Palantir Technologies Inc. (NYSE: PLTR)
June 6: Entered PLTR 6/14/24 $23.50 Puts at $0.52
June 7: Exited PLTR 6/14/24 $23.50 Puts at $0.74
+42.31% in 24 hours*
If you’re anxious to grow your account quickly, slow down. Keep things in perspective.
A small account is a blessing in disguise…
Zoom out and look at the big picture. Understand where you are in your trading journey.
If you take things one step at a time and approach each step of your journey with discipline, you’ll be well on your way to your dreams of trading a massive account.
Happy trading,
Jeff Zananiri
P.S. We have a rare trading opportunity to leverage the biggest wealth explosion of Elon Musk’s career…
“Elon’s Next 1,000% Chapter” could unleash a potential $10 trillion market opportunity for AI.*
And it’s why Tim Bohen is going LIVE with an emergency AI briefing on Thursday, June 13 at 8 pm.
Click here to secure your spot for Thursday night’s emergency AI briefing!
*Past performance does not indicate future results
