Sell naked put for SPY to collect $4 premium a month which is about $100/week. If get assigned (SPY tanked), then do the reverse - covered call (to collect the same premium each month) and eventually your stocks will get called away, repeat the process again, got it ?
There is no inherent edge in trading for small profits, and I would think about the time and effort you will have to put into trading. If you want to treat it as a hobby and don't mind losing your 40K, then fine, but I really would advise you to go slow and learn to trade on paper first. It could easily take you several years to learn to trade profitably if you don't have someone to show you how to do it. Even then it can take quite awhile. Trading is easy once you know how, can be boring in fact, but it isn't that easy to learn. Suppose you wanted to learn to fly a light plane, you would not, I hope, just drive to an airport, jump into a plane and take off. Instead you would take lessons from a licensed flight instructor and you could count on most of the instructors being pretty good pilots and reasonably good instructors. You would also read some instruction manuals and they would have few, if any, errors in them. Then finally you would have to get licensed by showing that you can safely take off, land, etc. Now suppose you want to learn to trade. Initially when you are confronted with a platform like IB's it might seem about as complicated as the instruments on a light plane. You can buy some manuals and books on trading, but much of what you read will point you in different directions and there is a pretty good chance that some of it will be flat out wrong. There will be many people trying to sell you lessons, but only a few will actually be competent traders (if that). Some folks will offer to give you advice on what to buy and sell, for a fee, and try to get you to buy something they want to sell and vice versa. Instead of emphasizing the dangers involved they will down play the dangers (which will be in small print) and exaggerate profits. You won't need any license to put your money at risk. In other words, about the only similarity between learning to fly and learning to trade is that both can be somewhat difficult to learn well, and they both take study and dedication. But there the similarity ends. If you want to learn to fly you will mostly be confronted with people that have your best interests at heart and are competent. But if you want to learn to trade you will be confronted with a pack of lying, cheating thieves who are after your money. Your broker will not be your friend no matter how friendly they seem when going after your account. (Your broker wants you to make money, naturally, but not nearly as badly as they want to make money for themselves!) You probably should pay close attention to Nodoji's PM. She usually gives very good advice.
There's no reason to trade the ES if your target profit is $100/week. The only way you'll get that in the ES is if you can scalp accurately and profitably (cuz that's like 2 points on one contract) or if you have like a 51% win average and your balance at the end of the week is +$100. Otherwise just trade SPY, you can use less leverage than you are forced into using with the ES.
I suggest that so that instead of losing X amount of dollars on 1 ES contract, you can scale down your trade so that you lose X/k dollars on SPY where k is some constant that you control. It is just a way of keeping your account alive longer while you learn. You can also do this with papertrading, but unless you are a unique type of individual, you won't trade the same on paper as would when you have real money on the line.
You can't get a little bit pregnant. Either you lose consistently or win consistently; and if the latter, you don't settle for small profits for long. You are better off just betting everything in one shot on some news event, hopefully double your account, then close it down. If you lose the coin flip, well, at least you've saved alot of time and effort. Don't mean to be rude but no one should be getting into this game for those stakes.
Sounds like little to no trading experience, you would be better off taking scuba lessons and going into all the ponds at golf courses and retreiving the balls to resell. Account size has little to do with ROI%. If you have no "edge", your funds will become someone elses - trading futures. To just start trading out of thin air, and no idea of how to day trade, like driving a car without sight. MOST of the time from all my backtesting, this is what has been true for me. Day trading provides highest winning % if you are scalping but to get this, you have to risk much more than return, and must average down, like I normally risk 2pts to get 3-4 tics in ES, but at each price level to 2pt, I add contracts, not all equal at each price level, but add sometime to each, so if trade goes against me and I am trying to get out at original entry price, a breakeven trade ends up being a profitable trade. All true breakeven trades are losers when you throw in fees if you don't average down, so in scalping, many trades of one tic are acceptable cause you are not losing. Once you develop your skills, you find that smaller profits are much easier to attain than much larger profits, but normally the winning % go down as you are targeting bigger returns, and since risk in day trading is approx the same whether I go for a few tics to handful of points, bigger profits has to offset a bigger losing %. Like if you take Pete Rose who was an incredible singles and doubles hitter (all time hit leader) and told him he could only shoot for home runs, his .303 plus batting ave would certainly go down badly. What is truely alarming to me is your statement "except I don't need the money ", if you don't trade for making money, you should not be doing this at all. You have to have the drive to sustain losses and keep putting on trades cause you have so much confidense you will make it back and profit. People I have worked with who have your thoughts don't usually succeed, trading futures is like you have not eaten for a week and there is one piece of meat, the one who is smarter and "take no prisoners" approach will win out. Good luck.
Some good advice for you in the last few posts jaxx. Be smart and listen to it, or you are headed straight for disaster..
Hi Galvin, Did you read Taleb's books? You should. Plus, what kind of margin does your broker require for selling naked puts? Best, TJ
Although you might be right with your first sentence about setting the goal too low (although for a newbie slightly profitable is an excellent goal) but your reasoning is faulty. He could achive that goal by swintrading 2-3 times a week, not just by scalping. If he has one 7 pts winner and one 5 pts loser, that is still 2 pts gain and reaching his weekly goal... Actually, for a beginner trading less is probably better...