Thank you for advices but no one answered me still. The question was if small accouns permitted to sell options and trade spreads. And what options strategies are alloweded to trade at all according to pattern day trader rule? i am not going to trade too frequently and to start with big sum of money as well but i want to know all details in advance. Thank you
Yeah, but it's $5K. Coming to market to day trade with $5K is like going to the State Fair with $20. Sure you'll be able to park, gain admission, have a ride or two, but you'll end up hungry and checking the cans for leftover beer
I'm probably not going to answer your question either. I'll just say if you want to trade frequently, then don't trade options. Just go long or short a stock. One of the main reasons for trading options is, to be able to pick your stock price, vs trading where it just happens to be that day. Another reason is to have time decay working for you. Another reason is to take advantage of margin leverage, to the degree that would be impossible via regular stock trading. Another reason is to take strategic advanage of changes in IV (implied volatility) and/or VIX. Another reason is your ability to select strikes and credits ITM, ATM, or OTM. Options is really more about "risk management" than trading quickly. If, because of the "combination" of time decay, leverage, the stock moving in the direction you want, changes in IV, VIX, ect.... you can get in and out pretty quick, then that's terriific. And that occurs more frequently then you might think. But I would not invest expecting all or most of those things coming together at once.... too often. Take advanatge of it when it occurs. But don't assume it will occur as often as you hope. Bottom line,... when trading options, assume the contract may remain intact for the duration, but take advanage of it when you can close early for a shorter ride. You can use any strategy you are comfortable with. Up to you whether you want to take advantage of time decay and sell puts, or put spreads,... or to use strategies that have time decay working against you, but may have other benefits you can use to your advantage, such as the ability to use massive leverage with just a little cash upfront,... or strategies that benefit more via changes in IV. Trading options is more about "risk management" than quick profits. How much money you need may depend on which strategy you select, and what your trading level of approval is.
On a per contract basis, my stop loss on the CL is $50 to $120 with a long term avg of $70. If you compare that with 1 option contract, near or at the money, with 2-3 months until expiration, I'm pretty sure the time premium you're paying for is not going to consistently allow you to pay $120 or less per contract. So, it's important to compare realistic losses for intraday futures traders vs theoretical losses on trading instruments, in general, which option books love to tout. [You'll get no argument from me on the greater loss risks for stocks vs options (comparing 100 shares vs 1 option) when overnight gaps are so common.] Time decay and sudden changes in implied volatility are what, imo, make swing trading options vs intraday trading the CL futures far more difficult. I only have to be right on the direction to make a profit on the CL. With buy-side options, it's that plus what can happen with the Greeks during your trade. It's better to start with a 20-25K account of capital you can afford to lose without causing one iota of financial hardship or alter your lifestyle if it went !!!poof!!! tomorrow than it is to scrape up 5K at a time and blow it 4 times in a row. When it comes to futures and newbies, trading the ES, YM or NQ is like lambs to the slaughter when the VIX is below 25. You have a better chance with the more volatile TF e-mini but even that is too choppy when compared to the CL. Higher volatility with as less chop as possible is what you ideally want (so kiss the currencies goodbye on 5 min and under timeframes too). More tradeable opportunities come your way with intraday futures (e.g., the amazing CL) than swing trading options (collective "well, duh!" here). The perception on your part that they're more difficult has to do with you realizing much sooner that your edge is dull than with swing options. With futures, you're dancing on the railroad tracks. With swing options, you're sliding on black ice.
5k account to trade option is a great idea. to day trade option is a bad idea. just as you said, the PDT rule, plus commisions. I trade options mainly. I long most time OTM, either call or put, occasionally slightly on/in the money options. I do not consider PDT since most trades I did is overnight, held days even weeks. my concern is the market trend, not the PDT, even my account does not have PDT limitation. if I see a trend, I jump in (buy otm call/put) as soon as possible. OTM is the safest option contrary to many people's view in my eye. do not look at OTM chart, since OTM chart is twisted by time decay/premium. so there is no sense for stop loss. if the underlying move up 1bucks, and your otm call moves 0.6bucks, next time, the underlying move up 1bucks, your otm might just move 0.4bucks. because of the twisting in option, you need pratice trading the underlying first, also study the movement relationship between teh underlying move and the option. 5k account to day trade futures is a bad idea too. since several points move in future is very common, in order to limit risk, you need cut loss frequently to control the defined risk, otherwise it easily wipe you out in one or two trades if you are sturborn enough to let loss run. trade futures in a little long-term frame is far better than day trading, particularly in a 5k account, that is barely one lot.
I do just this. I trade, spreading options all the time. Have been doing so for 3 months now. Using Nasdaq index options as an example i might buy the 2700 strike call and close with the 2720 strike call. I end up with spaghetti, but continuously try to keep it made up of long butterfly type positions, keeping my negative intrinsic value low with lots of small lottery type payoffs for expiry. If I a legging into this spreads successfully i create zero cost flys or condors. then i ring fence them and leave them for the "lottery Close out" at expiry. My account start value was $15K, now at $17K. Its doable and fun. I must add that i am a bit of a spreadsheet vba nut, so systems are everything to staying on top of what you have got and what you should do going forward.