If you took a good trader who was trading 200k account and gave them 10 k and said "If you can turn this into 15K in three months I'll give you a million dollars and if you lose it, well, no big deal", I think that they would find the task quite easy to complete. It is easy for a good trader to get high percentage returns on a small account. It is typical for the amount trading capital risked to grow at a smaller rate than trading capital available. When I first started trading I would forever be using the rule of 72 to compound my daily profit over one, two or five years. In practice though it is much harder to achieve compounding.
imho trading a small account requires a different mentality than a large one. You need to take bigger chances, to overcome the vig which tends to be a larger % of your equity. Trading a small account is about dodging bullets, and trading a large account is about good money management/risk management. Also, a large one has some psychological issues attached to it. Going from 10k to 2k feels a whole lot better than going from 100k to 20k, I'm sure. Flame away! - The New Guy
Trying to get into good habits early, playing with my 7K trading account as I drip-feed savings into it. Putting 1% of my equity at risk on each trade, I'd have to mount a pretty impressive losing streak to lose 80%!! Then again, a wipe-out is only a typo away. Neoxx P.S. Vig??
vig is a gambling term meaning the cost of the trade. Slippage + coms = vig. In options, the spread is so dang big and the coms represent such a large % of the trade on one contract that it's a big deal to deal with. - The New Guy
From your posts that I have read, I believe your intentions are soundly based. I also don't think you are merely trying to get rich quick. If you are, then options aren't for you because the "blowout" is inevitable. Greedy options traders always have a stretch of good trades followed immediately by a blowout. They get overconfident and start climbing further out onto that limb. At some point the limb breaks. As we all know, a 50% gain is just as easy to get as a 50% loss. Sadly, we also know that a 50% gain doesn't make up for a 50% loss. Can an average options trader make the kind of gains that you are talking about? Occasionally.....YES. Consistently.....NO! Can a knowledgeable options trader? Consistently....MAYBE. knowledgeable and disciplined? Consistently....YES! To a point. We could argue all day about the theory that turning 10K into 15K is the same as turning 1MM into 1.5MM. It might be as easy, but it isn't the same. Psychology IS different for the average person that isn't void of emotion, and emotionally charged trades might happen more frequently. Liquidity becomes more of an issue, as does slippage. You mentioned you like the idea of limiting each position to 10% of your account. With a 10K account this is very liquid. In a 1MM account it gets much more illiquid due to volume. But as mentioned earlier, a larger account might not fluctuate as much (have smaller drawdowns), which means that to some extent you've changed your strategy. You might now be limiting yourself to 2-3% on any one position, but your overall setups might be the same. This could reduce your ROI also. But the question is, do you really need the same ROI on 1MM that you needed on 10K. $15K/day!! IMHO you might be considered by some to be a little greedy in that case. I know this is all really simplistic and those that are really anal out there are going to look through it with their calculators and mount some huge attack on the idea. Oh well. Flaming won't solicit a response from me anyway. Point is....it's not only possible but plausible that once you are "good at" trading options you will realize those returns. It doesn't get any harder at 100K, trades are just larger and you have more choices. But who wants to stop at a measly 100K? If you are getting into this you must have a higher goal. You won't be able to use the EXACT same strategy once you are dealing with really serious amounts of money. Not saying that you need to know now, but what happens when you get to that point? What strategy are you working into? Oh by the way... you asked how long it might take to get "good at" trading options. I read a book once by Toni Turner, and I liked one quote in it. I don't remember it exactly but it went something like this....If you are smart, 1 year. If you are REALLY smart, 5 years! Funny, but in some ways very true. My advice is to discard most of the "theory" that you come across. Most of the books on options that I have read are completely full of it. They all used hindsight and perfect entry and exit points to promote their theories. That is not the world we live in. There are no perfect entries/exits. And in options, order execution is much more critical. The bid/ask spread is HUGE, even if it is only $0.05.
Through repetition, I want to reach the point where my 1% max loss rule becomes instinctive and inviolable. My work has taught me a lot of lessons, and I've realised the dangers of overconfidence first-hand... Again, I've been conditioned through my job to be clinically detached, but I'm not sure how much of this will carry-over to trading. At least for the time being, this feels like a game, with no connection between the numbers on the monitor and real money. 15K/day would definitely be greedy - if I was doing this for myself. While I'm excited by the freedom and choices that will come with more money, what I find most compelling, what's really fuelling the desire is what I'll be able to do for others; friends, family, charities, my community. I realise this may sound like complete hokum but it's true. I'm encouraged by your affirmation that this is possible; :he says wearing his flame-retardant vest and running for the air-raid shelter: ;-) I'm trying to learn all I can, and while I'm just experimenting with the basics right now, I think I'll eventually head down the delta-neutral route. Speaking of the b/a spread, $0.35 for ZIGO 12.5 calls. Daylight robbery!!