How Much Do You Need to Start Trading Options?

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by Gavin in Blog, implied volatility
December 7, 2017 20 comments
how much do you need to start trading options

How much capital do you need to start trading options?

This is a question I get asked a lot (along with “are 5%-10% per month returns realistic…).

When starting out in options trading, it is definitely advisable to keep risk small and not start trading a large account straight away.

Let’s take a look at how much you need to get started.



I was speaking to one trader the other day who had a $20,000 win with his first trade.

I explained that this was almost the worst thing that could happen, because he started thinking “this is easy” and “if I can make this much when I don’t know anything, imagine what I can do when I get some more experience.”

Sure enough, this trader blew up his account not long after.

He was taking on too much risk without knowing how to handle it.

For new traders, it is much better to start with a small account size.

Even if you have $200,000 available for trading options, just start with $10,000 and get a feel for how things work.

Then, when you’ve been trading for a year or so, SLOWLY build your account from there.

You don’t want to jump from $10,000 to $200,000 overnight.

The psychological aspect of trading a $200k account is much different to a $10k account.

All of a sudden a 1% loss has gone from $100 to $2,000.

So, the big question is how much do you need to get started trading options?

I believe there is no real minimum.

You can start trading with $200.

The experience you gain will be with you for a lifetime, so the earlier you get started the better.

That being said, there are certain strategies that will not be available to you with only a small amount of capital.

Iron condors for example will be hard to trade with less than $5,000.

Also, you need to keep in mind that commissions and fees are going to have a much larger impact on a small account.

Ideally, you want to have around $5,000 to $10,000 at a minimum to start trading options.

How To Trade Options Full-Time

To become a full-time options trading requires a big commitment both financially and mentally. As the old saying goes, “It’s the hardest way there is to make easy money”.

Trading is hard, there will be good times and bad times. Will you be able to handle the emotional upheaval the bad times can cause?

The first step to figuring out if you can go full-time, is to figure out how much you need to live off.

If you want to make it as a trader, you need to be prepared to live pretty frugally.

We’ve all seen the images of hot shot traders driving Ferraris, but that’s not the reality for 99% of traders out there. Most full-time traders I know live very frugally.

First things first, you should audit your spending behaviour and see if there is anywhere you can cut back without sacrificing your lifestyle.

The next step is to build a track record over a few years and figure out what sort of return you can expect on a consistent basis.

It would be good to have this track record through a variety of different market conditions.

There are a lot of “bull market geniuses” out there right now, but how will they fare during the next bear market?

Let’s say you’re pretty confident that you can achieve 15% per year.

If you can live off $50,000, then you need a capital balance of $333,333.33.

If your results indicate you can only achieve a 10% return then you need $500,000 but if you can achieve a 20% return then you only need $250,000.

You can see there is a massive variation in the amount of capital needed depending on your returns.

The best bet is to build that track record and figure out what sort of return YOU can achieve. Every trader is different after all.

Also note, that I haven’t met many traders consistently earning over 20% per year (despite what all those internet ads tell you), and I’ve met A LOT of traders in the last 15 years.

Dealing With Losing Months

Losing months are never fun for any trader, but they are a double whammy for full-time traders.

Not only has your account balance gone down, you’ve also had to withdraw funds to live off.

So your account has taken a double hit, and now you need an above average return next month.

Can you handle that kind of stress?

Having a minimum account size that you’re aiming for is a great idea, but it might be worth waiting until your balance is a little higher than you think you need in order to safely handle those losing months.

Some traders will have 12 months’ worth of expenses set aside (outside their trading account) before making the jump to full-time.

Trading is a tough game, and if you’ve got the added pressure of needing to make a certain return to put food on the table only adds to that stress.

Having some emergency funds put aside can help you focus on the business of trading.

Additional Expenses

One thing a lot of people don’t consider is the additional expenses that can be incurred as a trader.

Does your current employer cover your health insurance?

Do they pay for your smart phone?

Do they provide you with a fast computer?

A gym membership?

All these things and more will be your responsibility going forward.

If your computer breaks and you don’t know how to fix it, you need to pay a computer guy to fix it for you.

Previously your employer would take care of all of this. Same goes for your phone etc.

Be prepared for some additional expenses when you work for yourself.


How Much Money Do I Need To Start Trading Options?

There is no set amount of money required to start trading options, but many brokers have minimum account balances ranging from a few hundred to several thousand dollars.

Additionally, it’s important to have enough capital to cover the cost of the options you’re trading and any potential losses.

What Is The Minimum Account Balance Required By Most Brokers To Start Trading Options?

The minimum account balance required by most brokers to start trading options varies, but typically ranges from a few hundred to several thousand dollars.

Some brokers may also require a minimum balance to be maintained to avoid inactivity fees.

What Are Some Factors To Consider When Determining How Much Money To Start Trading Options?

Some factors to consider when determining how much money to start trading options include the cost of the options you’re trading, the potential risks and rewards of your trades, your overall investment goals, and your risk tolerance.

Can I Start Trading Options With A Small Account?

Yes, it’s possible to start trading options with a small account, but it’s important to manage your risk carefully and avoid overtrading.

Many traders use strategies such as vertical spreads or iron condors to limit their risk and maximize their returns.

What Are Some Tips For Managing Risk When Trading Options With A Small Account?

Some tips for managing risk when trading options with a small account include limiting your position size, using stop loss orders to limit potential losses, and avoiding highly speculative trades.

It’s also important to have a solid understanding of options pricing and risk management strategies.

Is It Possible To Trade Options With A Demo Account?

Some brokers offer demo accounts that allow traders to practice trading options without risking real money.

This can be a helpful way to learn how options trading works and test out different strategies before trading with real money.


Hopefully I haven’t stressed you out too much, but the reality is, you need a significant amount of capital before even thinking about becoming a full-time trader.

Those of you who have $50,000 and think you can go full-time, I’m sorry but it’s just not going to happen.

Unless you’re a single guy who can live the backpacker lifestyle in Thailand.

But, trading is one of the most rewarding jobs there is. No boss, work from home, travel, the list goes on.

Stick at it, take it step by step and slowly build your account, and you will get there.

Trade Safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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  1. Frank says:

    Great article! I would be happy if I could make $200 – $300 dollars. I have been trading Iron Condors since April. The month of October and November was not good for me. I am debating the worth of trading or whether I simply don’t have the skills. In the meantime I am paper trading, with the hope of figuring this thing out.
    Take Care

    1. Gavin says:

      Keep at it Frank, you will get there. November was a tough month for Condor traders with RUT going up 100 points in a short space of time.

  2. OSEI KWAME says:

    I need 50.000 to start

  3. Ishmael Bruce says:

    Hello, Osei Kwame, where are you trading from? I have just started to study the theory behind Options trading with the hopes of trading soon and I need help. Can we talk and discuss issues? I will be glad if we can work together. I am from Canada.

    1. Gavin says:

      Hi Ishmael, I’m from Melbourne Australia. Shoot me an email [email protected] with any questions.

  4. Joan says:

    Great article.. I’ve been learning and trading options for about 7 months account size 8k Long positions >6m – 1yr. it is definitely not for the faint of heart. I am pausing live trading for paper trading using the app ‘think or swim’ till I get comfortable.

    1. Gavin says:

      Paper trading is a good plan to get the hang of things. Another thing is to get Option Net Explorer so you can run backtests and see how certain trades would have performed in different market environments. You can get a 10 GBP trial via this link:

  5. Desmond Denbe Awalenga says:

    I’m Desmond, and I want you to help me make money online with small fund. I’m from Ghana.

    1. Gavin says:

      Hi Desmond, welcome to Options Trading IQ. I don’t really work one-on-one with people but feel free to ask questions here or via email.

  6. Khalilullah Babatunde says:

    I’m khalilullah I need someone to teach how to trade on expect option

  7. Desmond Lee says:

    Hi Gavin, I have been reading up on your blogs. Great articles as always.

    Desmond Lee from Singapore

    1. Gavin says:

      Thanks Desmond. Hope your trading is going well in 2021.

  8. Adrian says:

    Do you trade puts or calls and why

    1. Gavin says:

      Both. My main strategies are bull put spreads, iron condors and the wheel.

  9. Rene says:

    I have been doing call credit spreads and haven’t made any money I tend to panic when the short leg goes against me and end up closing the spread instead of waiting and giving it time ,how do you control your fears?

    1. Gavin says:

      Try having a plan for how you will handle the trade if it moves against you. Try to have everything mapped out in advance so you know exactly what you will do in any situation. That will help take the emotions out of the equation.

  10. Ashraf Youssef says:

    Great Article Gavin! Short, illustrative, straight and to the point
    Thank you for being so honest and genuine with your advices & tips…

    1. Gavin says:

      Thanks for reading Ashraf. I appreciate having you in the OTIQ community.

  11. Sanjay says:

    Looking to learn to trade and earn extra income – $1500-$2500 per month on the average (there will be losing months). How much do I need to start with to earn that?

    1. Gavin says:

      Let’s do some basic math. $2500 per month is $30,000 per year. Assuming a 15% yearly return you would need $200,000.

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Options Trading 101 - The Ultimate Beginners Guide To Options

Download The 12,000 Word Guide

Get It Now