Options trading has become very attractive in recent times as more people continue to look for ways to make a nice income from the financial markets. The entry barrier is no longer as high as it used to be, so more people are getting in with far smaller account sizes compared to a few years ago. But how small is too small, and is it possible to trade options with $100?
You can trade options with a $100 account. However, it requires a deep understanding of the markets and having the skill to pick high probability trades. Such an account balance limits the strategies and approaches a trader can deploy, and trading commissions have a weightier impact on results.
There are a few stories of traders that have turned tiny options accounts into decent sums across the web. Is it possible to replicate their success? In this article, I’ll cover everything you need to know to make it happen.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
Why Trade Options With $100?
There are a few reasons why anyone would want to venture into options trading with just $100. They include the following:
Learning the Ropes
If you’re just getting your feet wet in the options trading market, it makes sense to start with some test funds to understand the market before committing more money. With $100, you can test out a trading strategy without fear of accumulating heavy losses.
Some people may suggest going with a paper trading account instead. Still, a small account with $100 is more likely to teach you more about trading emotions and discipline than a practice account with notional funds or plain paper trading.
After you’ve significantly grown your $100 account, you’ll be in a better position to achieve good results trading with a more sizable account.
Starting With an Affordable Balance
Some people genuinely can’t afford to trade with more than $100. Think of the school kid that’s dabbling in the market with some saved-up lunch money. In this situation, there’s no $5,000 sitting somewhere in holding. The success of their trading career relies on how well they perform on the $100 account.
Is It a Good Idea To Trade Options With $100?
Like most aspects of the financial trading world, there are two sides to this coin. If you can only afford $100 for your options trading account, then it’s a good idea to start with it. However, there are a few bottlenecks you have to navigate. They include the following:
Finding a Broker
You need to find an options trading broker that’ll allow you to fund your account with $100, which is a lot easier to do today than a decade ago. While many options brokers require you to have a minimum account balance of $2000 or more, there are quite a few that don’t have any such limits.
Some brokers with no deposit requirement for their customers may still require you to have a certain amount in your account to trade a full options contract. Remember, many of the popular names like RobinHood and Webull offer other products. The conditions for stock trading will likely be different from what’s on offer for options trading.
If you find an options broker that has no deposit limits, watch out for the catch. You need to find a broker that’ll accept the $100 deposit without using a plethora of rules to make trading with the money very difficult. Read reviews and choose a broker that ticks all the right boxes for you.
Developing a Strategy
After you’ve found a broker, the next step is to develop a trading strategy that’ll help you make consistent profits with your money. Unfortunately, the type of strategy and approaches you can work with on such a small account is severely limited.
Most of the time, you can only work with directional options strategies, and you’ll need to use some leverage, which is a double-edged sword. The lack of flexibility with strategies can influence your chances of success a great deal, and directional strategies typically lead to lower payouts.
Dealing With Trading Costs
Most options brokers now use the “No Commissions” tagline to attract customers. However, once you settle in with any one of them, you can see where they make their money from.
While some of them charge fees to buy or sell options, others require you to pay an account upgrade fee before you can access some platform features that can help in your trading. You should also expect to pay higher spreads for the trading liquidity provided.
When you put all of these together, your $100 account is already under significant strain before you’ve made any profits or losses. Even when your trades end in a profit, the spread on your position can knock off a further 10% of your profits.
Battling Indiscipline
After you’ve found an options broker with the right trading conditions and developed a strategy that gives you an edge in the market, your success or failure will come down to how well you can manage your risk and stay disciplined while following your strategy.
People with a $100 trading account are more likely to adopt a cavalier approach to trading. They try to make as much money as possible from the (often heavily leveraged) positions without any attention to the risk implications.
It’s no surprise that very few people have managed to turn a $100 options trading account into 4-5 figure sums.
Can You Succeed With a $100 Options Trading Account?
Looking at the challenges of a $100 options trading account I’ve covered above, you may be wondering if there’s any chance of success with such a small account.
Unfortunately, there’s no right answer here. You need to first decide what success means to you. Do you want to turn the account into 5-6 figure sums in a couple of years? There’s an extremely low chance of achieving such success.
A quick look around online will show you that very few people have completed such a feat. You’ll find some traders claiming to have achieved something similar, but verifying their results is often impossible.
If succeeding with your $100 options trading account means achieving decent returns over the long term, you’re likely to succeed if you have a sound foundation and continue to treat your trading with the professionalism it demands.
You won’t become a millionaire quickly, but you can generate stable returns and become a much better trader.
I always recommend targeting modest monthly returns and working your way up. Most hedge fund managers will give anything if you can guarantee them 20% a year returns. Why would you want to try to make 10,000% in a year? Always look at the percentages instead of the dollar amount.
Some directional strategies can net you 3-5% monthly without putting your small account under excessive risk. If you can consistently use one of these strategies and stay disciplined, your $100 may be worth up to $10,000 in 5-6 years if you compound your gains.
You can speed up the process by putting more money into the account once you’ve grown in confidence and know-how to generate stable returns every year.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
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Conclusion
You can trade options with $100, but it requires a lot of discipline and patience. Such a small account is more challenging to trade because the trading conditions at most brokerages will limit how much wiggle room you can enjoy with trading strategies.
You’ll need discipline and patience to stick with a trading strategy that works and keep compounding your small profits over time.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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