brokers who allow under 1000$ deposits?

[trade5656]

Who is talking about right now? I'm talking about trading the SPY options during RTH. All your examples to do with the ES, during overnight, is total bullshit because this isn't what I'm talking about. The fact that you can't even follow my examples has me really having to re-evaluate if you honestly have a clue. Furthermore, nobody is talking about striking it rich. Before you can think about increasing size, you have to prove to yourself that you can be profitable after a series of trades, so executing this series of trades is what is pertinent. Whether that series consists of ticks that are $12.50 each or $1 each doesn't matter.

Now lets just give you a very basic example from today, and once again, this is the SPY and a SPY call, so don't come back blabbing about the ES. The 228 Call is on top, the SPY shares on the bottom.

View attachment 170660

As you can see, the option has a low of about 80 cents, and a high of about $1.50. During the first hour, the spread was easily 1 or 2 cents wide. If you just so happened to buy the option in the low 80 cent range, and held on to sell close to the top, (not suggesting this is in any way possible), this would net you a max of 70 cents, or $70 dollars. Furthermore, although I'm not sure of how the math works exactly, since this was an option that was about 80 cents during the low today, it would have required less than $100 in margin. Feel free to correct me if I'm wrong because I haven't actually watched how this affects my buying power when I was experimenting with options.

Now lets flip this example around. Suppose at the lows, you wanted to short, and hence buy the Put. Here is the Put option on top, SPY on the bottom. Notice how it has a high of about 48 cents, and a low around 16 cents. I'm not an options expert and so I'm not getting into the theory behind how these things move, but I do know that if I thought that at the open there was weakness, and I wanted to short, and I bought this put for 48 cents, even if I held it the entire day, praying for a turn around, I would only be down just over $30. If I sold it for the 16 cents at the end, I would have lost a total of $32, plus about $3 in commissions.

View attachment 170661

So now tell me, how is this going to kill my account in one day? Like I said, sticking to a stop of 10 or 20 cents to simulate an ES stop of 2 or 3 points, which is what many trades do allows one to trade with real money, while using a fraction of the leverage and exposure necessary for trading the ES.

Lastly, here is a 229 Put that is perhaps more appropriate for this example since I'm talking about buying options, puts or calls, that are in the money. So if you wanted to short, perhaps buying the 229 Put would be better. We have a high of 97, and a low of 35, for a range of 62, so the most that a person could have lost today buying this put was $62, and this correlates well with the 228 call which would have netter $70 if you got the direction right and went long. This is still too much to lose for a $1000 account (the $62 loss on the put), but once again, for day trading purposes, with a stop of about 10 or 20 cents, which amounts to a loss of $10 or $20 plus slippage and commissions, is acceptable.

View attachment 170663

Thanks for great post!

Can you suggest a broker who will allow to trade options with 1000$ deposit?

 

[Zzzz1]

First of all, one rarely trades the 1 day to expiries, so let's pick the Feb 17 expiry (8 days from now). The 228 strike trades at a 4-5 cent spread. That is an instant 1.8% spread. Meaning, if you trade in and out of this contract you instantaneously lose 1.8% of your capital. Then you pay another 2 dollars or so in commission for your 1 contract (and I am making this round trip charge extra cheap for you). That's almost another 1% of the notional, traded. So you end up with 2.8% cost up-front, not including slippage. That is 280 basis points. Do you know what edge you need to make up for that?

It is completely irrelevant how much you could have potentially made in return on that day. You could have easily lost an equal amount. It comes down to your edge that you need to overcome such exorbitant execution costs. Do you know how much I pay in cash fx in G10 currency pairs? Around 0.5 pips, including commission. That is more or less around 0.5-0.6 basis points. You basically paid 466 times the execution related cost that someone would pay in trading cash fx. Now, that is an apples and oranges comparison but I wanted to show you how much you are underwater from the get-go. You can now pick a more reasonable comparison but essentially in listed index and etf options that is the execution related cost you are facing as retailer and it is almost impossible to overcome unless you have an extremely strong edge.

Furthermore, a daily swing of 5-7% (potentially much more in more volatile times) off your entire bankroll is absolutely unacceptable from a risk management perspective.

I just want to show you that even with a tiny SPY options contract you still incur huge risks relative to your meager investment and you pay huge cost to participate in this game under-capitalized. You need a very well defined and strong edge to survive with such tiny account. That is all that I have been saying.

Who is talking about right now? I'm talking about trading the SPY options during RTH. All your examples to do with the ES, during overnight, is total bullshit because this isn't what I'm talking about. The fact that you can't even follow my examples has me really having to re-evaluate if you honestly have a clue. Furthermore, nobody is talking about striking it rich. Before you can think about increasing size, you have to prove to yourself that you can be profitable after a series of trades, so executing this series of trades is what is pertinent. Whether that series consists of ticks that are $12.50 each or $1 each doesn't matter.

Now lets just give you a very basic example from today, and once again, this is the SPY and a SPY call, so don't come back blabbing about the ES. The 228 Call is on top, the SPY shares on the bottom.

View attachment 170660

As you can see, the option has a low of about 80 cents, and a high of about $1.50. During the first hour, the spread was easily 1 or 2 cents wide. If you just so happened to buy the option in the low 80 cent range, and held on to sell close to the top, (not suggesting this is in any way possible), this would net you a max of 70 cents, or $70 dollars. Furthermore, although I'm not sure of how the math works exactly, since this was an option that was about 80 cents during the low today, it would have required less than $100 in margin. Feel free to correct me if I'm wrong because I haven't actually watched how this affects my buying power when I was experimenting with options.

Now lets flip this example around. Suppose at the lows, you wanted to short, and hence buy the Put. Here is the Put option on top, SPY on the bottom. Notice how it has a high of about 48 cents, and a low around 16 cents. I'm not an options expert and so I'm not getting into the theory behind how these things move, but I do know that if I thought that at the open there was weakness, and I wanted to short, and I bought this put for 48 cents, even if I held it the entire day, praying for a turn around, I would only be down just over $30. If I sold it for the 16 cents at the end, I would have lost a total of $32, plus about $3 in commissions.

View attachment 170661

So now tell me, how is this going to kill my account in one day? Like I said, sticking to a stop of 10 or 20 cents to simulate an ES stop of 2 or 3 points, which is what many trades do allows one to trade with real money, while using a fraction of the leverage and exposure necessary for trading the ES.

Lastly, here is a 229 Put that is perhaps more appropriate for this example since I'm talking about buying options, puts or calls, that are in the money. So if you wanted to short, perhaps buying the 229 Put would be better. We have a high of 97, and a low of 35, for a range of 62, so the most that a person could have lost today buying this put was $62, and this correlates well with the 228 call which would have netter $70 if you got the direction right and went long. This is still too much to lose for a $1000 account (the $62 loss on the put), but once again, for day trading purposes, with a stop of about 10 or 20 cents, which amounts to a loss of $10 or $20 plus slippage and commissions, is acceptable.

View attachment 170663

 

[Gotcha]

First of all, one rarely trades the 1 day to expiries

And why not? Here is a selection for this Friday expiry. With the SPY being at 230.44, if we use the 230.5 calls and puts, both during this screen capture have a spread of 0.01.

The 228 strike trades at a 4-5 cent spread. That is an instant 1.8% spread. Meaning, if you trade in and out of this contract you instantaneously lose 1.8% of your capital.

Here I don't understand your math. If the spread is 5 cents, that means if you buy and sell right away, you lose 5 cents on the option, which is $5 in actual money. $5 is 0.5% of a $1000 account. Even if you add in commission, this is now $7, and still less than 1% of your account. But there is no reason to even consider this because as I'm showing you, the spread is 1 cent, and you aren't going to be getting in and out right away. You will be using some sort of system which hopefully has at least a 10 cent stop and maybe 10 or 20 cent profit, or whatever you choose. The idea is to simulate trading the ES so that in the future, when you are ready, you can trade it because you're using a similar R:R.

It is completely irrelevant how much you could have potentially made in return on that day. You could have easily lost an equal amount. It comes down to your edge that you need to overcome such exorbitant execution costs.

Of course, but it seems like what you're saying is that in order to trade, you need a bigger account. So ok, lets start with a 10k account and trade the ES. So now after 3 trades for the day, you're down 10 points, and hence $500. If you were trading this with options in your little 1k account, you're down about 60 or 70 or even 80 bucks if you want to account for lots of slippage. And although as a percentage of your account, this is just as bad, in terms of dollars, you can probably still get on with your day having lost less than $100. It should teach you that maybe you don't have a clue, or maybe your setups just didn't work that day, but the lesson is still cheaper.

I just want to show you that even with a tiny SPY options contract you still incur huge risks relative to your meager investment and you pay huge cost to participate in this game under-capitalized. You need a very well defined and strong edge to survive with such tiny account. That is all that I have been saying.

Nothing wrong with this at all, but is trading an ES contract with a 10k account any better? It will pretty much work out the same percentage wise, trading the ES with a 10k account vs. trading the SPY options with a 1k account. When you don't have an edge, its better to find this out with a 1k account than a 10k account. I do agree that slippage and commissions on the ES are very favorable, in comparison to these SPY options, but once again, from a strictly cash point of view, you will burn through less cash trading these options than you will trading ES contracts, no matter how much commissions or slippage eats away at your little profits.

 

[Zzzz1]

Goodness...

a) Why not? Because not every day options expire, lol.
b) You chose the 228 strike, so lets stick with that.
c) If you do not know how to calculate percentages then I can't help you. If you sell something at 1 dollar and buy it back at 1.05 then what is the impact on your investment? A percent impact is calculated on investment not on your entire bank account, unless you wagered your full bank account in a single trade.
d) You are disingenuous, the spread is not usually 1 cent, and you do not trade ATM options all the time which on average are most liquid. Stop playing games and be honest for one moment.
e) You did not get my point at all: Correct, buying equity index options or options on etfs outright is generally a losing proposition for retail traders. If you do not believe me then go and check how many current or former bank prop groups and hedge funds employ options trading strategies that deal with listed vanilla contracts outright. Nobody. (unless they take the opposite side of your trade). And there is a reason for that.
f) Your last point is ALSO incorrect. You conveniently ignored that you expose your account to huge swings and hence risk when you only bankroll it with 1000 bucks and even trade 1 single SPY contract. 5-7% per day on average to be precise and potentially a multiple of that on volatile days. Congratulations, you have just violated every trading rule there is and are preparing to become a lousy trader who will not survive all that long. There is only one thing worse than trading listed equity options with an undercapitalized account, which is trading binary fx options.

I made my point, take it or leave it.

And why not? Here is a selection for this Friday expiry. With the SPY being at 230.44, if we use the 230.5 calls and puts, both during this screen capture have a spread of 0.01.

View attachment 170670


Here I don't understand your math. If the spread is 5 cents, that means if you buy and sell right away, you lose 5 cents on the option, which is $5 in actual money. $5 is 0.5% of a $1000 account. Even if you add in commission, this is now $7, and still less than 1% of your account. But there is no reason to even consider this because as I'm showing you, the spread is 1 cent, and you aren't going to be getting in and out right away. You will be using some sort of system which hopefully has at least a 10 cent stop and maybe 10 or 20 cent profit, or whatever you choose. The idea is to simulate trading the ES so that in the future, when you are ready, you can trade it because you're using a similar R:R.


Of course, but it seems like what you're saying is that in order to trade, you need a bigger account. So ok, lets start with a 10k account and trade the ES. So now after 3 trades for the day, you're down 10 points, and hence $500. If you were trading this with options in your little 1k account, you're down about 60 or 70 or even 80 bucks if you want to account for lots of slippage. And although as a percentage of your account, this is just as bad, in terms of dollars, you can probably still get on with your day having lost less than $100. It should teach you that maybe you don't have a clue, or maybe your setups just didn't work that day, but the lesson is still cheaper.

Nothing wrong with this at all, but is trading an ES contract with a 10k account any better? It will pretty much work out the same percentage wise, trading the ES with a 10k account vs. trading the SPY options with a 1k account. When you don't have an edge, its better to find this out with a 1k account than a 10k account. I do agree that slippage and commissions on the ES are very favorable, in comparison to these SPY options, but once again, from a strictly cash point of view, you will burn through less cash trading these options than you will trading ES contracts, no matter how much commissions or slippage eats away at your little profits.

 

[Gotcha]

a) Why not? Because not every day options expire, lol.

I don't really know what you mean here. Who cares about when they expire. We are talking day trading it here.. in and out in 5 min, maybe an hour or two. It just so happens that the closest expiry that are ATM have the tightest spreads with the most movement. An option 3 weeks out might not move too much with a 5 point ES move, but if its expiring tomorrow, it will move much more obviously.

b) You chose the 228 strike, so lets stick with that.

What I said was trading the option that is closest to the current price since this is clearly where the spread is the tightest, as I have shown.

A percent impact is calculated on investment not on your entire bank account, unless you wagered your full bank account in a single trade.

Yes, this is exactly the whole point of this. We are talking about 1k account for day trading purposes, not an investment account. Taking a trade with a risk of 1 or 2% is acceptable. After 10 losers in a row, you would be down 20%, but hopefully you have some winners in there too. Who cares if your option gains 100% if all it does is go up 20 cents. This 20 cents represents $20 of real money, and this $20 would be 2% of your 1k account.

d) You are disingenuous, the spread is not usually 1 cent, and you do not trade ATM options all the time which on average are most liquid. Stop playing games and be honest for one moment.

That's funny, I just did a screen capture for you again, and look, still a 1 cent spread (this time on the 230.5 options since this is where price is now, but even the 229.50 is 1 cent).

Maybe you don't trade these, but someone does, and the volumes in addition to the spreads are pretty damn good.

If you do not believe me then go and check how many current or former bank prop groups and hedge funds employ options trading strategies that deal with listed vanilla contracts outright. Nobody. And there is a reason for that.

I don't know what everyone else does. You clearly aren't going to get rich trading these things, but this isn't the point once again. The point is to say, I think the market is going up so I need to get in on this move, and if I'm wrong, I want to risk $10 and not $100 because I could be proven wrong in 30 seconds and I prefer to still be able to afford lunch.

You conveniently ignored that you expose your account to huge swings and hence risk when you only bankroll it with 1000 bucks and even trade 1 single SPY contract. 5-7% per day on average to be precise and potentially a multiple of that on volatile days. Congratulations, you have just violated every trading rule there is and are preparing to become a lousy trader who will not survive all that long.

Ok, so tell me wise one, if I was going to trade the ES, how big of an account do I need? Would 20k be ok? Maybe people want to trade with a 3 point stop, maybe even 5 point stop. So lets see, if I lose 3 points I'm down $150, and if I lose 5 I'm down $250. These two figures represent 0.75% and 1.25% of the account. Maybe I put on 4 trades today, and shit, all are losers, so even using a 3 point stop, my account is now down 3% for the day. Its just as easy to have a large swing in a bigger account when trading the ES.

The point still stands. You can lose a 1k account trading SPY options just as easily as you can lose a 10k or 20k account trading ES futures, but at the end, you will be happier to have lost only 1k vs. 10 or 20k.

 

[Zzzz1]

You should be re-reading your post when you have time and couple days of rest. You are misstating numbers, draw incorrect conclusions and knit pick wherever is most convenient to your argument. Go ahead, and trade the way you illustrated. Statistics are still heavily stacked against you. You should consider a career as brokerage sales person, you already got some newbies by the balls.

I don't really know what you mean here. Who cares about when they expire. We are talking day trading it here.. in and out in 5 min, maybe an hour or two. It just so happens that the closest expiry that are ATM have the tightest spreads with the most movement. An option 3 weeks out might not move too much with a 5 point ES move, but if its expiring tomorrow, it will move much more obviously.

What I said was trading the option that is closest to the current price since this is clearly where the spread is the tightest, as I have shown.

Yes, this is exactly the whole point of this. We are talking about 1k account for day trading purposes, not an investment account. Taking a trade with a risk of 1 or 2% is acceptable. After 10 losers in a row, you would be down 20%, but hopefully you have some winners in there too. Who cares if your option gains 100% if all it does is go up 20 cents. This 20 cents represents $20 of real money, and this $20 would be 2% of your 1k account.


That's funny, I just did a screen capture for you again, and look, still a 1 cent spread (this time on the 230.5 options since this is where price is now, but even the 229.50 is 1 cent).

Maybe you don't trade these, but someone does, and the volumes in addition to the spreads are pretty damn good.

View attachment 170675


I don't know what everyone else does. You clearly aren't going to get rich trading these things, but this isn't the point once again. The point is to say, I think the market is going up so I need to get in on this move, and if I'm wrong, I want to risk $10 and not $100 because I could be proven wrong in 30 seconds and I prefer to still be able to afford lunch.

Ok, so tell me wise one, if I was going to trade the ES, how big of an account do I need? Would 20k be ok? Maybe people want to trade with a 3 point stop, maybe even 5 point stop. So lets see, if I lose 3 points I'm down $150, and if I lose 5 I'm down $250. These two figures represent 0.75% and 1.25% of the account. Maybe I put on 4 trades today, and shit, all are losers, so even using a 3 point stop, my account is now down 3% for the day. Its just as easy to have a large swing in a bigger account when trading the ES.

The point still stands. You can lose a 1k account trading SPY options just as easily as you can lose a 10k or 20k account trading ES futures, but at the end, you will be happier to have lost only 1k vs. 10 or 20k.

 

[Gotcha]

You should be re-reading your post when you have time and couple days of rest. You are misstating numbers, draw incorrect conclusions and knit pick wherever is most convenient to your argument. Go ahead, and trade the way you illustrated. Statistics are still heavily stacked against you. You should consider a career as FCM sales person, you already got some newbies by the balls.

I see, you ran out of logical arguments against mine that you could illustrate. I guess when someone puts up a picture to show you the actual spread which is 0.01, then it makes it kinda hard to keep saying that its 5 cents and keep insisting the slippage will kill you. At least you're not trying to argue with facts, but its sad you have to rely on just saying I need some sleep. Statistics are heavily stacked against most traders. I know you're probably smarter than most on here, but even a dumb trader can understand that losing a 1k account is better than losing a 10k account.

 

[W.J. Feathermaker III]

First of all, one rarely trades the 1 day to expiries, so let's pick the Feb 17 expiry (8 days from now). The 228 strike trades at a 4-5 cent spread.

Nice cherry picked argument. The 228 strike is ITM. Everybody knows that SPY options that are ITM have wider spreads. You still refuse to look at SPY options (first off, attempting to divert the conversation to ES futures options in the middle of the night). Then when you come back around to the conversation, you instantly go to the ITM option to try and validate your erroneous point.

Shall we screenshot the damn .01 tick spread on the assortment of SPY options to get it thru your thick skull?

Gotcha should reconsider his original assumptions about this troll. If this sort of "anything to admit I'm not wrong" mentality is present in his trading, he must be a serial blow up artist.

 

[comagnum]

With only a thousand dollars to trade with, your chances of winning at a casino from a game like black jack are much higher since there are fewer variables.

But it's you $, if it makes you happy than go for it. Maybe I am the one that should go to a casino?

 

[W.J. Feathermaker III]

With only a thousand dollars to trade with, your chances of winning at a casino from a game like black jack are much higher since there are fewer variables.

But it's you $, if it makes you happy than go for it. Maybe I am the one that should go to a casino?

Sure, but a guy could also buy some "teenie" deep OTM SPY call options each time this market "dips" and probably have better odds than going to the casino.