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Low starting capital

Discussion in 'Options' started by MichaelJE, May 14, 2016.

  1. MichaelJE

    MichaelJE Guest

    Hi, I've bee reading these forums for a couple of months now and have learned a lot from the posts. I have been trading futures and have increased my account from $5,000 to a little more then $10,000 over the last year, trading when I can. I noticed that many of the active traders in these forums have much more capital that they are able to trade than I have available to me. I was wondering what you would recommend being a good option strategy to learn for such a small account (if there are any). I like the M3 trade and have been doing my own paper trading with ONE trying to learn from the videos John Locke has posted (I want to test out OV, but so far I have only been using ONE) I practice using the full 50,000 capital requirement he recommends during my paper trading. Does his M3 strategy material demonstrate how to trade with lower capital ($10,000 account)? If not, any other strategies that would work better, possibly, BB, Kevlar etc... I plan to purchase one of these programs if the strategy can fit my account size. I hope to someday get my capital to the level you all are trading at. Anyway, I enjoy trading futures but I find options very fascinating and want to learn as much as I can. Thanks for any help!

    MJE
     
  2. vega4mike

    vega4mike Well-Known Member

    You can trade the M3 & The Rock with small accounts $5000, however, this may sound strange, but you will have to be very good with your adjustments with a small account in order to trade the strategies successfully. In John's M3 course, he demos how to trade the M3, Rock & Bearish butterfly with a small account.
    On his website, if you are a member, there is a trader (Wayne Klump) who recently put up a live small synthetic M3 trade, all the configurations that occurred during the trade and an image of the T-log.
    You should also be able to trade the Rhino with a small account, just use a small number of butterflies, which obviously also means different delta adjustment triggers.
    So it is possible, you just have to make some modifications to the strategies to suit the small account size.
    Hope this helps.
     
  3. ACS

    ACS Well-Known Member

    The Road Trip is a great trade for small accounts and can be easily scaled up as your capital grows. Since the RTT is essentially an unhedged M3 placed a little further down it will give you experience in trading an M3 concept trade too.
     
  4. stevegee58

    stevegee58 Well-Known Member

    The Road Trip Trade (RTT) has a margin requirement of $1000 per lot plus you need to allocate some reserve margin for adjustments. Doing 1 lot makes it hard to adjust though.
    Dan and Tom have suggested 6 lots.
     
  5. DGH

    DGH Administrator

    I agree with ACS and with stevegee58. However, it is possible to trade a 1 or 2 lot RTT and simply make no adjustments. The trade plan is simply modified to direct the trader to exit the trade at a pre-defined small loss in a large down move, if it occurs, without hedges or adjustments. Since the strategy has a very high win rate, it will maintain its positive expectancy over many trades with this modification. The only adjustment which would be required would be the Reverse Harvey in case of an upside rally. However, if the RH is done on both sides symmetrically, there is no increase in margin requirements, and profit can be locked in accordingly and the position allowed to expire. That's why Tom and I say that, in essence, the RTT has no upside risk.
     
  6. Randy Schwartzenburg

    Randy Schwartzenburg Well-Known Member

    Most of the trades on here can be scaled down. And by doing a roll up or down of the longs (Reverse Harvey) before you add your adjustment you can keep your margin low.
     
  7. AKJ

    AKJ Well-Known Member

    If you can double your account size each year trading futures, I would just stick to that.
     
  8. MichaelJE

    MichaelJE Guest

    Thanks for all the responses! I'm going to check out some of the other strategies you guys have recommended.
    Happy Trading!!
     
  9. Venrcew

    Venrcew Well-Known Member

    How does a doing a RH protect profit with market rally? Anyone has a simple numerical trade to show how profit is made? In a market rally the brought put would be further otm and closing them would realize the lost on the two brought put. And buying another two put lower would incur another debit. How would closing the put at a lost protect profit?

    How do you know what situation is good to do a RH during the duration of the trade?
     
  10. Randy Schwartzenburg

    Randy Schwartzenburg Well-Known Member

    Most trades can be scaled up or down. The M3 also but you have use RUT and IWM which can be confusing at times.
     
  11. Teddy

    Teddy Well-Known Member

    You can trade smaller by moving to the SPY. The cost of the M3 is partially a function of the flies and the DITM long call. It is this call that makes the trade expensive. Typically, one long call might cost around $10-13K while on the SPY it would cost $1.4K in margin. The M3 for 52 DTE might require around 20 flies and a ditm call and cost $2.8K of reg-T margin. One does have to be careful of assignment with the SPY.
     

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