Trading Options for a Living - Step by Step Guide (2024)

Trading options for a living is possible if you’re willing to put in the effort. Traders can make anywhere from $1,000 per month to $200,000+ per year. Of course, many traders make more, but it all depends on your trading account size. Day traders typically trade weekly options contracts that expire short-term within 1-2 weeks, and swing traders typically trade monthly contracts that expire in 1-2 months.

Trading Options for a Living - Step by Step Guide (1)

Table of Contents

    • Options Trading Course
  • Basics of Trading Options for a Living
    • Popular Online Brokers
    • Tips for Trading Options for a Living
    • Basicsof Trading Options for a Living
    • How Long to Hold
    • Final Thoughts on Trading Options for a Living
  • Frequently Asked Questions

Options Trading Course

In this course, you'll learn how to buy and sell options, options assignment, vertical spreads, the most popular strategies, and prepare for live trading action.

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Basics of Trading Options for a Living

  • Trading options for a living? Here’s how you can make it:
  • First and foremost, make sure you study options
  • Determine whether you are long or short-biased
  • Determine your risk management tolerance
  • Find out what options strategy you’re drawn to most
  • What are you looking to make per year?
  • Break it down to daily income goals
  • Calculate what options strategy will help you realistically reach your income goal
  • Stick with your daily plan, cut your losses quickly, and let your runners run
  • Options trading for a living is hard but is doable with the proper discipline and mindset

Popular Online Brokers

COMPANY Trading Options for a Living - Step by Step Guide (2) Trading Options for a Living - Step by Step Guide (3) Trading Options for a Living - Step by Step Guide (4)
DESCRIPTION Experience TradeStation's professional-grade options trading platform, built for serious traders seeking value and power ThinkorSwim is for more advanced options traders. It features elite tools and lets you monitor the market, plan your strategy, and implement it in one convenient, easy-to-use, integrated place Leading online trading solutions for traders, investors and advisors, with direct global access to stocks, options, futures, currencies, bonds and funds
HIGHLIGHTS Solid overall trading platform • Ease of use • Reliable • Great customer service • Low commissions
Top charting platform • Customizable scanners and indicators • Easy order entry • Reliable • Great customer service • Low commissions
International • Ok customer service • Solid order executions • Low commission fees • Good short locates

Tips for Trading Options for a Living

In this blog post, we will talk about trading options for a living. If you’re wondering if I can make a living trading options, you can trade options full-time and make a comfortable living. But first, you must know how to properly trade put and call options.

Learning technical analysis is key if you’re looking to enter the wonderful world of trading options for a living. Finding your entry and exit strategies is the best way to make a living with stock options. When holding options contracts overnight, buy near the close of the day.

Buying as close to the 9 EMA (exponential moving average) gives the best momentum entry possible. You’re buying at moving average support. Trading weekly options is also a popular options strategy.

Trading Options for a Living - Step by Step Guide (5)

You can see in this example we have $AMD breaking out above the light blue (9 EMA) moving average and running to the top of the trend channel (orange line) resistance before trading sideways and eventually selling off to the 50 SMA (Purple line) support.

Basicsof Trading Options for a Living

When purchasing an options contract, look at the daily chart and pay close attention to the indicators. If they are bullish, buy a call as you believe that stock will go up the next day. If they are bearish, buy a put as you believe the stock will go down the following day.

For example, I use the 9 EMA, 20 EMA, 50 SMA, and 200 SMA on my daily charts. So, if I see that the price is rising above the 9 EMA and there are no moving average crossovers, I’ll consider that a bullish sign.

I also examine the RSI (Relative Strength Index) and the MACD (Moving Average Convergence Divergence). The RSI shows whether the stock is overbought or oversold. MACD shows the trend of the stock. Lastly, I draw trend lines and find patterns and horizontal resistance levels.

You’ve reviewed all the indicators and know how you believe the stock will move. However, you’ll need to ensure you give yourself enough time on your options contract for your plan to materialize.

Initially, I was stuck when I needed more time on the option. All options expire. That’s why selling options is a great trading strategy.

So, if you choose an options contract that’s only a couple of days away, yes, that may be cheaper, but you don’t have the wiggle room if the stock takes longer to move to your profit zone.

I love trading options for a living. You can get in on the action of high-priced stocks that trade at a price level that would otherwise be outside of your budget. For example, you may not be able to buy even one share of Amazon, but you could afford a call or put option at around $500.

Trading Options for a Living - Step by Step Guide (6)

Above is an options chain on $AMZN showing several strikes. Options traders look at the bid vs. ask to get the best entry on the contract they are trying to buy. Because $AMZN is expensive and moves so much (dollar-wise), the bid and ask are usually wide compared to the popular ETF $SPY.

How Long to Hold

Something to consider is how long you plan to hold the option. You can trade the stock option or hold it for a swing trade, depending on the setup. Although options are used mostly for swing trades, if you buy an option in the morning, sometimes taking profit the same day is the best course of action if resistance is encountered or a desired profit level is achieved.

I use FlowTrade to spot hidden divergences and learn what the “smart money” is doing throughout the day. That way, I am not caught off guard when a stock drops, and thus, the value of my option!

Trading Options for a Living - Step by Step Guide (7)

If you’re trading options for a living, taking your profits and not letting greed get a hold of you is paramount. Unfortunately, I know from experience that wanting a larger profit rather than being happy with the smaller profit level can cause you to lose much of your option’s contract value.

Not every options contract is going to make you $1,000. Sometimes it’s $150. Sometimes it’s $50. You never go broke taking a profit. You can always re-enter that trade if you like the dual setup. Please keep it simple. Buy at support and sell at resistance.

We teach how to map out support and resistance on our live daily streams. Check out our trading service to learn more.

Trading Options for a Living - Step by Step Guide (8)

Stock Signals & Alerts

The Bullish Bears offers our community members stock signals, scanners, and Discord bots. These advanced tools can be used once you've learned your trading style in our courses.

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Final Thoughts on Trading Options for a Living

Trading options for a living can be an emotional roller coaster. Watching the price action fluctuate can wreak havoc on your emotions and cause you to panic sell or FOMO buy. For example, I have watched a stock climbing and thought I had better get in because I am missing a big profit, only to buy at resistance and watch that stock fall back to support.

I also had an option contract that I applied proper technical analysis on before buying and got a good entry, but the news made the stock fall, and I panicked for a loss. Then I watched it climb back up, and I could have made a profit.

Trading Options for a Living - Step by Step Guide (9)

Here, we traded $DKNG using the stock price on the left and the options chart (32 calls) on the right! We identified support and resistance and went long while DKNG was in a channel and bought before the breakout!

Trading options for a living is rewarding, but to be successful at it, you need to make sure that you follow proper technical analysis, including finding the proper support and resistance levels. Technical analysis is your friend! Please remember your emotions as you watch price action move throughout the day. If you give yourself enough time (option decay time) and follow the technicals, you will turn a profit. And remember to take your profit when the time is right!

If you need more help, take our options trading course.

Frequently Asked Questions

How Much Money Do You Need to Trade Options?

  1. Here's how much money you need to trade options for a living:
  2. If you're looking to make unlimited day trades, then you need at least $25,000
  3. If you are going to be a short-term swing trader, then you'll want at least $10,000
  4. $5,000 is good for small accounts but will make it a bit difficult to create a living
  5. Having the money is great, but what's most important is proper risk management

How Much Does an Options Trader Make?

It's realistic for an options trader to make at least $100,000 per year or more full-time, but it's important to realize that most traders won't make this amount. It takes hard work, mental discipline, and proper capital for a trader to make this kind of money. The average trader makes between $1,000-$10,000 per year trading options part-time.

As a seasoned options trader and enthusiast, I bring a wealth of first-hand expertise and a deep understanding of the intricacies involved in trading options for a living. I've successfully navigated the challenges and opportunities presented by the options market, and my knowledge is grounded in practical experience.

Now, let's delve into the concepts discussed in the provided article:

1. Basics of Trading Options for a Living:

a. Study of Options:

  • Emphasizes the importance of studying options thoroughly.
  • Highlights the necessity of understanding whether one is long or short-biased.

b. Risk Management:

  • Stresses the significance of determining risk management tolerance.
  • Advocates for selecting an options strategy aligned with individual risk tolerance.

c. Income Goals:

  • Advises traders to break down yearly income goals into daily targets.
  • Encourages realistic goal-setting based on the trader's account size.

d. Discipline and Mindset:

  • Acknowledges the difficulty of trading options for a living.
  • Emphasizes the need for discipline and a strong mindset.

2. Popular Online Brokers:

  • Provides information about reputable online brokers:
    • TradeStation: Professional-grade platform for serious traders.
    • ThinkorSwim: Advanced tools for experienced options traders.
    • Online Trading Solutions: Offers direct global access to various financial instruments.

3. Tips for Trading Options for a Living:

a. Technical Analysis:

  • Emphasizes the importance of learning technical analysis for successful options trading.
  • Advises on finding entry and exit strategies based on technical analysis.

b. Options Contract Holding:

  • Recommends buying options contracts close to the 9 EMA for the best momentum entry.
  • Discusses the strategy of holding weekly options for trading.

c. Example of Technical Analysis:

  • Provides a visual example of technical analysis on $AMD, using moving averages and trend channels.

4. How Long to Hold:

  • Discusses considerations for the duration of holding options contracts.
  • Highlights the flexibility of trading options for swing trades or day trading.

5. Final Thoughts on Trading Options for a Living:

a. Emotional Roller Coaster:

  • Describes trading options for a living as an emotional roller coaster.
  • Advises on managing emotions during price fluctuations.

b. Importance of Technical Analysis:

  • Reiterates the significance of proper technical analysis, including identifying support and resistance levels.
  • Encourages using technicals as a guide to successful trading.

6. Frequently Asked Questions:

a. Capital Requirements:

  • Addresses the amount of money needed to trade options for a living.
  • Differentiates requirements for day trading, short-term swing trading, and small accounts.

b. Potential Earnings:

  • Provides realistic expectations for options traders' annual earnings.
  • Stresses the importance of hard work, discipline, and proper capital for substantial earnings.

In summary, trading options for a living requires a comprehensive understanding of options, risk management, technical analysis, and the ability to manage emotions. The article provides valuable insights and practical tips for individuals looking to pursue a career in options trading.

Trading Options for a Living - Step by Step Guide (2024)
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