Can you become millionaire by trading options ?

Options are the new hype in the market, nowadays people dont want those long term slow gains. Most traders now want to capture quick momentum and multiply their trading capital in few months. But as we know with great power comes great responsibility, as lucrative these fast moving assets are, they come with a huge amount of risks also. Rich people used options to hedge their portfolio but we as retail traders have to find a way to make quick profits and grow with a good rate of return here. Let us see the method through which option trading can make you good money.

Is it possible to become Millionaire by trading options ?

The answer is yes, it is possible. But you should always consider various factors involved. The capital with which you start, theta decay, risk management, Market volatility, position sizing etc. If you Have a defined Action Plan And you manage your risk throughout. There is a good chance that you make it to the elite one percent

Disclaimer: Options trading is a risky investment, this article is not made for investment advice. All the analysis, trades and ideas shown here are just for educational purposes. Trade according to your own risk.   

What is Options Trading ?

For the people who are new in the field of trading I would give a short description of what options contact basically means. There are two kinds of options  calls And puts. I will try to explain with a simple Example. Both type of options are available at various price levels Of different stocks and Indices. Call make money when the stock price crosses above a certain price level. Puts make money if the stock drops below a certain price level. 

Minimum capital to start options trading

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About 800 to $1000 for options buying and $2000 for option selling. People can say options prices are very cheap. Even 50 to $80 options lots are available on good stocks. Why do I need so much capital to start buying options ? I would say the main reason would be To manage the risk. You should always take trades of only 5% of your portfolio. As options are very volatile, if a trade goes wrong and you hit your stop loss. You can lose 10-30% in a single day. 10% of 5% capital used per trade would be only 0.5% of your total portfolio value. Similarly if you make a profit of 30% on 5% capital used you will Increase your portfolio by 1.5%. Slowly when you gain confidence and you become profitable and start making more profits than losses regularly, You will see multiple digit returns on your Total capital invested. 

Best type of trading to make money from options

I would say scalping trading is the best strategy to make money through options buying. Scalping basically means entering and exiting trade for a really short period of time to capture momentum moves in the market.The time can range from few seconds to few minutes but we never wait for hours when we do scalp trades. When we do intraday trades the theta decay is against us. Even if you take trade on the right side of the market you will lose a lot of profits. As options prices are decreasing over time the longer you wait the more decay you have to face.

pic courtesy: tradingview.com

See in the above example i’ve shown a good example of momentum scalp, 9 and 15 EMA Strategy shows good buying momentum , successful scalp traders stay in such trades for a few candles only in a small 5 min time frame and exit with a small quick profit. In such small and fast moves only ATM ( at the money) options can give good moves. Even though OTM (out of the money) options are much cheaper but they never give results.   

If you are doing option selling then theta decay is always in your favor, you have to take long intraday trades to capture that decay. It also requires greater capital. Sellers also have to safeguard their trades by hedging through OTM option buying.

Options sellers work a lot on probability as they want to take safe positions in the market. As a beginner if you plan on option selling, then first and foremost you should get a brief idea of buying. 70-90% of the day’s market index doesn’t move significantly. 1.5% up and down current market price calls and puts respectively on both sides are good options to sell on indexes. People with good investment capital use option selling to compound their wealth slowly.

Master plan to becoming a millionaire in the stock market from options.

Step 1: Have a good alternate source of income 

First and foremost if you are new to the market and you have a decent capital, never think of making the stock market your main and only source of income. Many people leave their jobs before confidently learning to trade, this leads them in huge losses as they have a lot of pressure to pay day to day bills and expenses through trade profits. Most beginners take risky positions that lead to non-recoverable capital losses, keep your day job or business going so you can have a nice revenue stream that can put food on table and even compensate your small losses from trading.

Step 2: Focus on learning options trading 

Have a lot of patience before putting a single money in the market. Invest some money just to start learning markets. If you want some good options trading book recommendations, you can go to this finance best picks section in my blog. Books will always be your best friend. Traders who have made it big have put all their trading journey experiences in a few pages. Only a few of the courses are worth investing in, rest all of the expensive courses by gurus are not worth putting money in. So you can’t rely solely on them. 

Step 3: Start small, but start now 

While you are learning, put the least amount of money possible on your concepts. Test your concepts for 90 trading sessions straight. Always start with the equity market with no margin, then you can take some margin after a few days. The goal here is not to  make money but testing the probability of your trading plan. If 70-90% of your trades become profitable then only you can think about going to the derivatives market. Have a strong grip and confidence on your plan first.

Step 4: Risk management wins the game 

If you listen closely to most of the successful traders, why do all of them say that managing the risk made them fortunes ? Even if your setup is 90% accurate, if your risk management is poor the 10% trades can wipe out all your gains. My favorite book on risk management is trading in the zone by mark douglas. He has told in detail about  how to have self control and treat trading like a business. Only professionals make money in this market, if you ever take revenge trade or lose balance you will lose all your capital to the ocean of stock market. 

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Step 5: Trading should make you capital for investing

Your trading capital should always be max 5-10% of your total investments, rest should be distributed in assets such as equity stocks, debt, real estate etc. For the first few months you should focus on staying afloat, any penny you make you should put in safe assets. This is the plan most successful traders used to make empire in the wall street. 

If you read till the last you are amazing enthusiast of stock market and have a keen interest in the field of finance, if you want to stay updated on learning market, do bookmark my blog for further interesting updates. Thank you for your valuable time

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Hi there, i am a content creator and a part time trader. Ive been researching on trading setups and executing them in live markets. I focus mainly on swing trading.

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