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What Can You Expect to Make on Average as an Options Trader?

The question comes down to returns on your investments and what you can expect to make.

Before we continue moving forward, I do want to let you know that you could submit your question by voice here!

Today’s question:

“Hello, I wonder what your annual return is and what I can expect as a student of you to get for any returning percent of my accounts, thank you.”

A pretty simple and direct question. I think it’s a good one to think about as you start looking at returns.

More about Return on Investment 

This comes down to the types of trades that you’re doing. For example, if you’re doing swing trading, day trading, it’s going to be different types of returns. And, of course, you have to look at the effort.

The effort that you’re putting in. Somebody who’s day trading has to be at the computer all the time. So a 6% return on an annual basis is not too bad if you only have to work one or two hours a month.

That’s not too bad, right. But let’s just say you need to work 20 hours a month and you’re getting a 7%-8% return. Is it worth the trade-off?

Always be thinking about this as we continue to go into this post more in detail. You look at it in terms of time. Managing money still takes time. And if somebody works 1 hour a month or year and they make 5%, it is that worthwhile to work 20 times as much to make an extra single percent. Sometimes yes. Sometimes no.

The answer is different depending on your situation. In either case, depending on the trading that you’re doing, you want to take a look at it and evaluate swing trading, day trading, options trading.

It’s all going to be different. When you look at swing trading and day trading, it’s going to depend on your money management skills. And also market conditions and your ability to stock pick.

That’s more difficult to estimate. Some people make as little as zero to a negative return to some people making anywhere between 5%, 10%, 15%, 50%, 200% return per year depending on how good they are.

When it comes to option trading, it’s easier to predict as far as the students that we have and as far as the people that I’ve worked with. That’s simply because of the consistency that people are looking for. And the type of audience that I’ve worked with, mom-and-pop retired people, single people. They all have different risk tolerance.

Risk Tolerance in Options Trading

That’s what you should look at. I will, on average, tell you that most people will look to make about 5% a month return on their investment.

Sometimes you’ll make maybe 7%. Sometimes you’ll make 2%. Sometimes they’ll be down a percent or two. But on average you’re looking at about 5% a month.

For example, let’s just say you’re single it’s going to depend on your risk levels. For somebody single, who’s got kids, who are retired, who are working, they all have different risk tolerances.

And depending on how you set up your trades in the same way that if you’re a day trader, you might have higher risk tolerance or a lower risk tolerance as a day trader. Everybody’s different. And you need to find the risk tolerances that match for you.

A lot of single people have higher risk tolerance. You don’t have to worry about kids. But even then, even if you’re in the high range, you still might have a low-risk tolerance of maybe 70% compared to somebody else who’s at 100%.

Look at those levels, and it just depends on you. That means you might make (if you’re at a higher level) more return on investment – maybe 16%. But you also have larger swings in fluctuation which in some months you might be down 7%-10% or more. It depends on the trades that you put on.

If you’ve got kids, maybe you’re aiming for a little bit lower return, and why is that? That’s because you don’t have the time and you don’t need the extra stress. Instead of 5%, 7%, or 16%, you might look at something maybe around 3% every month.

We’re talking about a month here because when we’re dealing with options, we’re looking for selling premium each month. That’s what we’re getting down to because we have a lot of people that are into trading options.

If you have six kids and you don’t have time, maybe you’re looking for a 2% a month return. If you’re retired, you could have the low-risk tolerance, low-risk level. It could be similar to people that have kids.

Maybe you’re at 4% or 5% return that you’re looking for. But again at a low point, you might be 3%, 2% or even 1% return per month of investment.

Everybody’s at different points. Somebody who’s a working (mom and pop because you have money coming in), you might be looking to shoot for a 6%-8% return on investment if you’re at the higher end. And maybe if you’re at the lower end, you aim for a 6% range.

That’s because you’re still a little conservative, but you have money coming in, and you’re okay risking more than the average. Here’s an average of 5%.

Trade Example 

Here’s what I’m talking about. Here’s an options trade for you. And if we take a look at the calculator, this trade’s been up for a couple of days right here. And when you look at this trade, you can see we are profitable at about $350.

The capital that we use this $4,600, and this is a skewed butterfly or broken wing butterfly depending on the terms and words you like to use.

It’s about 7% here a week or so that this trade’s been going on. You can see it’s not unreasonable and not realistic. 

Here’s another example. Here I have Netflix. This one is profitable about $58 – not extreme money, but you could see here this one also a couple of days on it about 1090 is the capital used. 

If we use a calculator and go 1090 on the capital, and then we divide that by about $58 on the profits, you’re looking at about 5%.

Of course, there are going to be some losing trades. Don’t think that you’re going to have winners constantly. And that’s the point. Out of four or five trades, you might have a few winners like this. And then you might have one or two losers.

And then, all in all, it should bounce balance to roughly about 5%. That’s looking at a person with average risk tolerance and an average decent understanding of trading options.

If you have a huge extreme risk tolerance, you’re shooting for the moon and stars; you can make more. Some people have friends and families with disabilities. Sometimes some people who are working a lot on their physique, trying to relearn to walk and rehabilitate themselves they don’t have the time to do trading as much like this. Or be a full-time trader.

They’re trying to put on one or two trades a month, and that’s it. And they might only be looking at a couple of one or two percent a month. Your situation is a little different. You have to evaluate your risk tolerance.

Ask yourself what makes sense for you. Do you like pickles on your hamburger, or do you like tomatoes or both? Or do you want mushrooms on? Do you want bacon on it? Everybody’s a little different.

Key Takeaway: You have to match up your risk tolerance with where you’re at and the type of trading and your experience. All in all, you should come out to about 5% for most people on a month-to-month basis.

Some months you might have 7% or 8%, other months you might have down one or two percent or maybe only 2% that you’re making.

Final Word

That just hopefully gives you an idea and some insight into what you could expect as an average person. You might be the exception and outstanding, and you might have a massive amount of winners.

You might not be interested in having kids. Then your returns could skyrocket, but look at your life and make your trading balanced with your life because, in the end, there is more to life than just money.

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