How Much Money Can Option Traders Make?

You can make anywhere from $0.01 to becoming a millionaire, and you can lose up to everything if you don’t have proper risk management.

The truth is, the amount of money that can be made as option trader depends on your experience, how much you’re willing to risk, your ability to do some technical analysis, and having great risk management.

According to Comparably, option traders in the US can range from $29,000 to $791,000. The median salary is around $142,000.

Is Options Trading a Good Way to Make Money?

The quick answer is yes! Option trading is a wonderful way to make money. The wonderful thing about trading options is the compounding effect.

Let’s look at this compound progress tracker tool, and see what an investment of $10,000 could look like with 33 successful trades.

In the settings page, I’ve added an account value & principal of $10,000. I’ve also configured that I’m willing to risk 10% of my portfolio in a trade, that my price target per trade is 30%, and that my stop loss is -20%.

Here are the results:

By the end of 33 trades, you can make an additional $15,750.83! That’s 150% more than the original investment.

If you’d like to play with the tool above, click here to demo it out!

What is the Most Profitable Way to Trade Options?

Typically the most profitable options are very volatile trades where the IV is high, the strike price is out-of-the-money calls or puts & it’s they’re weekly contract.

Now, the most volatile option contracts doesn’t always mean the most profitable. With high volatility, you stand a chance of losing a significant amount of your capital.

Picking monthly contracts may not move as quickly, but the premiums are higher and safer, which can provide just as much cash return as you would with weekly contracts.

Are Options More Profitable Than Stocks?

In the terms of percentages, yes. Options can give you a more profitable returns and quicker. But this really depends on how much cash you risk with options vs stocks.

For example, let’s say you make an option trade of $AAPL for a $160 call strike price, and you risked $1,000. The final result is that you got 30% return on your trade–that’s $300 in profit!

Now let’s say you purchased $NVDA stock after a huge selloff and you invested $10,000. A week from now the stock is up 10%–that’s $1,000 in return.

Even though options give you a higher return, it’s very typical to invest a lot more in stock because sound companies will not go to zero as options would.

This really depends on how much you’re willing to risk on both sides.

Is Option Trading like Gambling?

When you have proper risk management and emotional control, then option trading is not gambling. But if you go in on a trade without controlling your emotions, or understanding the basics of options, greeks, and picking contracts–then yes, you’re gambling your money away.

If you go to a casino and risk $100 on 10 red, you cannot get out of that play. You can lose your entire $100 and you’re out.

The biggest lesson I’ve learned with stock/option trading is my relationship with money. To take my net worth to the next level, I need to learn to have a different relationship with money. A relationship where I’m not afraid to risk some cash for a potential opportunity.