The answer to this question depends on several factors. Regardless of your account size, it’s essential to have sufficient funds to trade consistently and manage potential drawdowns for your chosen SPX trading strategies. To determine the appropriate account size, consider these two key questions:
Are you using margin or cash account?
If you’re using a margin account, you’ll be designated as a pattern day trader, which requires a minimum balance of $25,000 as set by the SEC. In contrast, a cash account avoids these restrictions, enabling smaller accounts to participate in day trading without limitations. Cash accounts can effectively trade SPX or SPY options, and our SPX trading strategies are designed to work seamlessly with cash accounts. This means that even those with smaller account sizes can engage in day trading—the key is to avoid using a margin account.
Do you plan to trade SPX or SPY options?
Basically SPX options are more expensive and so require a larger account than SPY options. The amount required to trade just a single SPX option contract on expiration day can range from $1,000 to $2,500 or more. If you trade the SPY the amount required to trade a single contract on expiration day can range from $100- $250 or more. On SPX credit spreads there is a $500 margin requirement per contract.
Remember, each trade is risky, and a trader can potentially lose 100% of what is invested in any single trade. In our own trading we always use stops and we share those levels with our members. However, one should always be prepared for the worst case scenario. So, never trade more than you can afford to lose. It is important to be able to withstand the drawdowns in day trading options. Our own approach is to never risk more than 5% of our trading capital in any single trade. But each trader is different, and you must make that decision yourself. If you are interested in reading more about how we approach account size, be sure and check out this link.