The Challenge – Swing Trade Options from $1,000 to $10,000

My journey begins here. There’s are a lot of so called “experts” out there offering paid trading ideas, but do they actually make money? How much money can you make swing trading? How do you know who to trust? I seek to answer all of those questions by providing proof that my ideas are good, that money can be made swing trading, and that myself and any other traders on this website can really put their money where their mouth is.

A quick note, I’ll be updating my progress often, and if you’d like to receive updates on mile stones please join our mailing list by scrolling to the bottom of the page. Also, give us some pub on your favorite stock trading forums!

1000% Gains Challenge

The challenge is simple. Start a brand new cash account (non-margin) and fund it with $1,000. Trade that account with the methodology you believe in, and prove that it works when your account reaches $10,000. This is a gain of 10 times your starting capital. This is a demonstration of quality trade ideas, and risk management strategy.

We really don’t want this to take any more than 6-12 weeks, but it’s also important to be mindful that if the balances dip too low too early it could mean reaching a point of no return. Leverage will be an important factor in getting quick returns, but this leverage will require that we stay extremely disciplined with our risk management strategy. Leverage comes in a variety of shapes and sizes. For me, leverage means options. For you, leverage may mean margin, futures, or forex.

I’ve broken down my strategy into 3 stages.

Funds $0-$2,500: Option Contract Type & Position Size

My biggest concern is turning the first $1,000 into $2,500. I believe that from then on it will be smooth sailing. Therefore, I will be limiting myself to certain options strategies for the first $3,000. After this goal is exceeded, I’ll open up additional strategies. I will be playing long calls and puts as well as some calendar spreads.

Long calls and puts will be for strike prices that are ITM (In the money), or ATM (At the money). In my everyday trading account, I love speculating on far OTM (out of the money) long calls and puts, but for the first $2,500 we need to primarily be concerned about capital preservation. We’re not going to hit any 500% winners, but we’re certainly not going to lose any more than 50% of our original investment. We’re going to be looking for middle of the road Delta, and lower than average Implied volatility. That last part is going to eliminate any earnings plays. I’ll be a little bit flexible on my DTE (days until expiration), but in general I’ll be looking at staying in a trade for 1-4 days and buying contracts that have at least 14 DTE to minimize theta risk while keeping contract prices down. We’re going to look for charts in channels up or down and swing trade in the direction of the channel, but only after confirmation of pivot.

Calendar spreads are going to be an important part of our early strategy because of their attractive and easy to manage risk profile. We want to sell some premium that has only a few DTE which will largely consist of weekly contracts on high liquidity stocks. We’re going to look at contracts with ATM strike prices with a quick short leg expiry and at least 7-14 DTE on the long leg. Most importantly, we’re going to try and find charts with price approaching trend lines and that will likely bounce. We want high confidence that our short leg will expire worthless while our long leg retains most of it’s value.

Position sizing will be limited to 25% of our funds no matter what. This is very high, but we are still paying flat rate commissions and have a bid ask spread to beat. This stage of the challenge is the most precarious, which is why we’re playing options contracts with better risk profiles. The way I see it, we need to be winning 3/5 trades in order to stay above ground, but of course we’re going to be targeting better to start making some good progress.

Funds $2,500-$5,000: Option Contract Type & Position Size

At this level we’re going to allow for a little bit more speculation. We will be reducing the raw dollars risk, but we will open up to buying long calls and puts that are a little bit more speculative in nature. This means slightly OTM long calls and puts with less DTE, and now some vertical call and put debit spreads. We can now tolerate higher IV, which will bring some less exciting earnings plays into the mix. This will reduce our win rate, but will also see an improved risk-reward ratio.

We’re going to start targeting breakout patterns more aggressively in our chart search, but we’re more likely going to wait for confirmation than speculating on the breakout itself. This will be more about knowing price targets and how much room is left in analyzing our risk-reward ratio to determine if it is adequate. No catching falling knives, no shorting over bought stocks just because they’re over bought.

Position sizing will drop to 10-20% of our funds. A win rate of 3/5 will mean real good progress because being a touch more speculative should help us see a higher return rate. This stage of the challenge is less precarious because we can always revert back to our lower fund strategy and readjust if we’re not seeing the results we need.

Funds $5,000-$10,000: Option Contract Type & Position Size

It’s the home stretch. At this point, we’ll allow full speculation knowing that we have the capability of sustaining a few more losses in exchange for higher gains. Naturally we can be a little more aggressive on higher IV earnings plays, but we’re also going to apply our same basic swing strategies to stocks with more volatile options contracts such as FAANG, TAN, and the like.

We can’t forget the basics at this point, and what has gotten us to 5x our account balance in the first place. Part of what’s allowing us to be more speculative and capture big moves is that fact that we have a steady stream of income coming in from the boring calendar spread and low volatility ITM, ATM contracts that got us here in the first place. We always want to keep at least half of our funds in safer, lower risk, lower return kinds of plays. This is the aspect of our $5,000-$1000 trading strategy that is going to require the most discipline because the finish line could potentially only be one win away, but these are not high probably wins.

Our position sizing for calendar spreads and low risk options is going to drop to 10-15%. Our position sizing for speculative plays will be 5-7.5%. Our account diversity will be at minimum 50% quality contracts, and the remaining could be more speculative. We’re going to target winning 2/5 speculative plays, and remain at 3/5 or better on our lower risk spreads.

Updates

I’ll be updating several times a week with my progress whether it’s good or bad. Join the mailing list at the bottom the page, and wish me luck. Do you have any interest in taking on the challenge? If so, let me know in the comments.

Good luck!

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