What Can I Realistically Make My 1st Year Trading Stocks And Options?

stock options

The only reason anyone starts trading stock options is to make money, and one of the most common questions people ask is “What can I realistically expect to make in my first year of trading?” It’s a critical issue, but you probably won’t like the answer very much.

I don’t know.

There is no set figure on what you can make in your first year as there are so many variables. However, what I do know is that without proper trading education and a solid trading plan, you are probably going to lose a couple of years’ worth of income.

New traders tend to dive in, investing their hard earned money day in and day out and unfortunately, most of them end up having to learn the hard way – hell I did myself when starting out. But, it doesn’t have to be that way.

What Would Be A Realistic Earning Expectation For Trading Stock Options?

Let’s face it every trader starting out will have hopelessly unrealistic expectations if they haven’t done their homework. Whether it’s from films and TV shows about trading, or mates down the pub, or wherever the incorrect information comes from, it fills people with false hope and expectations when setting out in trading stock options.

Just because someone traded 1 penny stock five years ago does not mean that a 454% return is normal or even expected. I’ve even had people ask me point blank if making a 25% return each month is reasonable – um let’s see. . . NO!

Starting off your trading career with unrealistic expectations inevitably will lead to failure.

It’s better to face reality now than be blindsided later. I would say a realistic goal would be to aim for around 20-25% return per year… not per month!

Start The FREE Course on "Options Basics" Today: Whether you are a completely new trader or an experienced trader, you'll still need to master the basics. The goal of this course is to help lay the groundwork for your education with some simple, yet important lessons surrounding options. Click here to view all 20 lessons ?

What Do I Need To Know To Make My First Trading Year Successful?

Let’s stop talking about how much you’ll make or not and start focusing on education. You need to learn how to trade stock options successfully before you put a penny into the market otherwise you will fail. It’s like any other skill or challenge; you find out how to do it first before you take part.

As a starting point, listen to this podcast which should help you to put together a game plan and aid you to hack through the options trading learning curve in 3 months. Surely it’s worth spending time learning, rather than rushing in feet first and losing money because you were too impatient? We lay out the complete framework in the podcast and notes page.

Next, sign up as a free member to check out our Beginner Video Track which takes you through everything you need to know as a new stock options trader.

Make sure you set yourself a trading plan and educate yourself to have the best chance of success in your new endeavor. Learn about technical analysis and trading psychology now.

Trust me it will make things much easier down the road.

New Trader – First Year Checklist

  1. Learn to avoid the common mistakes

The figures are a little off depending on who you talk to, but around 80% to 90% (maybe more) of traders end up losers and leave the business altogether. So figure out why they fail and learn to avoid the common mistakes early. On a positive note, take the time to find out how the successful trader’s trade, the techniques and strategies they use, and any other tips that help you move away from the greater majority.

  1. Accept that you will incur losses

Only a small number of traders are profitable, and that number gets even lower if you look at a 3-5 year average that measures consistency. Don’t get discouraged, we all fell off the bike before we learned to ride it, right? If you are just starting out, you should expect to incur some losses as you climb the learning curve. No question about that. However, what matters the most (and differentiates you from many other traders) is learning from the mistakes and continuing after failing.

  1. Paper trade first with a small amount of money

I always tell my beginning coaching students to paper trade everything first. This way, you learn how to enter orders, adjust trades, and more importantly learn from your mistakes without losing real money. And even then, you need to keep it small once you decide to invest real money. If you can’t trade profitably with $1,000 how in the world are you going to make it with $100,000?

  1. Trade consistently – don’t walk away from a small losing streak

Again, I see too many people quitting after a streak of 4-5 losing trades. What? You didn’t think this would be a walk in the park, did you? Come on people, losing money is part of the game. It’s how you manage your losses that make all the difference. Besides, it is impossible to predict price movements consistently (which is why our strategies don’t need the requirement for success). Listen to the technical indicators, control your emotions, and above all…preserve your capital!

  1. Don’t expect to become financially independent overnight

Don’t you think it’s completely unrealistic to expect a small account, say under $5,000, to generate consistent income to replace your regular job? I sure do. Rather, concentrate on low-risk, low-frequency trading with income-oriented trading systems. The key to success with options is keeping your trades consistent, and trading them persistently.

  1. Develop your trading strategy based on facts

One of the most effective ways to succeed in options trading is by having a sound trading methodology. Take time to sift through most of the information available on the internet and conduct factually driven research on trading stocks and options. This way, it will be easier for you to set realistic income goals and avoid making too many mistakes. Don’t let your emotions get in the way of the math.

What Were Your Expectations When You Started Trading Stock Options?

Share your expectations here, however crazy they might seem now – if you have been trading for a few months how has it been? Share your stories and experiences with us in the comment box below.

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he’s a Full-time Options Trader and Real Estate Investor.

He’s been interviewed on dozens of investing websites/podcasts and he’s been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and two daughters.

  • Joe Bracco

    Sounds like a plan to me! Great work!

    • Kirk

      @Joe Bracco, Thanks Joe. The reality is that if you break-even your first year trading then you did really good. But most people will have an “education” and take a loss. Stick with it though!

  • Great post Kirk,

    If you:
    a. dont understand the share market (as of course these are derivative products based on underlying equities)
    b. Dont understand how the options market works including how options are priced
    c. Short your learning for each strategy – master each before you move to the next
    d. dont have a written trading plan for EVERY options strategy
    e. dont follow your trading plan
    f. Dont have s system to choose the right strategy for prevailing market conditions and YOUR personal circumstances (for we all know there are many options stratgies you can use on a technical buy signal for example)
    g. Dont have an options specific position sizing calculator (and it needs to be more than just dividing your capital into chunks)
    h. Dont have a method to record your trading (and this is MORE than P/L ..we want your decision making processes recorded)

    Miss any of the above your expectations should be you WILL lose!..simple

    Do them all..and you will know what you can realistically expect after 3-6 months of trading.

    It is complete folly to state a $ figure it is meaningless and will always be unrealistic..celebrate great decision making consistently and what can be real for you will become clear… Be the trader you can be (in attitude, diligence and discipline x Do the right things consistently = results will follow automatically.


    PS My expectation is most who read this will not take action nor will even take it seriously enough to use it to review their own trading..rather they will believe the ”used car salesman” who bring a bad name to those who are REALLY interested in educating, will perhaps add another indicator for of course that is bound to make a difference to mediocrity in results ..NOT.. or simply look to the next new vehicle to trade:-)

  • ty

    Im a 18 year old college student. Is it unrealistic to think I could make roughly $500 to 1000 a month purely by trading stock?

    • Depends on how much you start with in your account but probably trading stocks that might be unrealistic

      • disqus_82nORETPLU

        lets say we started trading with 500 dollars, would it be possible to make 1000-1500 a month then? even if we nickel and dimed our way to said goal…

      • Is this even a real question? No way! Find me any system that comes close to that overtime and I’ll pay you the difference. You cannot expect to start and account with $500 and make that kind of money!

      • Sahil Sooknandan

        I’m a grad student and I’m also expecting the same outcomes. What will be a reasonable amount to start an account with?

      • Even as little at $1k is reasonable just don’t expect to make another $1,000 off that :)

    • Praveen

      Mate, even if you are a professional/active Option trader earning 100% on a monthly basis is pretty unrealistic. However, 5-7.5% isn’t unreasonable if you’re an active trader!

  • Sue

    Hi Kirk, I think you will find a lot of people are thinking exactly the opposite to what you believe. I am one of those people that have avoided educating myself about the stock market because my expectations are that you make $0.00 money from it. I have made my money from real estate. I really enjoyed reading this though, so I am going to subscribe. Some people have the same unrealistic expectations in real estate. I built my wealth and knowledge up over 30 years and tell people ‘go slow and don’t get burnt’. I had no opportunity for education and therefore no way of earning a decent wage so I had to learn how to make extra income but if I were young, I would just concentrate on my education and getting a well paid job as top priority. Maybe this will teach me how to get a few extra bucks in my retirement which I could pass onto the kids, that would be nice.

    • Thanks for the honest insight Sue (and for subscribing of course!). I agree, an education in any particular area of investing is needed badly.

  • Thanks for adding in here Stephen!

  • Thanks for comment!

  • I agree – I would hate looking at them every day too!

  • ken

    good basic intro to options …yes there is to much hype out there regrading options …my advice paper trade until you are getting 7/10 trades in profit before investing real cash…patience is crucial…

  • That’s great!

  • it depends the way how you are looking to the time,means how you are looking to one year.According to me one is long time where you can actually achieve the success and many more.

  • neled10

    Hi Kirk,

    Is it true and possible for some people to make 3% per month consistently? Do you know anyone that does it?

    • Depends on the market you are in but it’s possible though not consistently month after month at the exact same rate. Could be higher or lower each month.

  • James

    I have just left uni and am looking into trading to try and generate some capital. I don’t really know what to expect at the moment. I have spent around a month so far on research and plans to make. Is it realistic that starting with £200 I could make £50 from that by doing day to day trading in a month?

    I want to start small before I actually commit a real amount of money. Until I can actually get the hang of not losing a small amount of money, I will then consider putting more in. After all it is essentially strategic betting

    • No James it’s not. That’s a 25% return per month and not realistic unfortunately. I agree though that you have to start small and 25% per year is a better target.

      • James

        Ah ok thanks. I came across Binary option trading which sells itself as stock trading but in reality it’s not. So many people rush into things like this and lose so much money because they didn’t do their homework. Thanks for the reply anyway

      • Yep I agree – don’t rush take your time and do it right.

  • Nick P

    Hi Kirk,

    I am about to take a equity day trading job just out of college. I will be starting with $100,000 buying power and my pay is all commission based. I understand I will not be profitable everyday, but right in the beginning is it a resonable aim to try to make $2000 in the first month if my strategy is momentum trading? I am not trying to get greedy everyday to max out my profit. If I make enough return ($500+) at any point in the day then I prefer to stop trading. I am asking because no one can give me an honest answer of what to expect.

    • Here’s my honest opinion – be careful. Most of these firms use $100k to quickly vet out those who are good from bad and then they will cut you lose quickly. If you are just trading stock (and no options) it’s going to be very hard to day trade profitably. The more trades you make the worse your statistically likelihood of making money will be because more occurrences means that your theoretical win rate will get closer to 50/50. That said you are better of (though marginally) making position trades long or short for longer periods of time. Even better still you are better off to use options.

  • Sure maybe luck or good judgement. I just know that long term your odds get closer and closer to 50/50 the more “coin flips” you make directionally. High frequency trading firms and prop firms make money with lots of trades (but that are rarely too directional). Sure there are guys that do better than others I would just stay away from it if I were you (again my honest opinion) and find a firm that will coach you through options trading.

  • Hey Diego – I think $500 per month is very reasonable.

  • Correct. Now of course you could make more if you are more aggressive in your trading but that also means you’ll go through more ups and downs in your account. I think a very reasonable expectation is something along the lines of what you outlined here. But hell even at 20% ROI it’s worth the time and effort!

  • More than enough.

  • Just because something has a high returns doesn’t mean the risk is equal in both so I’m not which one you should go with.

  • Seth

    So your saying if I start with $1000, I should only expect to make $20 that month. I think making 10% a month is not at all unrealistic. If your trading full time, making $100 a month off should be nothing overly inpossible

    • Well go for it then – 10% per month and 120% per year consistently while taking decent risk is way unrealistic. Trading full time or not it’s unsustainable without taking considerable risk in blowing up your account.

  • Bob Bert

    Welcome to 2015…”It will be great!” They said…I kick myself daily for pursuing a PhD, I should have gone into a trade straight out of high school and by now would have been able to start my own small business. Might be a slightly smaller paycheck but much more potential and no boss to contend with.

    • Maggme

      You’re Education is Priceless and for Life.
      Money is here today gone tomorrow.

  • Hey Marius! The bigger the return you’re going to shot for the bigger the variance each month will be (as it should work in an efficient market right). So I think it depends on some many factors it’s hard to say; market volatility, position sizing, earnings etc. I’ve had months of losing trades and then months over big winners.

  • Per month.

    • chris

      If you start with $500 can’t you just slowly build up your funds from that and eventually start trading with much more money?

      • Sure you could always start with that – I just don’t want people to have an unrealistic expectation of how fast an account will grow.