Lesson Learned #129: Small Account Options Strategies for 2026
ID: LL-129
Date: January 10, 2026
Severity: HIGH
Category: strategy, options, small-account, research
Research Summary
Synthesized from top options trading sources (Jan 10, 2026 weekend research session).
Key Finding: Credit Spreads > Cash-Secured Puts for Small Accounts
Problem with CSPs for $5K account:
- CSPs require enough cash to buy 100 shares if assigned
- F at $10 strike needs $1,000 collateral (20% of account)
- Limited diversification possible
Better Alternative: Credit Spreads
- Bull put spreads require significantly less capital
- Defined risk, similar probability of profit
- Can do multiple positions for diversification
Recommended Strategies for $5K Account
1. Credit Spreads (Primary)
- Vehicles: SPY, QQQ, IWM (liquid ETFs)
- Timing: 15-30 DTE
- Target: 30-45% probability ITM (0.30-0.45 delta short strike)
-
Premium rule: Collect minimum 33% of spread width
- Example: $5 wide spread = collect at least $1.65
2. Iron Condors (Market Neutral)
- Short strikes at 15 delta each side
- ~85% probability of profit
- Good for low-volatility environments
3. Poor Man's Covered Call (Capital Efficient)
- Requires only 20-30% of traditional covered call capital
- Buy deep ITM LEAP call (70-80 delta)
- Sell short-term OTM calls against it
- Example: Ford PMCC needs ~$400 vs $1,200 for shares
Position Sizing Rules
| Rule | Limit |
|---|---|
| Max risk per position | 5% of account |
| Max portfolio delta dollars | 50% of account |
| Per spread position size | 2-3% |
| Per iron condor | 5% |
Risk Management
- Profit target: 50% of max profit
- Stop loss: 100% of credit received (2x risk)
- Monthly max loss: 10% of account
- Focus: 65%+ probability of profit trades
Action Items for Our System
- Shift from CSPs to credit spreads for $5K paper account
-
Update
rule_one_trader.pyto use bull put spreads - Add position sizing validation (5% max per trade)
- Target SPY/QQQ instead of individual stocks (more liquid)
Capital Tier Strategy (Updated)
| Capital | Strategy | Max Position |
|---|---|---|
| $500-$1K | Single credit spread on SPY | $50 risk |
| $1K-$2K | 2-3 credit spreads | $100 risk each |
| $2K-$5K | Iron condors + spreads | $250 risk each |
| $5K+ | Full wheel strategy | $500 risk each |
Sources
Tags
small-account, credit-spreads, iron-condors, pmcc, risk-management, 2026-research
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