The Best Way to Start is Small

What About Bob? is a 1991 American comedy film starring Bill Murray and Richard Dreyfuss. Murray plays Bob Wiley, a mentally unstable patient who follows his egotistical psychotherapist, Dr. Leo Marvin, on vacation. In the end Bob Wiley is the stable person and Dr. Marvin becomes very unstable. One of Dr. Marvin’s efforts is connected to the way he counseled Bob Wiley to take “baby steps” in his recovery. The same thing is true about trading options. When I help investors get started with options trading, I encourage them to find a lower-cost stock, buy 100 shares, and then trade options on those 100 shares.

While most of my per-trade options income is over $200, I do a few smaller trades. Today’s example illustrates the path you can take. You buy shares, you trade a covered call on those shares, you roll the contract as many times as you wish, and then you let the shares be called for a profit.

The Journey From January to July 2026

Even though my VALE shares were called on Friday at $15/share, I bought them for $14.08/share. That means I made a profit of $91.50. I sold the first option contract in January and I earned income of $13.33. Then I quickly rolled the contract to a higher strike price. In July I rolled the contract down to the original $15 strike price. On Friday, my 100 shares were called. The reason is simple. The price of the shares was above $15 at the market close.

During the life of this investment, I made $47.97 in options income, so my total income from this investment was $139.47 or a gain of almost 10%. While that is nothing to shout about, it illustrates the process. I didn’t risk many dollars, and I made tax-free income in my ROTH IRA.

The Journey Can Continue

I was pleased to see that VALE’s share price dropped this morning. Sometimes the share price continues upward. The price range for VALE shares today was $14.50 at the low, and $14.85 at the high. That means the investor who bought my shares for $15 is already in negative territory. I, however, was able to buy 100 shares of VALE for $14.55 per share using a buy limit order. Then I sold another covered call option contract that expires this coming Friday and made a bit more cash.

I share this because if your shares are called, it doesn’t mean you have to stop trading those shares. I was able to purchase the shares for less than the amount I received for the shares that sold. Again, this is not my normal way to make money. Small dollars amounts are generally not significant. You can, however, learn to trade options with relatively little cash. The education can then be translated into bigger trades as you gain skill and confidence.

My YouTube Channel

I started a series of YouTube videos that cover the use of Fidelity’s Trader+ software. That is my preferred tool for options trading. Here is a link to my channel:  Wayne YouTube Channel

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