One of the questions I get asked most often is, “How do you buy an options contract for only $50?” If you're new to options, it can seem confusing at first. The good news is that the basic math is actually pretty simple. In this guide, I'll show you exactly how I look for a near $50 contract using thinkorswim, how I enter the trade, and how I set up my exits so I know in advance where I want to take a loss or a profit.
The 1-in-3 Rule: How Asymmetric Risk-to-Reward Keeps You Profitable
You do not need a high win rate to make money trading options. With a strict bracket order (pre-planned profit target and stop-loss), you can lose 2 out of every 3 trades (a 33% win rate) and still walk away with a net profit.
The Setup: $50 per Trade on SPY
Day Trading vs. Swing Trading: Knowing the Difference
Before placing a trade, it is important to know your holding timeframe:
- Day Trading: Opening and closing a position within the exact same trading day. You never hold contracts overnight, eliminating the risk of after-hours market gaps.
- Swing Trading: Holding a position overnight, across several days, or over weeks to capture larger multi-day price trends.
- Cash Accounts vs. Settled Funds: If you trade in a standard cash account, you can day trade as much as you want as long as you only use available settled cash (options settle the next business day, T+1).
- Margin Account Requirements: In a margin account, day trading is subject to intraday margin rules and broker-specific equity requirements, meaning your broker calculates real-time intraday risk rather than just overnight balances.
If you want to review how these rules apply to your specific positions, Charles Schwab has a dedicated **Schwab Trading Services desk** staffed by specialists who handle active trading platforms, options, real-time intraday risk, and margin requirements.
You can reach them directly or connect with the broader support team:
* **Schwab Trading Services Desk:** 1-888-245-6864
* **General Trade Desk:** 1-800-435-9050
The Setup: $50 per Trade on SPY
SPY moves fast, making it ideal for short-term option brackets. Every time you enter a $50 contract, your bracket removes emotion by setting fixed exit rules in advance:
- Cost per Trade: $50.00 (Buy 1 Contract @ $0.50)
- Target Profit (+70%): Auto-sell at $0.85 = +$35.00 gain
- Cut Loss (-20%): Auto-sell at $0.40 = -$10.00 loss
Using paper money trains you to calculate your bracket exits quickly and accurately, building the discipline and muscle memory needed to execute trades without hesitation when real capital is on the line.
The Proof: 3 Trades Scenario
| Trade | Result | Exit Rule | Dollar Impact |
|---|---|---|---|
| Trade 1 | Loss | Hit -20% Stop | -$10.00 |
| Trade 2 | Loss | Hit -20% Stop | -$10.00 |
| Trade 3 | Win | Hit +70% Target | +$35.00 |
| Net Profit (1 Win, 2 Losses) | +$15.00 Net Gain | ||
The Arithmetic:
Total Losses = $10 + $10 = -$20.00
Total Gains = +$35.00
Net Result = +$15.00 (a +10% overall return on your $150 total capital deployed across all three trades).
Ready to test bracket orders without risking capital? Practice with paper money on the Charles Schwab's - thinkorswim platform.
If you are completely new to options trading, one of the first questions you may have is: Can I buy an option for $50?
The answer is yes, in some cases. However, there is an important detail every beginner needs to understand before placing an options trade: one options contract normally represents 100 shares of the underlying stock or ETF.
That means an option quoted at $0.50 generally costs approximately $50 per contract, before applicable fees.
Ready to get started? Learn how to place your first trade for as little as $50 using
thinkorswim by Charles Schwab.
This guide explains how to buy an option for $50 using thinkorswim, how to read the options chain, how to calculate the actual cost, and how to place a small options order without accidentally risking more money than you intended.
Can You Really Buy an Option for $50?
Yes, but you need to understand how options are priced.
When you look at an options chain, you might see an option priced at:
- $0.10 = approximately $10 per contract
- $0.25 = approximately $25 per contract
- $0.50 = approximately $50 per contract
- $1.00 = approximately $100 per contract
- $2.00 = approximately $200 per contract
The reason is the standard 100-share options multiplier.
The basic calculation is:
Option premium × 100 = approximate contract cost
For example, if an option has an ask price of $0.50:
$0.50 × 100 = $50
Therefore, one contract would cost approximately $50 if your order fills at $0.50.
Remember that the market can move while your order is being entered. The price you see is not necessarily the price at which your order will execute.
Before You Buy a $50 Option
Options are not the same as buying shares of stock.
With a $50 options purchase, the entire $50 premium can potentially be lost if the option expires worthless. In addition, options can lose value quickly because of time decay and changes in the underlying security.
For a beginner, the goal should not be to find the cheapest option available. A very cheap option can be cheap for a reason.
Instead, think of your $50 as a maximum planned risk for a single speculative trade.
Never assume that buying a $0.05 option is automatically safer than buying a $0.50 option. The percentage risk can still be 100% of the money invested.
What You Need in thinkorswim
To follow this process, you will need an account that is approved for options trading and access to the thinkorswim trading platform from Charles Schwab.
If you don't have an active account yet, you can open a Charles Schwab account here to get started with the thinkorswim platform.
If you are new to the platform, start by becoming familiar with the order-entry screen before risking real money. Charles Schwab provides comprehensive educational resources and paper trading tools to help you practice understanding options safely.
I mostly use mobile to make my trades, so most of my instructions will be taylored more for mobile.
For additional beginner-friendly trading information, you can also explore the SEO-Alien Day Trading category.
Step 1: Choose the Stock or ETF
Open thinkorswim and go to the Trade tab.
Type in the ticker symbol (the short letter code) for the stock or ETF you want to trade.
Stock vs. ETF: What is the Difference?
- Individual Stock (e.g., AAPL for Apple, GOOGL for Google):
You are looking at a single company. If that specific company performs well, the stock goes up; if it struggles, it goes down. - ETF / Exchange-Traded Fund (e.g., SPY, QQQ):
An ETF bundles dozens or hundreds of different companies into a single "basket" that trades just like a regular stock. For example, SPY tracks the 500 largest US companies simultaneously. This spreads out your risk across the entire market instead of relying on just one company's news.
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Enter the symbol for the stock or ETF you want to investigate.
For example, you might research a highly traded ETF such as SPY or another security that has an active options market.
Do not automatically buy the first option you see.
Your first job is to understand the underlying security.
Look at the current price, recent price action, volume, support and resistance, and the overall market environment.
You can learn more about these concepts in the SEO-Alien Day Trading resources.
Step 2: Open the Options Chain
Once you have entered your symbol in thinkorswim, locate the options chain.
The options chain will display available expiration dates and strike prices.
You will generally see two sides:
- Calls — generally used when a trader expects the underlying security to move higher.
- Puts — generally used when a trader expects the underlying security to move lower.
For a beginner, understanding the difference between calls and puts is more important than trying to predict the market perfectly.
Step 3: Pick an Expiration Date
Options can have many different expiration dates.
You might see contracts expiring within days, weeks, or months.
A common beginner mistake is choosing the expiration date simply because the option is cheap.
Short-dated options can move very quickly and can lose value rapidly.
Longer-dated options generally cost more, but they may provide more time for your trade thesis to develop.
Before purchasing an option, understand exactly when it expires.
Never enter an options trade without knowing the expiration date.
Step 4: Find an Option Near $50
Now we get to the part that matters most for this strategy.
Suppose you want to spend approximately $50 on one contract.
You are looking for an option trading around:
$0.50 per share
Because one contract normally represents 100 shares:
$0.50 × 100 = $50
However, you should look at the bid and ask, not simply assume that the displayed number will be your final purchase price.
Understand the Bid and Ask
The bid is generally the highest current price buyers are offering.
The ask is generally the lowest current price sellers are willing to accept.
The difference between the two is called the bid-ask spread.
For example, suppose you see:
| Price | Example |
|---|---|
| Bid | $0.45 |
| Ask | $0.50 |
| Spread | $0.05 |
If you purchase one contract at $0.50, the approximate cost is:
$0.50 × 100 = $50
But if you submit a market order, the actual execution price may differ.
For a small account, learning to use limit orders can help you control the maximum price you are willing to pay for the contract.
Step 5: Use a Limit Order
A limit order allows you to specify the maximum premium you are willing to pay.
For example, suppose the option is currently showing:
Bid: $0.45
Ask: $0.50
You could enter a limit price of $0.50.
If the order fills at $0.50, the approximate cost is $50.
If the market moves away from you and the option cannot be purchased at your limit price, the order may remain unfilled.
This is different from a market order, where you are generally prioritizing execution over controlling the exact price.
Step 6: Check the Order Before Sending It
This is one of the most important steps for a beginner.
Before pressing Confirm and Send, carefully inspect the order preview.
Check all of the following:
- Underlying symbol
- Call or put
- Strike price
- Expiration date
- Number of contracts
- Buy or sell
- Limit price
- Estimated transaction cost
For a $50 strategy, you generally want to see 1 contract, not 10 contracts.
For example:
1 contract × $0.50 × 100 = approximately $50
But:
10 contracts × $0.50 × 100 = approximately $500
That simple multiplication is why checking the order preview is critical.
Step 7: Confirm and Send
Once everything looks correct, review the order one final time.
If you are satisfied with the order, submit it.
Your order may fill immediately, partially, or not at all depending on market conditions and the price you selected.
After the order fills, you can monitor the position from your thinkorswim positions screen.
How I Set a 20% Stop Loss and 40% Profit Target
When I buy a small options position, I don't want to enter the trade without knowing where I'm willing to get out. For a roughly $50 options contract, one simple approach is to establish a maximum loss of 20% and a profit target of 40%.
Here's how the numbers work:
- Initial purchase: $50.00
- 20% loss: $10.00
- Stop-loss level: approximately $40.00
- 40% profit: $20.00
- Profit target: approximately $70.00
Because one standard options contract represents 100 shares, a $50 contract has a premium of approximately $0.50. A 20% loss would put the option around $0.40, while a 40% gain would put it around $0.70.
In thinkorswim, after your options order has filled, you can use the position's order controls to create an exit strategy. The exact interface can vary depending on whether you're using the desktop platform, web platform, or mobile app, so always review the order carefully before submitting it.
My Basic 20% / 40% Example
| Action | Option Price | Approximate Value |
|---|---|---|
| Buy | $0.50 | $50.00 |
| 20% Stop Loss | $0.40 | $40.00 |
| 40% Profit Target | $0.70 | $70.00 |
This creates a simple risk/reward framework: I'm initially risking approximately $10 to potentially make $20. That doesn't mean the trade will work or that the order will execute exactly at those prices. Options can move extremely quickly, and fills can be affected by liquidity, bid-ask spreads, market volatility, and price movement.
Important: A stop order does not guarantee that you will be filled at your exact stop price. During fast-moving markets, the actual execution price can be significantly different. For that reason, understand the order type you're using before relying on it.
For a beginner, the most important lesson isn't the 20% and 40% numbers themselves. It's developing the habit of deciding where you will get out before you enter the trade. Having a predefined exit can help prevent emotions from taking over when an option suddenly moves against you.
What Happens After You Buy?
Suppose you purchase one call option for $0.50.
Your initial premium is approximately:
$50
If the option rises to $0.75, the contract would theoretically be worth approximately:
$75
That would represent a theoretical $25 increase before transaction costs.
If the option falls to $0.25, the contract would theoretically be worth approximately:
$25
That represents a theoretical $25 decrease.
And if the option eventually expires worthless, the premium paid could be lost entirely.
Why a $50 Option Can Be Risky
The biggest mistake beginners make is thinking:
"I'm only risking $50, so this must be a low-risk trade."
That isn't necessarily true.
Options are leveraged financial instruments. A relatively small movement in the underlying security can create a much larger percentage movement in the option premium.
A $50 option can potentially become $75 quickly.
It can also become $25 quickly.
It can potentially go to zero.
That is why a $50 options strategy should be treated as a risk-management exercise rather than a guaranteed money-making system.
Watch Time Decay
Options have an expiration date.
As expiration approaches, an option can lose value simply because there is less time remaining for the anticipated move to occur.
This phenomenon is commonly referred to as theta decay or time decay.
This is particularly important for traders buying short-dated options.
You can correctly predict the direction of a stock and still lose money on the option if the move does not happen quickly enough or strongly enough.
Don't Ignore Implied Volatility
Another important concept is implied volatility, often abbreviated IV.
Implied volatility reflects the market's expectations about the magnitude of future price movement and plays an important role in option pricing.
When implied volatility is elevated, options can become significantly more expensive.
This means you should not evaluate an option solely because its premium is $0.50.
Look at the complete picture, including the underlying security, expiration, strike, volume, open interest, bid-ask spread, and implied volatility.
A Simple $50 Options Checklist
Before entering a trade, run through this checklist:
- ☐ I know what the underlying stock or ETF is doing.
- ☐ I understand whether I am buying a call or put.
- ☐ I know the strike price.
- ☐ I know the expiration date.
- ☐ The contract premium fits my budget.
- ☐ I multiplied the premium by 100.
- ☐ I checked the bid-ask spread.
- ☐ I know my maximum intended loss.
- ☐ I am using the correct number of contracts.
- ☐ I reviewed the order preview before submitting.
Example of a $50 Options Trade
Let's create a simple hypothetical example.
| Item | Example |
|---|---|
| Underlying | ABC ETF |
| Option type | Call |
| Expiration | 30 days away |
| Strike | $100 |
| Ask | $0.50 |
| Contracts | 1 |
| Approximate premium | $50 |
The calculation is:
$0.50 × 100 × 1 = $50
This is only an educational example. It does not represent a recommendation to buy any particular security or option.
Common Beginner Mistakes
1. Buying the Cheapest Option
A $0.05 option may look attractive because it only costs about $5.
But an extremely cheap option may have a low probability of finishing profitably, a wide spread, or very little liquidity.
2. Using Market Orders Without Understanding Them
A market order prioritizes execution rather than a specific price.
With options, where bid-ask spreads can sometimes be wide, this can result in an unexpectedly poor fill.
3. Forgetting the 100 Multiplier
This is probably the easiest mistake to make.
A $1.00 option is generally not a $1 purchase.
$1.00 × 100 = $100
4. Buying Too Many Contracts
If you intend to risk approximately $50, buying five $0.50 contracts would put approximately $250 at risk instead of $50.
5. Ignoring Expiration
An option is a wasting asset. You must know when the contract expires before you purchase it.
6. Treating Options Like Lottery Tickets
A small account does not mean you should make random trades.
A better approach is to define the trade setup, entry, maximum acceptable loss, and exit plan before placing the order.
Can You Make Money Trading $50 Options?
It is possible for an option purchased for approximately $50 to increase in value.
However, there is no reliable strategy that guarantees profits from $50 options trades.
The goal for a beginner should be to learn how options work while keeping position size small enough that a losing trade does not cause serious financial damage.
Think of the first stage of options trading as learning execution and risk management, not trying to turn $50 into $500 overnight.
Paper Trading Is Worth Considering
If you are brand new to options, consider practicing with paper trading before using real money.
thinkorswim provides paper-trading functionality that can allow you to become familiar with the platform and order-entry process without immediately putting your capital at risk.
This can be especially useful for learning how to:
- Read an options chain
- Select expiration dates
- Compare strikes
- Use limit orders
- Monitor an open position
- Practice exits
- Understand profit and loss changes
For official information about options trading and associated risks, review the resources available from Charles Schwab and the Options Industry Council.
Final Thoughts
Buying an option for $50 on thinkorswim is possible, provided you find a contract trading around $0.50 and purchase one contract.
The basic calculation is simple:
Premium × 100 = approximate contract cost
But successful options trading is about much more than finding a $0.50 option.
You need to understand the underlying security, expiration date, strike price, bid-ask spread, implied volatility, liquidity, time decay, and your maximum acceptable loss.
Most importantly, never let the low dollar amount fool you into believing that an options trade is automatically low risk.
If you are starting with a small account, focus on learning the mechanics, controlling position size, using limit orders appropriately, and developing a repeatable trading plan.
For more beginner-friendly trading strategies and educational resources, visit the SEO-Alien Day Trading section.
Disclaimer: This article is provided for educational and informational purposes only and does not constitute financial, investment, trading, tax, or legal advice. Options involve substantial risk and are not suitable for all investors. You can lose some or all of the money invested in an options contract, and certain options strategies can involve substantially greater risks. Nothing in this article is a recommendation to buy or sell any security, option, ETF, or other financial instrument. Past performance does not guarantee future results. Always conduct your own research, understand the risks, and consider consulting a qualified financial professional before trading. SEO-Alien.com and its authors assume no responsibility for losses resulting from the use of this information.
About the Author:
The SEO-Alien is a project started in 2009 regarding all things online marketing. The site started out more of a diary of predictions, suggestions and references to things I frequently used for online marketing... long before social media marketing was even an option.
I hope you find the information and tools presented here useful and something worth sharing with others.
If there is anything else about online marketing or any online advertising strategy you think would be helpful, please let me know.
