Last weekend's 'chat with a Pro' evening at Market Forum was hosted by a poster handle 'stimpy' aka Mr. Jonah Ford, who has helped traders overcome obstacles and instructed on futures spread trading. I'd like to relay the response he gave to a question given to him. It made me think about the way I trade, or rather, the way I don't trade and probably should.
http://marketforum.com/?id=1220672&ss=night

Night Desk - Sunday at 10:55 PM
1. Would an account devoted exclusively to options require more or less equity as compared to just outright positioning? In other words, would the recommended minimum account size be different?
2. % of account margined, would selling options allow one to lean in harder than one would if trading outright?
3. Do you stay in for the last dollar or do you usually leave some crumbs on the table when having sold an option and it becomes close to worthless?
4. Are you into those seemingly complex multiple option strategies, butterflies, condors and the like?

stimpy - Monday at 2:01 AM
1. Would an account devoted exclusively to options require more or less equity as compared to just outright positioning? In other words, would the recommended minimum account size be different?

--- Having witnessed many many accounts in action over the years, two come to mind with regards to this question. One went from 12k to about 1.5 million to about zero inside of 12 months, mostly using options. Another went from 1,600 to 30k in about 6 months, using options first and then futures (and they took a huge chunk out at the 30k level so I lost track of the performance overall from there).

Lots of lessons from that but the one I am raising here is to lose a million bucks in a month is easy as losing 3k in a month. I probably wouldn't think that were true if I hadn't watched it myself.

You cannot put yourself in a margin sensitive position with limited margin. If you are only buying options or covered spreads, you only need to put in what they cost. Some people trade that way, farmers who hedge only send in money when they are establishing coverage and carry no excess margin in their hedge accounts. I always use 10k as a minimum. But it is halucinatory, 1k or 100k or 1mm it is a question of moving the decimal. In that regards, you can start with far less using options than futures because you do not need margin at all.

If you are writing options, you could do so with 3k. I wouldn't, but you could. It would take a long time to compound your money wisely though. Recall the penny-doubling exercise of grade school. The first 20 days are weak. Most trading from small accounts are looking for escape velocity. If you approach it at a low threshold you reduce your odds. It can still be done (metmike has true stories, so do I), but 10k or up gives you a lot more options (no pun intended).
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2. % of account margined, would selling options allow one to lean in harder than one would if trading outright?

--- As a rule, no. The great part of writing options is consistency in returns if you do it right, and minimal stress/danger. BUT... you must control your leverage or you die. So, I would say leaning in harder is the opposite. You lean in less, earn less when you get it right, but earn steady over time.
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3. Do you stay in for the last dollar or do you usually leave some crumbs on the table when having sold an option and it becomes close to worthless?

--- always close them early. Ever since '05 at least. Sold a boatload of $5.50 bean calls four months out. Market was around $4.90 with a month or so to expiration. Back then 60 cents was miles away. They were 1 1/2 bid at 2 cents offered, I closed them all out for $100 each. A month or so later they traded $1.00 each. Wished I had bought a hundred of them of course, but covering for the hundred saved me from annihilation. I've covered them ever since.

Follow Pareto's law. 80/20 principle. When you've netted 80% of the sale value, cover and move to another strike if you still want exposure in that market.

4. Are you into those seemingly complex multiple option strategies, butterflies, condors and the like?

--- Yes but only to a degree. Not the butterfly condor etc so much. But backspreads are great, 4-way options are great. I developed a crude oil credit spread that has killed for years. It has its limits as well, but essentially you buy close to the money puts and calls, and ratio out further. The gains can be extraordinary for any one month, and over time they average out to a very high return. The downside risk is significant though, you have to take a loss a couple times a year, and that is curiously almost always a directional breakout signal to trade the futures in the direction you have to cover. Complex combinations -when you are quite familiar with the dynamics- are very powerful.

Also adding them to futures and futures spreads makes for a multi-dimensional position that allows for all kinds of flexibility. Much of that elaborated on in the cotton charts/thread below. But also much more in the course...

Hope that covers it, feel free to add and I will elaborate if need be.