Best Cheap Stocks for Options Trading Under $20
Summary
Trading options on stocks under $20 means 100-share positions cost $500-$2,000, making covered calls and cash-secured puts accessible to accounts as small as $2,000-$5,000. The key is finding cheap stocks with liquid options, reasonable IV, and enough fundamental quality that you're comfortable holding shares. Stocks like SOFI, F, NIO, PLTR, LCID, and several others fit these criteria.
Key Takeaways
Low-priced stocks aren't inherently riskier — Ford at $12 is a $48B company. Look for minimum 5,000 daily options contracts and bid-ask spreads under $0.10. Higher IV on cheap stocks (often 40-70%) generates proportionally larger premiums relative to the stock price. The wheel strategy (sell puts, get assigned, sell covered calls) is the best approach for cheap stocks in small accounts. Watch out for penny stocks masquerading as options candidates — stick to names with real revenue and positive cash flow.
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When you're starting with a $5,000-$10,000 account, selling covered calls on AAPL at $210 ($21,000 for 100 shares) isn't an option. But that doesn't mean you can't sell covered calls at all. There are dozens of quality stocks under $20 with liquid options and generous premiums.
The List
Here are the best cheap stocks for options trading, ranked by a combination of options liquidity, IV, and fundamental quality:
| Stock | Price | 30-Day IV | Avg Daily Options Vol | 100-Share Cost |
Top Picks in Detail
SOFI ($12, IV ~55%)
SoFi Technologies is one of the best cheap options stocks available. The stock has massive options volume, $0.01-$0.03 bid-ask spreads, and enough IV to generate meaningful premium on a small position.
Selling the 30-DTE $13 covered call for $0.50 gives you 4.2% monthly on a $1,200 position. That's $50 per month — small in absolute terms but excellent as a percentage return.
Ford ($11, IV ~35%)
Ford is the cheapest mega-cap stock with liquid options. With 100 shares costing just $1,100, it's accessible to almost any account. The $12 covered call (30-DTE) for $0.30 yields 2.7% monthly. Combined with the $0.15 quarterly dividend, total yield approaches 20% annualized.
The Wheel Strategy on Cheap Stocks
The wheel works perfectly with cheap stocks because the capital commitment is small:
Step 1: Sell a cash-secured put on SOFI at the $11 strike for $0.45. Cash required: $1,100.
Step 2: If assigned, you own 100 shares at $11 (effective cost $10.55 after premium).
Step 3: Sell a covered call at the $12 strike for $0.40.
Step 4: If called away, you profit $1.45 per share ($12 - $10.55) plus $0.40 premium = $1.85 total, or 16.8% on your $1,100 investment.
Step 5: If not called away, repeat the covered call next month.
On a $5,000 account, you can run the wheel on 3-4 different cheap stocks simultaneously, diversifying your income across sectors.
What to Avoid
Penny stocks under $2. Options liquidity drops off a cliff below $2, and the bid-ask spreads eat your premium. LCID at $3 is borderline — monitor its spreads before trading.
Stocks with no revenue. Pre-revenue biotech or SPACs might have high IV, but they can go to zero. Stick to companies with real businesses.
Earnings surprises. Cheap stocks move in percentage terms more than expensive ones. A $1 move on a $10 stock is 10%. Always check the earnings calendar.
OptionsPilot's strike finder works with any stock price, helping you find optimal covered call and put strikes on cheap stocks just as easily as on mega-caps. Filter by your account size and target return.