How to Get Approved for Options Trading (Any Experience Level)

With options trading you can hedge risk exposure, make a profit (or lose) based on price moves, or generate income.

To get started, you will first need approval to trade options. You can open a new account, or you can ask for options trading privileges on an existing account. This article will explain how to get approved, no matter your level of trading experience.

Steps to Get Approved for Trading Options

Each broker has simple steps you can follow to get approved for options trades. There are varying levels of options trading based on experience, risk tolerance, employment history, investment objectives, and income/financial information.

The following are general steps for if you already have a trading account and want to add options privileges to it.

If you are opening a new account, you will typically be asked during the account opening process what assets you want to trade.

Select “options trading” if this is of interest to you, as well as any other markets you are interested in trading. Your broker’s account opening process will guide you through all the steps for getting options approved. If you have an existing account, here is how to get approved for options.

1. Log in to your brokerage account.

2. Find your trading permissions in your Settings and select Options. For example, if you are using Interactive Brokers, you go into your Settings, then click on Trading Permissions.

   

3. When you request to add options trading privileges, you’ll need to fill out an application form. It will include questions on your income and net worth, employment information, and how you plan trade with the options.

   How you answer these questions, especially how you plan to trade the options, will help determine which tier of options trading your broker provides you.Since the broker already has your documents on file, you may just need to verify your existing information with a signature, or you can choose to update the information.  

4. Submit the application. You will typically receive a response within a few business days.

Check out our review of Charles Schwab for options trading.

Option Trading Tiers

Brokers offer tiers for options trading, and while the levels are similar across various brokers, they may be called slightly different things.

Here is how options trading tiers are structured:

• Cash account – In a cash account you can buy calls and puts, sell covered calls, or sell cash secured puts. Basically, you can do things with defined risk or trades where you have enough cash and securities in your account to cover the liability. This is often referred to as “level one” trading.
• Margin Limited – This is a margin account, which means you can take positions worth more than the cash you have in the account. In terms of functionality, you can trade the same types of options as a cash account, but you have access to margin.
• Margin Basic – With this type of margin account you can complete the aforementioned trades, as well as making debit or credit spread trades. This is often referred to as Level 2 options or tier 2 options trading.
• Margin Advanced – With this type of account you can conduct all the previously mentioned trades, as well as advanced trades. This tier may also provide privileges in other markets, such as shorting stocks, futures trading, or cryptocurrency trading, depending on the broker. This is level 3 / tier 3 options trading.

Each broker may break down its tiers slightly differently, with some perhaps having 5 tiers, but the general structure is the same.

Tips to Get Approved for Options Trading

If you want to make sure you get approved for options trading, here are some tips to follow.

The approval process for options trading is relatively straightforward, and you likely shouldn’t run into any problems. Here are some tips to keep it that way.

• Request what you need – no more. If you only plan to buy calls and puts, say so when filling out the questionnaire. If you don’t need access to advanced features, don’t ask for them.
• Trade safely and responsibly, then request more features if needed. Start with the minimum features you need to trade. If you need more, you can always make a request later after the broker has seen that you know what you’re doing.
• If you are rejected for options trading, or the broker doesn’t give you access to the features you want, you can always contact them and plead your case.

Each options broker has their own process for approving options accounts. If one broker denies you options privileges, you can always try another broker. Options are commonly traded, and brokers want you to trade.