Option trading is done through a brokerage account. Brokers have become quite innovative. Almost all brokers allow for trading stocks, ETFs and options as well. However, not all account holders know how to activate option trading on their account. 

A new account holder needs to apply for options trading authority. When seeking permission to trade the trader will find that their broker encourages them to read the Characteristics & Risks of Standardized Options before making their first trade. The reason a broker asks account holders to read through this publication is that the risks of trading options are different and more complicated than trading stocks. 

Because of the additional complexity of options, most brokers establish permission levels as a method of proTECTing traders. For some brokers, each permission level allows only certain option strategies to be implemented. The higher levels of trading authority include all the permissions from the lower levels.

Getting increased permission to trade options often requires that traders complete a separate application. Once granted, the trader can place trades using the strategies they are cleared to trade. Clearance is often granted on some combination of account size, suitability of investor needs, and options trading experience.

Options Academy has researched and identified the authorization requirements a trader needs for different options strategies at several of the more popularly used brokers. The article connected to this video includes a description of these levels and how a trader can go about getting the authorization they want at each broker. 

While it’s true that transaction costs are a factor in the decision of which broker to select, other considerations are also important. For example, ease of use. Lower commissions may actually cost more money if trading mistakes persist due to a confusing order interface.

If you already have an account with a broker, it might make sense to remain there and obtain options trading permission at the desired level. That said, the broker you select acts as a silent partner in your efforts to find opportunities in the world of options. Be sure to find one that matches well with your trading needs, interface preference, and desired cost structure.

Option trading is done through a brokerage account. Brokers have become quite innovative. Almost all brokers allow for trading stocks, ETFs and options as well. However, not all account holders know how to activate option trading on their account. 

A new account holder needs to apply for options trading authority. When seeking permission to trade the trader will find that their broker encourages them to read the Characteristics & Risks of Standardized Options before making their first trade. The reason a broker asks account holders to read through this publication is that the risks of trading options are different and more complicated than trading stocks. 

Because of the additional complexity of options, most brokers establish permission levels as a method of proTECTing traders. For some brokers, each permission level allows only certain option strategies to be implemented. The higher levels of trading authority include all the permissions from the lower levels.

Getting increased permission to trade options often requires that traders complete a separate application. Once granted, the trader can place trades using the strategies they are cleared to trade. Clearance is often granted on some combination of account size, suitability of investor needs, and options trading experience.

Options Academy has researched and identified the authorization requirements a trader needs for different options strategies at several of the more popularly used brokers. The article connected to this video includes a description of these levels and how a trader can go about getting the authorization they want at each broker. 

While it’s true that transaction costs are a factor in the decision of which broker to select, other considerations are also important. For example, ease of use. Lower commissions may actually cost more money if trading mistakes persist due to a confusing order interface.

If you already have an account with a broker, it might make sense to remain there and obtain options trading permission at the desired level. That said, the broker you select acts as a silent partner in your efforts to find opportunities in the world of options. Be sure to find one that matches well with your trading needs, interface preference, and desired cost structure.