Options are risky vehicles for the novice trader. Since brokerages are responsible for covering bankrupt accounts, they are understandably careful with who trades options. In fact, you are not allowed to trade options on margin. As a result, most brokerages require you to apply for option trading privileges.
Personally, I trade on TD Ameritrade’s thinkorswim platform. It is the most robust option trading platform out there with excellent tools and reasonable commission pricing. You may use any brokerage you like, but this guide to obtaining advanced options trading capability will assume you are using the thinkorswim platform.
To get started: 1. Open a TD Ameritrade account on www.tdameritrade.com 2. Hover over “Client services” box; under “My Profile” click on “General”. 3. You will see a table, and the left side is titled “Elections and Routing” Enable Options Trading. 4. Fill out the form to apply for Tier 3-Advanced Options trading.
What is the difference between Tiers 1, 2, and 3? Tier 1 trading allows you to sell cash-secured puts and write calls against shares. It is the absolute minimum requirement for fundamental trading. Tier 2 allows you to do verticals, butterflies, and condors which are featured in both newsletters. Tier 3 will allow you to do calendar and diagonal spreads, which will be featured more often in the technical trading newsletter.