New traders ask what do you need to get approved for options trading, and the answer is shorter than most expect. Your broker asks four things: income and net worth, trading experience, time horizon, and the objective you are trading for. Then it assigns you a level. Buying calls and puts, the trades almost every beginner starts with, sits at Level 2 at nearly every US broker. Fill the form in once, answer it straight, and the account can be live in a day or two.
I have traded for 35 years and I still watch people stall here for weeks. They open the brokerage account, hit a wall of questions about net worth, and close the tab.
So here is the walkthrough, question by question, level by level.
The Four Questions On Every Options Application
Brokers lay the form out differently. The content is the same at all of them.
Your Money
Annual income, total net worth, liquid net worth. These are self-reported, and you answer them accurately. Liquid net worth means the money you could reach this week, so retirement accounts and home equity sit outside that line.
Small numbers alone rarely block Level 2. Small numbers paired with an aggressive stated objective do.
Your Experience
Years trading stocks. Years trading options. How many trades a year, and at what size. If you have held stocks for two years and have never touched an option, write that down.
Blank experience plus a request for naked options is the most common reason a reviewer hands back a lower level than you asked for. Level 2 forgives a thin history. Level 4 does not.
Your Time Horizon
The broker wants to know when you need the money back. Trade with money you can leave alone for years. That answer is honest for most people learning options, and it reads as sane to whoever reviews the file.
Your Objective
The menu usually runs capital preservation, income, growth, speculation, hedging. Buying calls and puts gets filed under growth or speculation at most firms.
Pick capital preservation and then ask for Level 2 and the two answers argue with each other. Reviewers notice.
Options Trading Approval Levels Explained
The names change from broker to broker. The order almost never does.
Level 1
Covered calls and cash-secured puts. You already own the shares, or you hold the full cash to buy them. The broker is taking little risk on you, so this tier opens to nearly everyone with a funded account.
Level 2
Long calls and long puts, and at many brokers long straddles and strangles. This is the tier beginners want.
The reason it opens early: when you buy an option, the most you can lose is what you paid for it. Your risk is defined the moment the order fills. That defined ceiling is why brokers hand out Level 2 to traders with modest experience.
Level 3
Spreads. Debit spreads, credit spreads, iron condors, calendars. You are now short an option with a long option backing it, and most brokers require a margin account before they let you place one.
Level 4
Uncovered calls and puts. The loss on a naked short option is open ended, so this tier carries the heaviest experience, net worth and margin requirements on the form. Few traders need it, and almost no beginner should ask for it on day one.
What Do You Need To Get Approved For Options Trading At Level 2
Four things, and none of them are hard.
- A funded brokerage account. A cash account is enough to buy calls and puts. Margin comes later, when you move to spreads.
- An honest experience answer. Stock experience counts. Paper trading counts at some brokers if you say so.
- An objective that matches the request. Growth or speculation.
- Liquid net worth you can state without flinching. How much you fund the account with is a separate decision, and I walk through that in how much money to start trading options.
Most brokers approve Level 2 the same day. Some take a business day or two and send an email. If the account is already open and funded, the options application usually lives under account settings, somewhere near permissions or features.
Once you are approved, the first decision you face every morning is direction, which is why I wrote call vs put options before anything else on this site.
When The Broker Approves You For Less Than You Asked
It happens constantly, and it is reversible.
Trade what they gave you. Place real orders at Level 1 or 2 for a few months, build a record inside that account, then reapply. Brokers weigh activity in your own account heavily on the second pass.
Call the options desk. A short phone call, where you explain which strategies you want and why, moves more applications than another online form.
Open at a second broker. Approval standards differ, and there is nothing stopping you from holding accounts at two firms.
One thing to avoid: inflating income or experience to climb a tier. The level exists to keep you away from positions that can lose more than the account holds. Getting Level 4 before you are ready is a fast way to join the traders I describe in why new options traders lose money.
Approval Takes An Afternoon. Skill Takes Longer
The application is the smallest part of this. Clicking through a form does not teach you which strike to buy, which expiration gives the trade room to work, or when to walk away flat.
That part has a timeline, and I lay out an honest one in how long it takes to learn options trading. If you are still weighing whether options belong in your account at all, start with options vs stocks and decide that first.
Get Level 2. Fund it with money you can leave alone. Then spend your energy on the trade, where it belongs.
Nothing here is financial advice or a recommendation to trade. Options carry real risk, including the loss of the full amount you pay for a contract. Know your worst case before you place an order, and never risk money you cannot afford to lose.
Register for the free opening-hour webinar and watch me place a trade live, start to finish, once the account is approved.
