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How to fill out an options trading application
Answer every field truthfully, and ask for the lowest level that names the trades you plan to make. For covered calls and cash-secured puts, that's usually one of the first two levels.
The short answer
The options application is a short form. It asks about your goals, your experience and your money. The broker uses it to pick which options trades your account may place.
There are no "right" answers to type. There are true ones. Fill it in honestly, then ask for the level that covers what you plan to trade, and no more.
Each field, in plain words
| Field | What it's asking | Why the broker asks |
|---|---|---|
| Investment objective | What you want this account to do: keep money steady, earn from holdings, grow, or speculate | Riskier levels usually need a growth or speculation goal |
| Stock experience | Years trading shares, and roughly how many trades a year | Shows whether you've placed trades before |
| Options experience | Years trading options, if any, and how often | Higher levels usually need some history |
| Annual income | What you earn in a year, before tax | Helps judge how big a loss you could absorb |
| Net worth | Everything you own minus what you owe | The same question, from a wider view |
| Liquid net worth | Money you could turn into cash quickly, not your house | Shows how much is really at risk |
| Employment | Your job, and whether you work at a broker | Industry staff may need employer permission |
| Level requested | Which options level you want | Decides which trades the ticket accepts |
Some forms use ranges, like "$50,000 to $100,000." Pick the range your real number falls in.
Answer honestly, even when it feels like a test
It can feel like a quiz you need to pass. It isn't. The level guards you as much as the broker.
If you overstate your experience or income, you may unlock trades that can lose more than the money in your account. If the broker later finds the answers were false, it can close or limit the account. A true "none" for options experience is fine. The lowest level is built for people starting out.
If your situation changes later, like a new job or a year of stock trades, you can update the form and ask for a review.
What level to ask for
For covered calls, ask for the level that names covered calls. At many brokers, that's the first one.
For cash-secured puts, look for the level that names them. Some brokers put them in the first level, and some put them one step up. The numbers don't match across brokers, so ask by name: "Which level lets me sell covered calls and cash-secured puts in this account?" My page on the options level for covered calls, by broker covers the differences.
Both trades make up the wheel strategy. Neither needs the top level.
What that level lets you do (a hypothetical example)
An illustration, not a trade idea: you sell one 30-day Cash-secured put on a made-up stock, XYZ, at the $30 Strike price for $0.50. You collect $50. The broker holds $3,000 in cash, in case you have to buy 100 shares at $30.
| XYZ at expiry | What happens | Total result |
|---|---|---|
| $35 | Put expires | +$50 |
| $30 | Put expires | +$50 |
| $29.50 | You buy 100 shares at $30 | $0 (break-even) |
| $25 | You buy 100 shares at $30 | −$500 + $50 = −$450 |
| $20 | You buy 100 shares at $30 | −$1,000 + $50 = −$950 |
The approval checks that the $3,000 is there. It doesn't stop the stock from falling after you buy.
In Canada, and in retirement accounts
Canadian brokers use their own level ladders too. Covered calls are widely allowed in a TFSA or RRSP. Cash-secured puts there depend on the broker. In the US, IRAs often allow both, but usually stop below the margin levels.
If the form comes back with a no, see why an options application is denied. If you're applying after a loss, read what to do after losing money in stocks first.
Questions
What should I put for options experience if I have none?
Put "none." The lowest level is meant for people starting out, and it often covers covered calls. Overstating it can unlock trades that lose more than you have.
What investment objective should I choose?
The one that's true for this account. If you plan to sell covered calls on shares you hold, an "income" or "growth" goal often fits. Don't pick "speculation" just to get a higher level.
How long does approval take?
It varies by broker. Some answer in minutes, others in a day or two. A manual review can take longer.
Can I change my answers later?
Yes, if your situation changes. Update the form with the new, true details and ask the broker to review your level.
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