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Was wondering if anyone had insight as to what determines whether someone gets approved for margin and options trading levels (i.e. being able to write covered calls level 1 and write naked puts the highest level. Higher levels require margin). I understand its based on liquid net worth, net worth, trading experience, trade size, etc but is there a general ratio/amount/rule that your broker looks for?

My story is that I've recently had to switch brokerage accounts to my employer due to trading restrictions and in the process have to re-apply for this approval. My previous account had both margin and the highest level of trading approval (took a phone call with the previous broker to work it out), but now my am getting rejected by my new broker even though I actually have more experience now, blah blah.

I know this isn't science and up to their discretion but pretty much looking for a way to get approved again as a low net worth individual. Also, cannot call the people who do the approval this time around as they do not transfer to or give out that number.

*also pretty sure the rejection is not due to being an employee as I would have been told so after calling (I'm a non finance related position).

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Comments (5)

  • Edmundo Braverman's picture

    It's pretty subjective and varies from brokerage to brokerage. If you work for a firm whose bulk of clients are not heavy options traders, you can expect that they won't give Level 5 (or Level 4, whatever the top clearance is these days) to anyone.

    Thing is, were you really granting a bunch of puts? Or did you just like saying you had Level 5 clearance?

  • ddar999's picture

    Yeah I'm in the case where most clients aren't options traders. Still find it highly frustrating though and as you said I could live without being able to write naked puts (highest level), but not even being able to use spreads (requires margin even if you only want debit spreads?) or calendars is a bit excessive.

    *edit: I've only been granted the lowest level which is covered calls and protective puts only. Its a joke

  • trade4size's picture

    Another question you should always ask is how much margin is required for iron condor type positions where you are short both a call spread and a put spread. You should only have to put up margin for one side because its impossible for the underlying to be at 2 prices at once thus one side must expire worthless.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • Edmundo Braverman's picture

    lol @ Iron Condor. You're right, of course, but we always made a bunch of jokes about the names of exotic spreads back in the day.

    "I've got a Triple Fagliachi reverse condor credit spread that can't miss!!!"

  • trade4size's picture

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