Negotiate for more trading privilege?

R

rselitetrader

I have been trading my IRA with IB, and selling naked options is forbidden in IRA accounts. I am thinking of opening a regular trading account, and I want to get the highest level of trading privileges.

It seems to me that as long as people have enough funds to cover the margins, brokers should care little about what people do. Brokers are not there to look after clients' interests; investors are responsible for their own actions, and no one needs brokers to be mom or dad.

So, if I want to sell naked calls on indices, do I need to show my broker how many trades I have done, how much money I have made or lost, what kind of grades I received in college math classes? Or simply a statement of intent? IB is closed for the weekend now. I can call them next week, but I just can't wait.

RS
 
"I have been trading my IRA with IB, and selling naked options is forbidden in IRA accounts. I am thinking of opening a regular trading account, and I want to get the highest level of trading privileges."

It's not likely that a newbie is going to get the highest level of option trading privileges from the get go. It can occur if you're transferring in an account with highest level of approval and it contains sufficient assets.


"It seems to me that as long as people have enough funds to cover the margins, brokers should care little about what people do. Brokers are not there to look after clients' interests; investors are responsible for their own actions, and no one needs brokers to be mom or dad."

Generally, the first thing that brokers are concerned with is protecting themselves. While I don't know the specifics, I surmise that some base level of the option approval process is mandated by the SEC or other regulatory body (brokers have the right to make requirements more restrictive). And then there's that little "Know Your Client" rule. Lawsuits, aka arbitration, occur when idiots lose their money. Why be bothered when you can weed out the idiots ? :)


"So, if I want to sell naked calls on indices, do I need to show my broker how many trades I have done, how much money I have made or lost, what kind of grades I received in college math classes? Or simply a statement of intent? IB is closed for the weekend now. I can call them next week, but I just can't wait."

If you're dealing with a voice at a standard option firm, generally, you have to be able to talk the talk. If you know option terminology and can speak the language, that can often get you a higher level of approval than the LIES on the application (g).

As for IB, when I opened my account, they required that you take an options test for approval. Amount of liquid assets, income level and experience were other factors but they didn't request proof.
 
IRAs cannot take on positions with undefined risk.

No company allows you to take undefined risk w/ IRAs.

IB does allow naked puts in IRAs I believe, along with all kinds of spreads with DEFINED risk.

If you don't know what defined/undefined risk is, you shouldn't be trading any short positions.

For REGULAR accounts at IB, there are no trading levels for options, it's all or none, they don't bother themself with bullshit trading levels. If you really think about it, if you write tons and tons of naked options and get fucked, the brokerage stands to lose very little. A stock would have to gap up or down 20% or more for it to wipe out your entire account and leave it w/ a debit balance. (So unless you shorted calls on DNDN when it was 5 bucks, chances are the broker doesn't stand to lose anything, plus for stocks like DNDN, they have special margin requirements).

And just FYI, I'm 21 and have had no problems getting full option privledges from OptionsXpress & IB. OptionsXpress will pretty much give you whatever options level you want provided you have $50,000+ in the account.
 
Quote from rselitetrader:



It seems to me that as long as people have enough funds to cover the margins, brokers should care little about what people do. Brokers are not there to look after clients' interests; investors are responsible for their own actions, and no one needs brokers to be mom or dad.

So, if I want to sell naked calls on indices, do I need to show my broker how many trades I have done, how much money I have made or lost, what kind of grades I received in college math classes? Or simply a statement of intent? IB is closed for the weekend now. I can call them next week, but I just can't wait.

RS
More...


Brokers` obligation is to follow "know your client" rule which means to collect information to verify that high risk instruments trading is suitable for you.

They don't do this for fun, but to protect other investors/traders and to meet regulatory requirements.

If you can't wait through the weekend I doubt that selling naked options is good strategy for you. I might be wrong on this, but I have never met successful option trader who is impatient.
 
Quote from rselitetrader:
It seems to me that as long as people have enough funds to cover the margins, brokers should care little about what people do. Brokers are not there to look after clients' interests; investors are responsible for their own actions, and no one needs brokers to be mom or dad.
RS
More...

And while that sounds good now, as soon as you blow your account out, you'll scream 'how could they let me do this to myself!'

That is the reason for the know your customer rule as the other poster said. Basically, it's to help prevent retards from trying to point the finger at someone else. All the rules and regulations in place are the result of people making idiotic decisions, suing the broker/NASD/etc. And it only takes a few of these lawsuits to occur before the brokers ban together and put rules in place to help prevent future lawsuits.
 
Quote from brownsfan019:

And while that sounds good now, as soon as you blow your account out, you'll scream 'how could they let me do this to myself!'
More...
More important--as soon as you blow out your account, your *broker* is required to cover your losses. (At least until they can recover from you. IF they can recover anything from you)

Now why should a broker extended you credit to do something really stupid when they have to pay for it? This is like arguing that a credit card company should give you unlimited credit because you are smart enough to handle your purchases.
 
As someone else pointed out thinkorswim allows me to do anything I want in the IRA except for short stock and naked calls. The main issue is that they cannot collect for a margin call. That is against IRS rules if you have already maxed out your contribution limits for the year.

I also agree some people are stupid. At the same time I like the fact that thinkorswim treats me like an adult. As long as I acknowledge I understand the risk I don't think I need to be baby sat.

And what really irritates me are the brokers touting how great and 'safe' covered calls are but at the same time try to scare you away from naked puts or refuse to let you trade cash covered naked puts. Brokers that do that clearly do not understand the product they sell or simply trying to get 3 X the commission.
 
You must log in or register to reply here.
Back
Top