Whick broker will give you approval to trade spreads?
- Thread starter silent_tunes
- Start date
I don't know if TDA still has different rules than TOS, The last time I checked, they still had different "new customer" processes and your account was assigned to the organization you signed up with.
The level of trading privileges they assign is their interpretation of the legal requirements for due diligence. It depends on how you filled out the questionnaire. You want more privileges, answer the questions differently. As I recall, TOS would let you know as you went along if you would be qualified for the level you were requesting, thus giving you hints regarding what was required.
Do they not have a "know the client" questionnaire? If so just fudge the answers a bit, and over state your actual option experience, income level, and net worth.
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As you probably know, trading spreads does require a margin account, and some brokers will more closely review your options trading experience as well as your financial status, prior to granting spread trading approval. Often times people will understate their networth because they do not want the brokerage firm to know their personal business, but this makes it harder for them to get spread approval.
They do have a "know your customer" questionnaire that asks for info about annual income, experience, net worth etc.
After the second rejection, I sent an email to TDA saying how disappointed I was and that I was thinking about closing my account.
Their rep replied saying that I had to provide proof that I had 10 years of experience trading options and spreads ! I replied that if I already was trading spreads, I would not be asking them approval to trade spreads !!
After the second rejection, I sent an email to TDA saying how disappointed I was and that I was thinking about closing my account.
Their rep replied saying that I had to provide proof that I had 10 years of experience trading options and spreads ! I replied that if I already was trading spreads, I would not be asking them approval to trade spreads !!
Once upon a time (before the big war) when men were men...
a covered call writer/option buyer get on the phone and often secure Level 3 approval by offering the argument that spread approval would allow you to efficiently roll your positions up or down or out, reducing risk (versus than legging out/in). One could also add the argument that spreading is a lower risk strategy). This worked for me but I have no idea if it's relevant in this cookie cutter age of E-mail correspondence.
You want approval? Add a few inches to the size of your account!
Exactly. I've never known anyone with a material-sized account to be declined for options trading. And if OP has no money, WTF is he doing trading options?
I used some formal education in trading spreads rather than extensive experience to get over this hurdle.
The risk/reward is very different. With a debit spread you can't lose more than your original net cost. With a credit spread your worst case loss can easily be ten times or more what you received for the sale of the spread. There's nothing inherently wrong with credit spreads, I sell the dang things all the time, but you have to be aware of the risks.
Anyhow, if you want to trade options don't use TDAmeritrade. Their commissions are too high and you really don't need some ignoramus telling you that buying a call is safer than buying a debit call spread.