Can anyone tell me the actual requirements for applying for level 2 options (or whichever one selling puts falls under in Fidelity)? I am currently selling covered calls and am more or less content, but I would like to start using the wheel strategy on weeks such as this one.
The 5 Levels of Options Trading
On Fidelity, there are five levels of options trading. Get to know them before you start your application.
How to Get Approved for Options Level 2 on Fidelity
As long as you show enough knowledge of options trading in your application, you may be approved for Level 1, which allows for selling covered calls, rolling covered calls, and buy-writes strategy. Because it’s the lowest options trading level on Fidelity, most people tend to get approved.
Level 2 options trading is where a lot of people struggle with. And it also happens to be the most popular options trading level among investors and traders.
Options level 2 will let you open call and put options. Furthermore, cash-covered puts, long straddles, and strangles are also available at this level.
Because of the risk associated, not everyone qualifies for options level 2.
The key to getting approved for options level 2 on Fidelity is to provide positive answers in your application.
Traders with a lot of experience in stocks and options trading are likely to get approved. Having a high-risk tolerance can also influence your eligibility.
You can start a new application or re-apply via the Margin and Options page.
Why did Fidelity decline my account for options level 2 trading?
Fidelity’s options vetting process is intentionally vague. Most traders will need to apply a few times before they can get approved for options trading level 2 and higher.
Fidelity won’t tell you the exact reason why your trading account was rejected for options trading. You may need to go back and review the information you filled out in your application.
Investment experience: how many years have you been trading.
Financial information: annual income, estimated net worth, and estimated liquid net worth.
Employment status: your current employer and what you do for a living.
Here’s an example application:
Fidelity will assess your application based on that information. The risks get greater as you apply for a higher options level.
💬 Community Discussion
Steve B:
If you’re looking to get approved for Level 2, there are a few things you can do to improve your chances. Make sure that you’re familiar with the basics of options trading. You don’t need to be an expert, but understanding the concepts will help you understand the approval process.
Options are contracts that give the buyer the right, but not the obligation, to buy or sell a security at a specific price on or before a certain date. When buying options, the investor risks losing the entire premium paid for the option if it expires worthless. When selling options, the investor risks being forced to buy or sell the security at an unfavorable price if it is exercised.
Be patient and stay focused. The approval process can take some time, so don’t be surprised if it takes a few weeks.
Adam S:
From what I can tell, Fidelity is one of the more conservative brokerages. You will need at least a 20k account size before they’ll even consider giving you level 4 or 5, and even if you have that, they’re still going to want to see good income and net worth numbers before they approve it.
They’re also terrible about telling you if you were denied. I only found out because I called in to check, and I also learned of the account size minimum.
Fidelity is also annoying in that they won’t let you open 0DTE positions unless you have a $1,000,000 or better account. You can’t even apply for it.
Jeremiah M:
I’ve got a 250k account and okay with the maximum risk. If you have options experience, you should be fine. If you don’t have any options experience, just say you do, and they’ll probably approve your account. It’s not like they have any way of checking.
Sandro C:
I got to options level 4 pretty quickly—I started options level approvals in April last year. By around November, I reached Level 4 by applying every 3 months or less.
Hi! I'm Diego, 38, and I currently reside in New York. I work as a financial analyst. I primarily focus on initiatives involving research and data analysis.
At Fidelity, this requires completing an options application that asks questions about your financial situation and investing experience, and reading and signing an options agreement. It is also possible to trade some options strategies in other types of accounts, such as an IRA.
Trading level 2 adds the ability to buy call options and put options. This is typically the level that most beginners are allowed to start with. The key difference between level 1 and level 2 is that traders are able to make directional bets with level 2.
Level 2 options trading offers a bit more leeway in terms of what investors can and cannot do with options. Specifically, Level 2 options approval permits investors to buy calls and puts on stocks that support options, as well as exchange-traded funds (ETFs).
Before you can trade options, your broker must approve your brokerage account for options trading. In order to be approved for options trading, you will need to fill out your broker's options agreement.
Many brokers take a day or two in order to upgrade your account. They are also required to provide special disclosures including the Characteristics and Risks of Standardized Options. Initially, most investors should be approved for level one strategies, enabling them to create covered calls.
There is no minimum amount required to open a Fidelity Go account. However, in order for us to invest your money according to the investment strategy you've chosen, your account balance must be at least $10.
Level 1 offers enough information to satisfy the needs of most investors, providing the inside or best bid and ask prices. 2 However, active traders often prefer Level 2 because it displays the supply and demand of the price levels beyond or outside of the national best bid offer (NBBO) price.
Customers of brokerages will typically have to be approved for options trading up to a certain level and maintain a margin account. Level 1: covered calls and protective puts, when an investor already owns the underlying asset. Level 2: long calls and puts, which would also include straddles and strangles.
For example, this is the information you will get if you pull up the listing for a stock traded on any major exchange. Level 2 data goes into far more detail.This shows you what is known as the “order book” for an asset. The order book is the list of orders to buy and sell a given asset over time.
Brokers will often give you higher level option approval just by asking if you have a large portfolio. If not, they may require some experience at Level One (covered calls) before approving Level Two (long puts and calls as well as cash secured short puts).
Most options brokers assign trading levels from 1 to 5; with 1 being the lowest and 5 being the highest. A trader with a low trading level will be fairly limited in the strategies they can use, while one with the highest will be able to make pretty much whatever trade they want.
The average options trader salary ranges between $65,000 and $185,000 in the US. Options traders' hourly rates in the US typically range between $31 and $88 an hour. Options traders earn the highest salaries in New York (145,716), Rhode Island (131,014), and New Hampshire (130,995).
Level 1 quotes provide basic price data for a security including the best bid and ask price + size on each side. Level 2 quotes provide more information than Level 1 quotes by adding market depth. Level 2 shows market depth typically up to the 5-10 best bid and offer prices.
To trade options you must have a minimum of two years trading experience with that product. Your Net Worth cannot be less than your Liquid Net Worth. To qualify for a Portfolio Margin account, your Net worth and Liquid Net Worth must each be greater than 100,000 USD.
Respondent's Level 2 options trading allows customers to engage in the options strategies of covered calls, cash-back puts, long calls and puts, and long straddles and strangles. Level 3 options trading allows more advanced trading such as options spreads.
Address: 5789 Michel Vista, West Domenic, OR 80464-9452
Phone: +97313824072371
Job: Education Orchestrator
Hobby: Lockpicking, Crocheting, Baton twirling, Video gaming, Jogging, Whittling, Model building
Introduction: My name is Rob Wisoky, I am a smiling, helpful, encouraging, zealous, energetic, faithful, fantastic person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
