5

I recently tried applying to get approved for trading options in my brokerage account. I have 10k in the account ~$4k in cash and I'm 23. I have more than the average investor's knowledge when it comes to investing and options in particular. My application was denied but of course.. they won't tell you the reason other than the fact that the financial information doesn't meet their criteria.

I've read online that a lot of times they really look for option trading experience... Well how am I supposed to get option experience if I can't get approved in the first place??

Would anyone recommend.. "exaggerating" my application in order to get approved? I'm not looking to do anything risky - I plan on using these very conservatively in fact - and I'm not trading on margin.

Improve this question
  • 2
    Reminds me of the college grad trying to get a job in their field but all available jobs require at least 2 years of experience... – TTT May 25 '16 at 20:41
  • 1
    Does "10k in the account" mean your share/ETF portfolio is worth $6k plus $4k of cash? (I'm not from the US so not familiar with the jargon there). If so, they may be looking for a bigger portfolio before they let you start. You could easily burn up half that cash float in a couple of days, just buying calls, if you get unlucky. Maybe $10k is just too small for them to bother with, or if they have an "old fashioned" attitude they would prefer you as a long term customer who eventually has a $1m portfolio, rather than to clean you out in a month and never see you again. – alephzero May 26 '16 at 1:46
  • 3
    Ask another Broker if they would approve you. Don't lie, ever. – Optionparty May 27 '16 at 14:40
8

They generally approve for basic options trading (buying calls) based on overall experience and will grant more rights as you build experience. I'd question how you have "more than the average investor's knowledge" about options if you've never traded them before, but that really doesn't matter. They're trying to protect you from yourself and satisfy legal requirements to that effect. If you want access, just lie and say you've been trading for a decade, hundreds of times a year. They can't verify it and won't ask for proof. Source: I did this

Improve this answer
  • 3
    I'm all about breaking the rules but not the law. In this case, the OP is 23, I'd suggest he limit his claimed experience to no more than 5 years. – JTP - Apologise to Monica♦ May 25 '16 at 20:19
  • 1
    @JoeTaxpayer - Agreed! Though in the US, some states you have to be at least 18 and in most states it's 21. – TTT May 25 '16 at 20:32
  • @TTT That doesn't preclude the possibility that OP lived in a country where the minimum age to trade securities is 18 and he then later moved to the US. – TainToTain May 26 '16 at 17:42
  • @TainToTain - I assume OP now has enough information to figure out how much exaggerating to do based on past residency. – TTT May 26 '16 at 17:54
  • You can always call the brokerage house and ask for a bump in level. – Pete B. May 26 '16 at 19:00
3

I would suggest trying opening an account with another broker. I was denied option trading privileges with ScotTrade in the past. I've had "Level 3" with TradeKing for years now. I may have had even less cash than than you when it was approved.

Disclosure: I am an account-holder with TradeKing, but am otherwise unaffiliated with them.

Improve this answer
2

I'm 18, with only a little over a year of actual experience in investing, and applied about a month ago for options trading with Charles Schwab. #1, I understand how easy it seems to put down information and experience you don't actually have, but trust me, it will come back to bite you. And I'm not just saying Karma haha they have ways of proving what you have. Not exactly sure what happens when you put something wrong down. The market can be affected in a negative way if a bunch of beginners put down info like that. They screen for a reason. I never heard back from them, so I called in, and they put me through rounds of questioning on investing strategies, terms, ect., and in the end I apparently got them all right and he approved me right then and there. Made my first trade this morning after researching and becoming more familiar via paper trades. Here's my advice for what it's worth. Boost your portfolio with more diversity and trades, and do some paper trades in the mean time until they allow you to join. Good luck investing!

Improve this answer
  • 1
    I think the reason for the questions is actually more to protect you from making bad trades and losing your money, and probably not so much to protect the market. (And the reason they want to protect you isn't just out of the goodness of their hearts, but because they want a solid defense in case you later try to sue them claiming ignorance.) Congrats on getting approved, BTW! – Justin Aug 23 '18 at 19:18

Not the answer you're looking for? Browse other questions tagged or ask your own question.