In the US, many brokerages require that you fulfill certain standards before they will let you trade options at various levels. These standards, from what I understand, are secret and at the discretion of each brokerage, but SEC mandates a minimum level that they all must maintain.

Among these are things like minimum balance, income, experience trading options and so on.

What exactly are the minimum standards mandated by the SEC? Surely they must be public information. As I understand it the general idea is to not let people trade options unless they "know what they are doing". Well, what exactly determines this, according to SEC?

  • 2
    They aren't secret. They do depend on the broker. Ask. But note that options, when used as anything but a hedging mechanism, are a notoriously good way to lose large amounts of money quickly.
    – keshlam
    Oct 28, 2016 at 19:06
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    @keshlam Thank you for this helpful disclaimer, I will now surely not be able to sue you if I lose a large amount of money on options.
    – Superbest
    Oct 28, 2016 at 19:21
  • If you feel you know enough to proceed, more power to you. Most have no clue how to manage the risks, and have no clue that they have no clue.
    – keshlam
    Oct 28, 2016 at 22:39
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    The problem with 'secret' is this - why bother sending in any paperwork at all if the application will come back rejected? I started trading options when I was still in school. The rules may have changed since, but I recently discovered that my newer retirement accounts were given a higher level trading ability than older ones. I'd call the broker's customer service department again and ask for a supervisor. Oct 29, 2016 at 13:11

1 Answer 1


The SEC outlines its requirements for brokers handling of clients wishing to trade options in this Investor Bulletin issued by the SEC dated Mar 18, 2015.

Here we note that :

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. In an options agreement, you will need to provide information that will assist your broker in determining your knowledge of options and trading strategies, as well as your general investing knowledge and your financial ability to bear the risks of options trading. Based on the information you provide, your broker will determine whether options trading is suitable for you and, if so, what types of options trading may occur in your account.

The bulletin highlights the information you will need to provides as :

  • Investment objectives such as capital preservation, income, growth, or speculation;
  • Trading experience such as the number of years you have been trading stocks and/or options, the number of trades you make per year, the average size of each trade, and information about your general knowledge of investing;
  • Personal financial information such as liquid net worth (investments easily sold for cash), total net worth, annual income, and employment information;
  • An indication of what types of options you would like to trade.

According to this information, acceptance by a broker will be a subjective judgement based on the information provided by the client.

The Broker's Option Agreement is described in this Investopedia page.

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