I never realized how hard it would be to be approved for options trading. When I originally wanted to trade options a few years ago I put in an application to my broker and was denied to even buy calls and puts. I wrote off options trading as something that they would only let you do if you have a very large account and didn’t think about it again.
A year or two later I looked into it again and realized that there is no reason they should be so strict with options and spread trading. I understand why they would be a little wary about who they let write naked options, but spread trading is defined risk and leaves nothing to chance. I decided to try again with a few brokers, but I never thought it would be a multiple month process with so many frustrations. After finally being approved I learned a few things about the process:
- Be persistent and constantly ask whoever you can, on the phone, over email, etc.
- Keep wasting their time and nag them until they crack.
- If you can, try to prove you know your stuff.
I tried getting approval with the broker of my choice and was instantly denied. I called up customer service and tried to push some answers of of them. It basically came down to my net worth, my account wasn’t big enough to get enough of their attention, so they just skipped over me. The rep told me in a very roundabout way that I should “take a second look” at my net worth and liquid assets and get back to them. I looked at it again with my beer goggles on and changed the info up one level of net worth and resubmitted it to them. They got back to me and asked for proof of my net worth. I couldn’t provide it so I moved on to another broker.
I chose the second broker based on their low commissions. I decided to be a little sneakier with this application, because I knew if I straight out said I wanted to trade naked options, they would probably deny me instantly. I started the process of opening an account with them and stated what level I wanted to trade as just regular stock with margin. I was connected by email with a service rep and I started emailing her questions about everything having to do with the account. I was living in another country outside the US so I had to send some paperwork by email over the next week. I emailed her a lot and used a lot of her time opening my account until it was almost done. Then right before submitting the last pieces, I said I had made a mistake on the trading levels and wanted to trade naked options. The trading level was changed and I was cleared to trade them. I’m not sure if they would have approved or rejected me from the beginning, but I think that it had something to do with all the time I spent corresponding with the person in charge of opening new accounts. After wasting so much of their time, I think they are anxious to get rid of you, and since your account is nearly complete, its probably easier to just approve it. This might not work with a bigger broker who has a more bureaucratic procedure, but tis worth a try.
So I was cleared to trade, funded the account and started trading with the new broker. I thought everything was solved, until I realized why they were a discount broker. The software was the worst thing I have ever used in my life. It had so many bugs and constantly crashed that I decided I had to leave and go to a new broker. So I went back to the broker I originally wanted.
I applied again even though I wasn’t supposed to reapply for a few months. I emailed them and told them I was already trading with another broker and I wanted to move my business to them. DENIED. Called them and talked to a live person. DENIED. I started emailing someone at the company about it and they referred me to someone else in the department who may be able to help me. I opened a new IRA account because I thought it might be useful to apply again in an account that hadn’t been denied numerous times before. I also took an options quiz at dough.com and showed them I knew what I was talking about when it came to options. They finally approved me! This was after being denied at least 5 times, and I was finally ready to go….
Except they only approved me to buy calls and puts. DAMN, too bad I never plan on buying a plain long option in my life. I emailed them back again and played the “I want to move my business here, BUT…” card again. They said they would try again and email me back in a few days. When I finally got a response, they had FINALLY approved me to trade spreads. It’s not uncovered writing, but I’ll take it for now until I build up a little history with them and apply again for naked options.
I’m an inpatient person and I hated every second of dealing with the brokers on this issue. I hate having to constantly call someone and deal with the same crap over and over. The bottom line is they don’t care about you if you don’t have a huge account, and you’ll have to be annoying and constantly nagging them to get it done. Now that its done, I feel great, except that now I need to move onto the next step…
Getting them to lower their commissions to match the crappy discount broker that I am with now. I am prepared for the exact same fight I had with the options approval, and I’m not looking forward to it one bit.