To get approved for options trading, you fill out an application at your brokerage that asks about your income, net worth, trading experience, and investment objectives. The broker uses this information to assign you an approval level, which determines which strategies you can trade. Most beginners start at Level 1 or 2 and can upgrade as they gain experience.

The Approval Levels (May Vary by Broker)

| Level | Strategies Allowed | Typical Requirements | Level 1Covered calls, protective putsAny experience level, basic income Level 2Buying calls and puts, cash-secured putsSome trading knowledge, moderate income Level 3Spreads (vertical, calendar, diagonal)1+ years experience, higher net worth Level 4Naked puts, straddles, stranglesSignificant experience, high net worth | Level 5 | Naked calls, uncovered writing | Extensive experience, substantial assets |

Note: Brokers use different naming conventions. Fidelity uses Levels 1–5, Schwab uses Tiers 0–3, and Robinhood uses a simpler approval system. The underlying concept is the same.

What Brokers Look At

1. Annual income. They want to see enough income to absorb potential losses. There's no hard minimum, but under $25,000/year limits you to basic strategies at most brokers.

2. Liquid net worth. Cash and investments you could access. This matters more than total net worth because a house isn't liquid. $50,000+ in liquid assets opens most levels.

3. Trading experience. Measured in years and number of trades. Stating 1–2 years of experience with 10+ trades per year typically qualifies for Levels 1–2. Higher levels want 3+ years with frequent trading.

4. Investment objectives. Options require "speculation" or "growth" objectives. If you select "capital preservation," you won't be approved for much. Be honest but accurate — if you plan to generate income with covered calls, select "income" and "growth."

5. Risk tolerance. Select "aggressive" or at least "moderate." "Conservative" risk tolerance and options trading don't mix in the broker's algorithm.

Step-by-Step Application Process

Step 1: Open a brokerage account (or log into your existing one).

Step 2: Navigate to options trading application. Usually under Settings → Account Features → Options Trading.

Step 3: Complete the questionnaire honestly. The form asks about:

  • Employment and annual income
  • Liquid net worth and total net worth
  • Investment experience (stocks, options, futures)
  • Knowledge level (limited, good, extensive)
  • Investment objectives and risk tolerance

    • Step 4: Submit and wait. Most brokers approve instantly for Levels 1–2. Higher levels may take 1–3 business days with possible follow-up questions.

    Step 5: If denied, you can reapply after updating your experience or trying a different broker with less strict requirements.

    Broker-Specific Tips

    Robinhood: Very lenient approval. Most applicants get at least Level 2 quickly. Limited to three strategies at each level.

    Fidelity: More traditional. Requires a phone call for Level 3+. Known for being thorough but fair.

    Schwab/TD Ameritrade: Combined platform after merger. Moderate approval standards. Thinkorswim platform is excellent for options analysis.

    Tastytrade: Options-focused broker with relatively easy approval. Designed for active options traders.

    Interactive Brokers: Requires detailed questionnaire and sometimes a knowledge quiz. Higher standards but lower commissions for high-volume traders.

    Common Reasons for Denial

  • Listing zero trading experience
  • Selecting "capital preservation" as your objective
  • Very low income or net worth relative to the level requested
  • Inconsistent answers (e.g., "extensive" experience but zero previous trades)

    • How to Upgrade Your Level

    After trading successfully at your current level for a few months, request an upgrade. Most brokers let you reapply online. Updated income, experience, or demonstrated trading history at the current level helps your case.

    Start with Level 1 (covered calls) and Level 2 (buying calls/puts, cash-secured puts). These are the most useful strategies for income generation and learning. OptionsPilot's tools are designed around these exact strategies, helping you find and evaluate trades that match your approval level.

    Should You Aim for the Highest Level?

    Not necessarily. Higher levels unlock riskier strategies like naked calls. Having access doesn't mean you should use it. Many experienced traders deliberately stick to Level 2–3 strategies because the risk/reward is more favorable.