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Option Account

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An option account is an account opened with an options or securities firm that permits a customer to trade options. The customer opening an option account must have margin and sign an options agreement prior to trading. The level a customer will be allowed to trade at in an option account is determined by their investing experience. The first level, in an option account allows covered call writing. This is considered the most conservative strategy for option trading. The second level, in an option account allows customers to buy puts and calls. More advanced levels in an option account permit customers to implement sophisticated option strategies like straddles and spreads. The most advanced level an option account can be approved for is uncovered call writing. The requirements necessary to trade in an option account of this level are more stringent. The customer must convey option savvy and have the financial resources necessary to maintain an option account with this degree of risk.

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