Can anyone tell me the actual requirements for applying for level 2 options (or whichever one selling puts falls under in Fidelity)? I am currently selling covered calls and am more or less content, but I would like to start using the wheel strategy on weeks such as this one.
On Fidelity, there are five levels of options trading. Get to know them before you start your application.
- Selling covered calls
- Rolling covered calls
Level 2 (everything from Level 1, plus)
- Buying calls
- Buying puts
- Selling cash-covered puts
- Long straddles and strangles
Level 3 (everything from Level 1-2, plus)
- Spreads (up to 4 legs)
- Selling covered puts- short stock secured
Level 4 (everything from Level 1-3, plus)
- Selling uncovered calls – stock/ETF
- Selling uncovered puts – stock/ETF
- Short straddles- stock/ETF
Level 5 (everything from Level 1-4, plus)
- Selling uncovered calls – index
- Selling uncovered puts – index
- Short straddles – index
Level 3 and above require a margin trading account.
How to Get Approved for Options Level 2 on Fidelity
As long as you show enough knowledge of options trading in your application, you may be approved for Level 1, which allows for selling covered calls, rolling covered calls, and buy-writes strategy. Because it’s the lowest options trading level on Fidelity, most people tend to get approved.
Level 2 options trading is where a lot of people struggle with. And it also happens to be the most popular options trading level among investors and traders.
Options level 2 will let you open call and put options. Furthermore, cash-covered puts, long straddles, and strangles are also available at this level.
Because of the risk associated, not everyone qualifies for options level 2.
The key to getting approved for options level 2 on Fidelity is to provide positive answers in your application.
Traders with a lot of experience in stocks and options trading are likely to get approved. Having a high-risk tolerance can also influence your eligibility.
You can start a new application or re-apply via the Margin and Options page.
Fidelity’s options vetting process is intentionally vague. Most traders will need to apply a few times before they can get approved for options trading level 2 and higher.
Fidelity won’t tell you the exact reason why your trading account was rejected for options trading. You may need to go back and review the information you filled out in your application.
- Investment experience: how many years have you been trading.
- Financial information: annual income, estimated net worth, and estimated liquid net worth.
- Employment status: your current employer and what you do for a living.
Here’s an example application:
Fidelity will assess your application based on that information. The risks get greater as you apply for a higher options level.
💬 Community Discussion
If you’re looking to get approved for Level 2, there are a few things you can do to improve your chances. Make sure that you’re familiar with the basics of options trading. You don’t need to be an expert, but understanding the concepts will help you understand the approval process.
Options are contracts that give the buyer the right, but not the obligation, to buy or sell a security at a specific price on or before a certain date. When buying options, the investor risks losing the entire premium paid for the option if it expires worthless. When selling options, the investor risks being forced to buy or sell the security at an unfavorable price if it is exercised.
Be patient and stay focused. The approval process can take some time, so don’t be surprised if it takes a few weeks.
From what I can tell, Fidelity is one of the more conservative brokerages. You will need at least a 20k account size before they’ll even consider giving you level 4 or 5, and even if you have that, they’re still going to want to see good income and net worth numbers before they approve it.
They’re also terrible about telling you if you were denied. I only found out because I called in to check, and I also learned of the account size minimum.
Fidelity is also annoying in that they won’t let you open 0DTE positions unless you have a $1,000,000 or better account. You can’t even apply for it.
I’ve got a 250k account and okay with the maximum risk. If you have options experience, you should be fine. If you don’t have any options experience, just say you do, and they’ll probably approve your account. It’s not like they have any way of checking.
I got to options level 4 pretty quickly—I started options level approvals in April last year. By around November, I reached Level 4 by applying every 3 months or less.
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