Opening an Options Trading Account

Because options prices can be quite volatile, and because it is possible for options traders to get locked into losing positions, brokerages  typically require customers to maintain options accounts with them. An account consists of a deposit  of securities  or cash, and it may be used to buy options on margin.

When you open your account, you will be required to complete an options agreement form, which asks for detailed information about your identity, age, citizenship, and finances. This information is used to verify that you have the necessary financial resources and investing experience for options trading. By signing the form, you agree to follow the various rules and regulations regarding options trading.

After you send in the form, you will receive two documents from the brokerage firm:

* Characteristics and Risks of Standardized Options. Also known as the “options disclosure documents,” this details the rules and obligations of options trading. Contact your financial representative for the appropriate options disclosure documents.
* A prospectus from the Options Clearing Corporation, the company that creates and clears most options contracts.