How to Open Your Options Trading Account

If you’re anything like me – I’m sure you’re gearing up and ready to get started trading. But like my dad used to tell me, “Andrew, good things take a little time.” And the same can be said for trading.

So before we start with the good things (like those massive gains you’ll be taking) – we’ve got to take a little time and get everything in order. And it all starts with opening your options trading account.

The Truth about the “Right Broker” for You

There are hundreds of different brokers out there, and they’re all competing for your business, so my number-one piece of advice is to shop around and figure out which can best suit your needs and your situation. Like with anything in life (and especially in trading), don’t jump into the first thing you see.

There’s a lot to think about when it comes to choosing your broker  – everything from account minimums, acceptable trade types, and commissions fees to trading platforms, customer service availability, and regulatory standing could impact your experience.

So be sure to ask all your questions.

In my personal experience, my favorite broker is Thinkorswim on TD Ameritrade. The platform comes with top-notch trading tools, the site is user-friendly, they offer 24/7 customer service, and there’s no minimum deposit to open your account – that means you can start trading with as little as you’d like. For more information, you can call them at (866) 839-1100. Now, I don’t receive any compensation from Thinkorswim – I just like them.

But here’s a list of other well-known brokers in case Thinkorswim isn’t want you’re looking for…

• For Charles Schwab, go to www.schwab.com or call (888) 279-0888.

• For TradeStation, go to www.tradestation.com or call (800) 328-1982.

• For Fidelity, go to www.fidelity.com or call (800) 343-3548.

• For Robinhood, go to www.robinhood.com.

Now, regardless of which broker you decide to go with, you’ll want to make sure you’ve got the following information handy…

• Your Social Security number

• Your driver’s license or government-issued state identification information

• Your employer’s name and address (if applicable)

• Statement of information for the assets or cash you want to transfer to your new options account

Once you’ve decided on a broker, you’re right on track to taking control of your financial future – but we’ve got a few more boxes to check off before you dive headfirst into the world of unusual options activity.

And your next step is one of the most important ones…

Getting your options clearance.

How to Get Your Options Clearance

Once you’ve picked your broker, it’s time to get your clearance.

The good news is that the hard part is over… no more spending hours on the phone interviewing brokerage companies comparing who has the lowest commission fees or whatever else you were hoping to get from your broker.

But we’re not ready to start trading just yet.

Here’s the thing about options – they come with a ton of benefits like lower cost, lower risk, greater potential gains, and more…

But you have to be approved to trade them.

This approval is called an options clearance. Now, don’t get stressed out… it’s not like taking the SAT to get into your dream college. Instead, there are just a few steps you have to take to get approved for the kind of trading we do here at Project 303.

And to assure this process goes smoothly, I’ve broken down the process of opening your options account below.

Step 1

I like to keep trading simple, so you won’t need a high-level clearance for this trading service. You just need the one that allows you to buy calls and puts.

Now, clearance levels vary from broker to broker, but below I’ve included an example from Charles Schwab…

In this example, you would only need a Level 1 clearance.

Also, in this step, you’ll be asked if you want “Margin Trading” or “Margin” added to your account.

A margin account is basically a “loan” given to you by your broker. This allows you to enter certain trades that could potentially end up costing you more money than you initially put in them.

But luckily, with the low level of clearance needed for my trades, most brokers won’t require you to open a margin account. And as you continue to further your trading education, you can always re-apply for a higher clearance level. So you’re not stuck at Level 1.

Step 2

Once you’ve chosen the clearance level that best suits you, your broker will ask you for some personal information. Now, this information can range from your income to trading experience – but the main purpose is to verify your identity and pinpoint your suitability for options trading.

Here’s a quick snapshot of Charles Schwab’s application. The questions can vary from broker to broker but most are pretty similar…

The questions about your annual income and net worth will be used to determine the types of options you can trade. It’s pretty similar to the information you provide when filing your annual tax return… except completing this task will help you make money.

Charles Schwab (and many other brokers) ask for both “Total Net Worth” and “Liquid Net Worth.” As the definition in the margin explains, “Liquid Net Worth” includes all investments that can easily be turned into cash, including funds, stocks, and so on.

However, “Liquid Net Worth” does not include any real estate investments. So don’t include the value of your house here.

Your “Total Net Worth” will include all of your “Liquid Net Worth” as well as any illiquid assets you may own (such as real estate).

And don’t worry if this seems too complicated to figure out on your own… Charles Schwab, for example, has the Personal Net Worth Worksheet you can use. There are also plenty of calculators and other helpful tools online you can use, such as the “What is My Net Worth?” calculator.

Step 3

You’re almost done. This is the second to last step… but it’s important, so just hang in there.

Your broker is going to want to know some information about your trading experience. Now, I know your knee-jerk reaction may be to beef up your resume, but much like lying on the first date – it can hurt you in the long run.

None of these are trick questions, and you’ll want to be as honest as possible to ensure you are not given the wrong clearance. There are no wrong answers here.

If you’ve never heard of options (until now, of course), you’ll want to check the box next to “None” under “Knowledge Level.”

If you’ve heard of options before, then you’ll want to check the box next to “Limited” under “Knowledge Level.” If you’re pretty familiar with options, you’ll want to check the box next to “Good” under “Knowledge Level.” And if you know options like the back of your hand, then go ahead and check the box next to “Extensive” under “Knowledge Level.”

The same thing applies to “Options Trading” below…

If you’ve never traded options before, you’ll want to check the box next to “None.” If you’ve placed an options trade before but are still pretty new to them, you’ll want to check the box next to “Limited.” If you trade them pretty regularly, you’ll want to check the box next to “Good.” And if you’re trading options like a pro, then go ahead and check that box next to “Extensive.”

Answering these questions honestly will ensure that you are given a clearance that best serves you. And like I said earlier, you can always re-apply for a new clearance.

Step 4

The last and final step!

The only thing left to do is sign off and mail, fax, or upload (depending on your broker) your application, and you’re done.

Now, your patience has paid off. Once you’re approved, you’re officially ready to enter the world of options, where you can turn tiny, 1% or 2% stock movements into money-doubling windfalls.

How to Place a Call Trade

Pat yourself on the back – because if you’ve made it this far, that means you’ve got your options account set up and your clearance has been obtained.

And now, it’s time for the fun to begin.

I like to keep things pretty simple in my life, trading included. So today, we’re going to cover one of the two trading strategies that helped make me millions. It’s the simplest trading setup out there but rest assured… this simple strategy can help you score some major cash.

I’m talking about call options.

Now, in layman’s terms, a call option is a contract that gives the buyer of the option the right, but not the obligation, to purchase a fixed number of contracts or shares of the underlying asset (or the stock) at a fixed price on or before a set expiration date. The buyer pays a premium to a seller for this right.

When you go with a call, you’re basically betting that the stock price will go up. And as the stock goes up, the value of your call option will go up as well.

Here’s an example of what a call setup looks like…

Action to Take:

Open a Call Trade
on Apple Inc. (NYSE:AAPL)

Entry Instructions

• Buy-to-open AAPL May 6, 2019 $105 call (AAPL190506C00105000)

• Pay no more than $2.00

• Enter as a day-only order

Exit Strategy

• Sell-to-close AAPL May 6, 2019 $105 call (AAPL190506C00105000)
for 100% gains.

Now, if you’re looking at that setup and scratching your head – no worries. I’m going to walk you through every last piece of it. And I also have a step-by-step course that will help you better understand this trading strategy (and you can grab your call trader badge).

So let’s get down to business…

When it comes to your entry – this is all you need to know:

Action to Take: Open a Call Trade on Apple Inc. (NYSE:AAPL): This will simply tell you what kind of trade we are getting into (a put or a call) and on what company.

Buy-to-open: This means that you’re opening a new position, rather than closing one you already opened, and that you’re opening your position by buying something.

AAPL May 6, 2019 $105 call (AAPL190506C00105000): This is the option you will be purchasing. But let’s look at a closer breakdown…

AAPL: This is the name and ticker of the company or ETF that your option is on. Some brokers will call this “the underlying security,” “the underlying stock,” or just “the underlying.”

May 6, 2019: This is the expiration date of the option you’re buying. In other words, the option disappears after this date. Now, usually we want to close the position (by selling the option) before the expiration date – but I’ll tell you all about that below when we discuss the Exit Strategy.

$105: This is the strike price of the option you’re trading. Anyone buying a call option with a $105 strike price is buying the right, but not the obligation, to buy the underlying stock or ETF (in our example, shares of AAPL) at $105, no matter what that stock is really trading at.

Call: This tells you the option type you want to trade – either a call or a put.

(AAPL190506C00105000): This is the option chain – an abbreviated name for the option you’re trading. The option chain includes all the information we’ve discussed above. The letters at the beginning (“AAPL”) mark the ticker of the underlying stock, followed by the expiration date (“190506” means “2019 May 6”), followed by the option type (“C” for calls, “P” for puts), followed by the strike price (in tens of a cent – “00105000” means $105). Pretty simple when you look at it like that!

Pay no more than $2.00: Finally, this sets the “limit price” – this price is the most you want to pay to enter this trade. This helps us not only control our risk but assure that our price targets hand us the biggest profits possible.

When it comes to your exit – this is all you need to know…

Sell-to-Close: This means that you’re closing an existing position, and you’re doing that by selling the option you just bought.

AAPL May 6, 2019 $105 call (AAPL190506C00105000): As we talked about in the entry breakdown, this just signifies the option you’ll be purchasing.

For 100% gains or more: This is the profit potential that we’re aiming for. So if we paid $2.00 for this trade – we’d be aiming to get out at $4.00. I’ll always be communicating with you about exits, but to get a leg up on the market, setting these profit targets can assure that you get the most bang for your buck (and you won’t be glued to your screen all day).

Now, Profit Pregame members like you will get daily updates on the stocks I like (or dislike) on any given day, as well as other information like the time frame in which I think the stock will move or the growth I expect from it.

But you can also join me in my Live Trading Room, where I give specific recommendations every week, including all of the factors listed above:

  • Underlying security
  • Expiration date
  • Strike price
  • Limit price
  • Exit strategy

To see how you can join me, all you have to do is click here.

See you there,

Andrew Keene
Founder, Profit Pregame