Analysis Techniques & Strategies
The option approval level will determine what options strategies you will be able to employ in the account. In general terms, the levels are defined as follows:
Level 0 - No options trading allowed.
Level 1 - Writing of Covered Calls, Buying Protective Puts.
Level 2 - Level 1 + Buying Calls, Buying Puts, Writing Covered Puts.
Level 3 - level 2+ Stock Option Spreads, Index Option Spreads, Butterfly Spreads, Condor Spreads, Iron Butterfly Spreads, Iron Condor Spreads.
Level 4 - Level 3 + Writing of Naked Puts (Stock Options).
Level 5 - Level 4 + Writing of Naked Puts (Index Options), Writing of Naked Calls (Stock Options), Writing of Naked Calls (Index Options).
These levels vary depending on the funding and type of account.