What is the difference between Level 1 and Level 2 option trading?
Based on the information you provided in your options application, ShareBuilder will assign an options trading level to your account. Level 1 Typically, if you are new to options trading, you will be assigned to Level 1 trading. A Level 1 options trader has the ability to access and place options trades from the Covered Calls tab in the Options Trading section. From this page, you can: • Write a Covered Call • Close a Covered Call • Perform a Buy / Write (Buy a stock position and write a covered call) • Perform an Unwind (Close a covered call and sell a stock position) Note: Individual and Joint account types approved for Level 1 trading can apply for Level 2 options trading at anytime. Level 2 Level 2 options traders have the ability to access both the Covered Calls and Buy / Sell Options tab in the Options Trading section. Level 2 trading is geared towards more experienced options traders, and allows you to: • Buy a call (to open) • Buy a put (to open) • Sell a call (to close) • Sell
Basically, Level 2 allows you to own long call and put option contracts: Level 1 A Level 1 options trader has the ability to place the following types of trades: • Write a Covered Call • Close a Covered Call • Perform a Buy / Write (Buy a stock position and write a covered call) • Perform an Unwind (Close a covered call and sell a stock position) Level 2 For more experienced traders, Level 2 gives you more options (pun intended) to choose from: • All Level 1 strategies above, plus: • Buy a call (to open) • Buy a put (to open) • Sell a call (to close) • Sell a put (to close) Please note: Options involve risk and are not suitable for all investors. Before investing in options, please read the Characteristics and Risks of Standardized Options.
