It is very simple really and you might even be able to try again at the same broker. They just want to cover their ass in case you blow out. They want to make sure that you have experience... So tell them you have experience with covered calls, long options, spreads, and naked options. That you have placed 25 to 50 trades a year for 3 years or so. They want to make sure you are not blowing money you need... Tell them that you have your $19K allocated for pure speculative trading and that blowing out is no concern to you because you have other monies and you are 20+ years old. They want to make sure your investment objectives fit the type of trading that you apply for. Speculation is the only objective you should list, or rank it the highest if they make you rank them. If you want to be denied check "preservation of capital and steady income" things like this. All brokers will have a levels of option approval... usually around four. The level you get has to do with the 3 things listed above and how much money is in the account. A sample of approval levels and cash needed... 1. Covered calls - any $ amount 2. Long options - $10K 3. Spreads - $25K 4. Naked - $50K Yelling a screaming wont help, it will hurt you. If you get called make sure you tell them you are comfortable with exercise and assignments too... www.preferredtrade.com is a options firm suitable for small traders. (No I do not work there...) Good luck...
I can't believe that you guys are advising him to LIE on an application!!! That is what pikers do. Find another way than to outright lie about your financial status. I sure as hell would not want my $$$ tied up with a broker that lets kids with no experience dip into the same capital pool, especially in an LLC structure where I was a Class B member. If you really want to trade and no one will let YOU, why not fund a sub account under your mentor, where all P/L is passed through to you and you execute trades on it?? Sign an agreement that all losses are yours and he has no financial liability for your actions, notarize it if you must and he should be fine with it.
Pathus, in the absense of having an options account, have you been following your mentor by trading in the underlying stocks and/or ETFs?
echo what quamax said, from my years of applying for option priv, high net worth is not as importance as experiences.
repercussions are jail or $100,000 fine or both. Just kidding... They simply will not approve you. You have to understand, they want to cover their butts in case you lose all your money and sue them for letting a novice like you trade options which is considered an unsuitable investment for your profile. If you claim you are an expert options trader with a nice net worth ( Not advising this but you could) they can protect themselves in court. If you tell them what they want to hear you should be prepared to lose your money because it can and probably will happen. And remember, you can't blame anyone but yourself even if their systems are down, stock gets halted and opens at 0... your mentor has a string of bad luck....These are all risks you should be prepared to deal with as an experienced trader. Good luck... Nick
Thanks for the input. Actually TOS doesn't even have an approval process. As soon as they get my money I will be able to trade options. Interesting. They did ask some questions about income and experience etc and I answered them well. Looks like everything is gonne be fine. I asked them why they don't have an approval process and they said its because they have state of the art risk management technology and that they can contact me if things go bad. I have not been trading the underlying stocks as my mentor because I still don't even have an account. And yes it is stretching the rules but I am not even technically an employee. Another good thing is TOS has free broker-assisted trades so I can trade from work on my cell.
Actually that is not totally accurate. TOS does have an approval process, it doesn's have trading levels. So as long as you're approved for options trading you can trade any strategy you want. There's no that: "Oh, you are on level 2 so you can only buy options"....crap.