Options accounts & routing
What are the different Options Approval Levels (Level 1 through Level 5) at major retail brokerages?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Retail brokerages typically assign Options Approval Levels 1 through 5 (or similar tiers) ranging from covered calls and cash-secured puts at Level 1-2 up to uncovered naked calls and puts requiring the highest level and margin approval.
How it works
Approval is based on self-reported trading experience, income, net worth, and risk tolerance per FINRA suitability obligations, with higher levels unlocking spreads, straddles, and uncovered option writing.
An example
Level 1 might permit only covered calls and protective puts, while Level 4-5 permits naked short calls and puts carrying theoretically unlimited risk.
Risk & limitations
Brokerage level numbering and specific strategy allowances vary by firm, so traders must check their specific broker's level definitions rather than assuming a universal standard.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.