Understanding options trading
Options are a complex investment and are not suitable for every investor. There are several types of options strategies, each with unique risks.
Considerations for options trading
Keep these points in mind when trading options:
- Consider whether options fit with your investment goals, risk tolerance, and objectives.
- You could see significant gains—or lose your entire investment—in a relatively short time.
- You should consult a professional tax advisor to discuss how options strategies may impact your tax situation.
Before you begin trading, we recommend that you read the brochure Characteristics and Risks of Standardized Options. We'll send you a copy if your option application is approved.
How to get started at Vanguard Brokerage
To buy and sell options on underlying financial instruments that trade on major U.S. exchanges, you must have a Vanguard Brokerage Account and be preapproved by Vanguard Brokerage to trade options in that account.
If you're already a Vanguard client, our brokerage associates are available to answer your questions at 800-992-8327 Monday through Friday from 8 a.m. to 8 p.m., Eastern time.
Submit your application
Complete and submit a Brokerage Option Application, one for each brokerage account that you intend to use for options trading.
Note: If you don't already have a Vanguard Brokerage Account, you'll also need to open an account.
In reviewing your application, we'll consider your account type and the information you provide about your finances, trading experience, and investment objective.
You'll receive notice of your approval or denial by mail.
We have four levels of options approval:
Level 1. Write covered calls, purchase protective puts, and write covered puts. (Margin approval is required to write covered puts.)
Level 2. Purchase calls and puts. Write cash-secured puts. (Includes Level 1.)*
Level 3. Trade equity and index spreads. (Includes Levels 1 and 2.)**
Level 4. Write uncovered (naked) puts. (Includes Levels 1, 2, and 3.)**
Learn more about options trading
Take an online class, watch a webcast, or try a virtual trading system.
The Options Industry Council's (OIC's) website has a wealth of education about options, whether you're just beginning or an experienced options trader. Some topics you may want to explore include:
- Trading tools.