straddles/strangles options?

Question

Hello-
I am looking for a broker site to trade staddles/strangles. I am using tradeking currently but the site will not allow me to trade straddles or strangles because it states I am not approved for this level of trading. Does anyone know a good site to trade from or know how to become approved?

Thanks so much.

Answer 1

Most brokers have different trading levels for options. The requirements for less restrictive trading levels vary by broker, so you will have to check with TradeKing to determine their requirements.

Regardless of the broker, to you sell straddles and strangles you will have to have enough margin to meet the margin requirements. That is a federal requirement, although brokerages are allowed to increase the minimum margin required.

Two widely used brokerages by active option traders are

http://www.interactivebrokers.com/en/main.php

and

http://www.thinkorswim.com/tos/client/index.jsp

so you may want to check with them.

You should be aware that most brokerages require a high trading level to sell naked calls, but allow naked puts at a lower level. If you can sell naked puts, you can trade synthetic straddles and strangles even if you cannot sell naked calls. (Example: If you short 100 shares of a stock and sell two naked puts with a strike of $50 that is equivalent to selling a straddle with a strike of $50.)