Get started with options

To get started trading options, you must first apply and be approved for options trading.

Note:
Please keep in mind that options involve risk and are not suitable for all investors. For more information, see Characteristics and Risks of Standardized Options.

Add options trading to my account
View options trading levels
View commissions for options transactions
Know which E*TRADE platforms support options trading
Learn more about options trading
Understand Universal Spreads
Remove options trading from my account

Add options trading to my account

You can add options trading to your account or upgrade your current options trading level online by clicking the link that corresponds to the account type below:

Options Upgrade ‒ Brokerage Account
Options Upgrade ‒ IRA Account

Once you have completed the application, we will notify you about the status within 1-2 business days.

If you prefer to submit your request by Mail, please go to the Forms & Applications page. Next to Brokerage Account or IRA Options Upgrade, select Download PDF, and then print out the form. Have all account holders (agents) complete and sign the required sections according to the instructions at the top of the form. If your account is a business account, enter the income and net worth of the business. Send your completed form to us at:

By regular U.S. mail
E*TRADE from Morgan Stanley
PO Box 484
Jersey City, NJ 07303-0484

By overnight mail
E*TRADE from Morgan Stanley
Harborside 2
200 Hudson Street, Suite 501
Jersey City, NJ 07311-1113

Note:
It generally takes about five business days from receipt of your request for us to review it. Once this has been done, we'll send you a Smart Alert message informing you of the outcome of our review. You'll also find out what options trading level you've been approved for.

View options trading levels

The trading levels available at E*TRADE – for customers who have applied and been approved for options trading – depend on the type of account.

Please select one of the following account types:

Margin account
Cash account
IRA

Note:
The level of options trading for which your account will be approved, if any, will be decided based on the information you provide us in your Options Upgrade Request form.

View options trading levels in margin accounts

We offer four different options trading levels for the following types of margin-approved brokerage accounts:

Individual accounts
Joint accounts
Investment club accounts
Business/corporate accounts (provided the corporate charter allows for the requested level of options trading)
Trust accounts (provided the trust agreement allows for the requested level of options trading)

Level	Options Strategies Available
Level 1	Covered calls, including: Covered calls sold against stocks held long in your brokerage account Buy-writes (simultaneously buying a stock and writing a covered call) Covered call roll-ups/roll-downs
Level 2	All Level 1 strategies, plus: Synthetic long puts Married puts Long calls Long puts Long straddles Long strangles Covered puts (short stock and short put position) Cash Secured Puts
Level 3¹	All Levels 1 and 2 strategies, plus: Equity debit spreads Equity credit spreads Equity calendar/diagonal spreads Index debit spreads Index credit spreads Index calendar/diagonal spreads Naked Short Puts² Butterflies Iron butterflies Condors Iron condors
Level 4¹	All Level 1, 2, and 3 strategies, plus: Naked Short Calls

To place a naked equity call or put trade (Levels 3 and 4) you must have equity of at least $5,000 in your margin account.
At Levels 3 and 4, margin customers will be allowed to enter naked short put positions. These positions will be subject to the naked maintenance margin requirement rather than the cash-secured requirement.

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View options trading levels in cash accounts

We offer two different options trading levels for the following types of cash-approved brokerage accounts (unless noted in parentheses below):

Individual accounts
Joint accounts
Investment club accounts
Business/corporate accounts (provided the corporate charter allows for the requested level of options trading)
Trust accounts (provided the trust agreement allows for the requested level of options trading)
Custodial accounts (Level 1 and Level 2)
Coverdell Education Savings Accounts (Level 1 only)
Estate accounts (Level 1 only)
Profit sharing and money purchase plans (Level 1 only)
401K accounts (Level 1 only)
Non-custodial retirement plans (Level 1, only available if the plan agreement allows for options trading)

Level	Options Strategies Available
Level 1	Covered calls, including: Covered calls sold against stocks held long in your brokerage account Buy-writes (simultaneously buying a stock and writing a covered call) Covered call roll-ups/roll-downs
Level 2	All Level 1 strategies, plus: Married puts Long calls Long puts Long straddles Long strangles Cash-secured puts

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View options trading levels in IRAs

We offer three different options trading levels in the following types of IRA accounts:

Traditional IRA
Roth IRA
Rollover IRA
SIMPLE IRA
SEP-IRA

Level	Options Strategies Available
Level 1	Covered calls, including: Covered calls sold against stocks held long in your brokerage account Buy-writes (simultaneously buying a stock and writing a covered call) Covered call roll-ups/roll-downs
Level 2	All Level 1 strategies, plus: Married puts Long calls Long puts Long straddles Long strangles Cash-secured puts
Level 3	All Level 1 and 2 strategies, plus: Equity debit spreads Equity credit spreads Index debit spreads Index credit spreads Equity calendar/diagonal spreads (long positions only) American-style index calendar/diagonal spreads (long only) Butterflies Iron butterflies Condors Iron condors

View commissions for options transactions

For information on options commissions – as well as all other commissions and fees – see our consolidated Commissions & Fees page.

Know which E*TRADE platforms support options trading

Here are the gateways and trading platforms available at E*TRADE through which basic and complex options trades can be placed.

Basic options trades
(Buying and selling calls and puts)

E*TRADE web site
E*TRADE Pro
E*TRADE Mobile

Complex options trades
(Spreads, straddles, combinations, buy-writes, butterflies, condors, and more)

E*TRADE web site
E*TRADE Pro
E*TRADE Mobile

You can also place options trades by calling us at 800-387-2331 and speaking with one of our brokers; a fee of $25 may be charged for broker-assisted trades.

Learn more about options trading

Our Options Education section provides an overview of the basics of options trading, as well as a glossary and detailed descriptions of the various options strategies.

Understand Universal Spreads

Definition: A Universal Spread is a spread meeting certain conditions as set forth in amendments made to FINRA Rule 4210 by Regulatory Notice 12-44. Specifically, these amendments allow for the pairing of option-only spreads where the risks offset each other and the total risk of the combined spread is less than the sum of the risks of each individual spread. This is a more flexible form of pairing that allows strategies with limited risk to be combined into a type of super-spread, resulting in a lower overall margin maintenance requirement.

Traditional Spread Example: A short 40-50 put spread and a short 60-70 call spread with the same expiration would fit the traditional definition of an "iron condor" strategy, and would thus have a traditional margin requirement of $1000. This is calculated as the most the position set can theoretically lose if held to expiration (the $10 spread width x the option multiplier of 100), since both sides of the spread cannot possibly be in-the-money at expiration. The stock cannot possibly be below $50 and above $60 at the same time.
Universal Spread Example: Now consider the above example with spreads of different widths. A short 40-55 put spread and a short 60-70 call spread with the same expiration would have traditional margin requirements of $1500 and $1000 respectively. The total traditional requirement on this position set would be $2500 because there is no traditional strategy that allows these four options to be combined, yet the most this position set can theoretically lose if held to expiration is only $1500 (if the stock closes below $40). As a result of the updates to FINRA Rule 4210, these positions can now be combined into a Universal Spread with a margin maintenance requirement of only $1500.

General Eligibility: To be eligible for Universal Spread treatment, a position set must have a defined maximum spread risk.

All options must have the same underlying security or instrument.
All long & short contracts must either be all American-style or all European-style.
No underlying stock positions or adjusted options are allowed as part of a Universal Spread. Stock may be present in an account but will never be paired as part of a Universal Spread.
The total call option count cannot be negative, and the total put option count cannot be negative. For example if a position set is long 9 calls, short 10 calls, and long 1 put all in the same expiration, then the call option count is negative and a Universal Spread using all options cannot be formed.
For each short call there must be at least one long call with the same or later expiration, and for each short put there must be at least one long put with the same or later expiration; i.e. short calendar spreads are considered naked and not limited risk. For example if a position set is long 5 April calls, short 15 May calls, and long 10 June calls, then 5 of the May calls do not have long calls in the same expiration or later, and a Universal Spread using all options cannot be formed. Note: Please also see the "Additional Limitations" section below for more information on calculating margin requirements for Universal Spreads with multiple expirations.

Additional Limitations: In order to fully understand the margin requirement for a Universal Spread, it is important to understand some additional limitations:

Since a Universal Spread is a method of combining long and short options into option spreads for margin requirement purposes, Universal Spreads can only be formed in accounts approved for Option Level 3 or Option Level 4.
E*TRADE will calculate both (a) the margin requirement using traditional strategies, and (b) the Universal Spread requirement (if eligible) for a position set on a given underlying. Universal Spread will only be used if it results in an improved (lower) margin requirement.
When calculating the margin requirement of a Universal Spread for a position set with multiple expirations, special considerations exist depending on when the long and short positions expire:
Expiration Consideration #1: If no short option expires later than any long option, then all options will be considered together for calculation purposes and the requirement will be the same as if all options had the same expiration. For example, if a position set is long 1 Jan $40 Put, short 1 Jan $55 Put, short 1 Jan $60 Call, and long 1 Feb $70 Call, the margin requirement would be $1500 (same as if the Feb call expired in Jan).
Expiration Consideration #2: If at least one short option expires later than any long option, then a Universal Spread margin requirement must be calculated within each expiration, and the sum of these will be the Universal Spread requirement. Important Note: This scenario also requires that no expiration is short calls or puts. Therefore if any short option expires later than a long option and at least one expiration is net short calls or puts, then Universal Spread cannot be used and the traditional strategy-based margin requirement must be used instead.
At this time, Universal Spreads are "all-or-none" and a subset of positions cannot be selected for Universal Spread treatment. For example, if a position set has a long call at each of 10 different strikes and a short call at each of 11 different strikes (with the same quantity at each strike, thus net short overall), traditional strategy-based margin pairing must be used. A Universal Spread cannot be created using the ten long call positions plus ten of the short call positions, leaving the eleventh short position out of the Universal Spread.
This also means that an entire position set can become ineligible for Universal Spread if certain trades are made. For example, an account could have a large Universal Spread consisting of many offsetting positions, and selling even one additional option contract could make it ineligible for Universal Spread. This would force the position set back to being paired using traditional strategies, which could have a much higher margin requirement and could result in a much larger increase than just the requirement on the trade that eliminated the Universal Spread (see example in next bullet).
Continuing the preceding examples, if a position set has a short 40-55 put spread and a short 60-70 call spread with the same expiration, the Universal Spread requirement will be $1500 (instead of the traditional requirement of $2500). However if one more option is sold, the position set would become ineligible for Universal Spread. The pre-existing put spread and call spread would revert back to their traditional margin requirements of $2500 total, resulting in a $1000 increase in margin requirements in addition to the requirement for the new option that was sold.
Universal Spread positions can currently be displayed only on an all-or-none basis A? i.e. if Universal Spread pairing is used, all options on that underlying security will be displayed as a Universal Spread in the Margin Analyzer (even if extra long positions not used in the Universal Spread requirement calculation are present).
Additional requirements may be added to Universal Spreads containing cash-settled European options with less than five days to expiration, and also in cases where the Universal Spread is valued at a credit that exceeds the Universal Spread requirement.

Remove options trading from my account

You can remove options trading from your account by phone or mail.

Call us at 800-387-2331 and speak with a Financial Services Representative.
Write us a letter and provide the following information:
- Your account number
- Your current options trading level (e.g. options trading)
- The trading level you want to change to (e.g. cash account)
Have all account holders sign the letter and send it to us at:
By regular U.S. mail
E*TRADE from Morgan Stanley
PO Box 484
Jersey City, NJ 07303-0484

By overnight mail
E*TRADE from Morgan Stanley
Harborside 2
200 Hudson Street, Suite 501
Jersey City, NJ 07311-1113

About five business days after we receive your request, we'll send you a Smart Alert message letting you know that options trading has been removed from your account.

Note:
Before you can remove options trading from your account, you must first close out all options positions.