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How to Get Options Trading Permissions With Vanguard


Vanguard offers self-directed investors the ability to trade options, but you’ll first need special permission. Options provide unique opportunities to hedge risk or generate income, but they can be highly risky. For this reason, Vanguard requires brokerage account holders to complete applications providing details on employment, income and investing experience. After evaluating an application, Vanguard uses regular mail to notify prospective options whether or not they have been approved. Consider discussing your options trading goals with a financial advisor to determine if this strategy aligns with your risk tolerance.

Options Trading Approval Background

Options trading is more complex and potentially riskier than regular investing activities such as buying and selling stocks, bonds and funds. Properly executed, strategies can produce big profits. But they can also lead to major losses.

Standard Vanguard brokerage accounts don’t allow options trading by default. Instead, you must submit an application for approval to trade on margin or deal in puts, calls and other options.

Vanguard reviews each application to verify that you understand the risks that options present and have the resources to manage them. This process aims to protect investors from taking on excessive risk.

Who Can Qualify

An options trader makes a transaction on his computer.

Both individual and joint Vanguard brokerage accounts may apply for options trading. Managed and Cash Plus accounts aren’t eligible for margin or options trading, however. And different requirements apply depending on your account balance and intended trading strategy.

Vanguard has three escalating levels of options trading permissions:

  • Level 1: Enables traders to write covered calls, buy protective puts and write cash-secured puts. However, margin approval is required for writing puts.
  • Level 2: Allows traders to purchase calls and puts, and write cash-secured puts, in addition to Level 1 capabilities.
  • Level 4: Level 4 traders can write uncovered puts, in addition to levels 1 and 2 capabilities.

Vanguard formerly offered a Level 3, as well. This allowed the ability to trade equity and index spreads in addition to the capabilities of Levels 1 and 2.

When applying, you must select an investment objective aligned with the options level you seek:

  • Income and hedging for Level 1
  • Hedging and speculation for Level 2
  • Speculation for Level 4

You’ll also need to provide personal details like your income, net worth and trading experience. Note that getting approved to trade on margin requires a separate application.

Talk to a financial advisor today to discuss options and investing strategies.

What Do You Need to Apply?

You can complete the application for options trading permission online. Before starting the process, gather information on the following:

  • Your Vanguard brokerage account number
  • Choice of investment objective
  • Personal contact and employment details
  • Number of dependents and marital status
  • Income, net worth and trading experience information

You’ll also need to grant consent for electronic disclosures.

Applying for Options Trading Permission

An investor reviews the applications requirements for options trading permission.

When applying for options trading permission with Vanguard, you’ll need to follow these steps:

  1. Log into your Vanguard brokerage account online.
  2. Search for “options application” and click on the link for “Apply for margin or option trading.”
  3. On the following screen, consent to electronic delivery of materials.
  4. Select the account you are using and click “yes” to apply for option trading.
  5. Confirm you are applying for option trading.
  6. Select an investment objective and desired options level.
  7. Next, you will be asked for account owner information including your name, date of birth and Social Security number.
  8. Provide information on your employment.
  9. Answer whether you’re associated with various financial organizations or institutions.
  10. Next, describe your trading experience.
  11. Tell Vanguard whether there is an agent authorized on this account.
  12. Next, you can elect to apply for a margin account.
  13. Provide the requisite financial information.
  14. Consent to electronic delivery of disclosures.
  15. Review and submit your application.

Approval takes five to seven business days after you complete the application. Although you can apply online, Vanguard uses regular mail to notify you whether or not you have been approved.

Bottom Line

With proper permissions, Vanguard brokerage accounts let you diversify into options trading. Obtaining approval to trade options using a Vanguard brokerage account involves filling out an online application with details on your occupation and investing experience, then waiting a week or so to receive notification by regular mail.

Investing Tips

  • Seeing how assets can appreciate in value can help you make more informed investment decisions. Use SmartAsset’s investment return and growth calculator to estimate what your investment could be worth in the future.
  • Before applying for options trading permissions, consider connecting with an advisor to build an appropriate options strategy. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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