Are you a buy-and-hold type of trader? Perhaps you like to sell premium using defined-risk spreads or naked options? Regardless of your trading style, how do you know which account is right for you? What account types and trading levels do tastyworks provide? Well, read on you'll be dinging (the sound of a filled order) in no time.
First, there are two account types: cash accounts and margin accounts. You can trade within both account types, but there are significant differences between the two with what you can do. The tables displayed below go over the allowable strategies in each account type.
Possibly the simplest account type to understand is a cash account, so let's walk through what a cash account is what you can do with one.
What can I trade in a cash account?
You may buy stock, buy options, sell cash-secured puts, sell covered calls in a cash account.
What can I not trade in a cash account?
You cannot short sell stock, trade defined-risk spreads, sell uncovered options (calls), and trade futures in a cash account.
Permissible strategies in a cash account
|Short Sell Stock||☓|
|Sell Covered Calls||✔|
|Sell Cash Secured Puts||✔|
|Sell Uncovered Options||☓|
|Smalls & Futures||☓|
Margin Account Trading Levels
There are three different trading levels for margin accounts–Limited, Basic, and The Works. The types of strategies you can do are dependent upon which trading level you have. Standard margin accounts (non-ira) have 2:1 leverage for stock. That means if you had $10,000 of options buying power, then your account will have $20,000 of stock buying power (for non-elevated stocks). Your allowed trading level is solely based on how you self-report your Investor Profile. If you currently have a margin account and you're looking to upgrade your trading level, then please click here.
Why do I need a Margin account to trade risk-defined spreads?
A margin account is required when trading any options spread/vertical (long or short). Margin's primary function in options trading is for relief since short equity options can be exercised by the counterparty (owner of the long option) at any time up until expiration, resulting in an assigned position.
Permissible strategies in a margin account
|The Works||IRA The Works (Margin)||Basic (Margin)||Basic (IRA)||Limited|
|Short Sell Stock||✔||☓||☓||☓||☓|
|Sell Covered Calls||✔||✔||✔||✔||✔|
|Sell Cash Secured Puts||☓||✔||☓||✔||✔|
|Sell Naked Puts||✔||☓||✔||☓||☓|
|Sell Naked Calls||✔||✔*||☓||☓||☓|
|Smalls & Futures||✔||✔**||☓||☓||☓|
✔*To qualify for uncovered call writing in an IRA account, you must have the suitability requirements for IRA The Works–our highest trading level. To learn more about enabling short calls in an IRA, please click here.
✔**Your account must qualify for IRA The Works to apply for futures trading. For more information, please click here.