Age limitations
If you are less than 18 years old, you must ask your parents for help to set up a custodial account.
A custodial account allows an adult to control an account in the name of a minor. A minor is considered a person under the age of 18 or 21, depending on the country of residence. Approval from the custodian is a mandatory legal requirement to buy or sell using a broker. If you cannot get your parents on board to help you open a custodial account, there is no way around this and you will have to wait until you are of legal age.
Minimum age requirements for some brokers offering options trading:
Interactive Brokers: 21+
Tradestation: 21+
E*Trade: 18+
Think or Swim: 18+
Tastyworks/Tastytrade: 18+
Account minimum
In order to start trading, you will need to deposit a minimum of $2000 into your brokerage account.
$2000 is optimal as a minimum requirement because it allows you to start following some of the professor’s plays while you learn how to manage risk properly.
For you international traders: $2000 ≈ £1600 ≈ €1900
DO NOT begin trading with less than $2000!
If you do not have $2000 to deposit into your account, then learn one of the other many skills provided in other campuses, such as Copywriting or Freelancing. It is very common for people to blow up their accounts when they start with less than $2000. We don’t want that to happen to you.
Required information
Brokers need personal information to comply with tax laws, anti-money laundering regulations, anti-terrorist financing requirements, record-keeping procedures, and determining suitable investments. Gather the required information below so you can open your account with the broker:
U.S. citizens need a tax identification number (TIN), which is usually a Social Security number (SSN).
Non-U.S. citizens can use a valid passport number, an alien registration card number, or other government-issued ID numbers. Other frequently requested information includes your name, address, and date of birth.
When your broker asks you for this information, you must provide it. There is no way around this.
The jurisdiction-specific information on the TINs and their functional equivalents, split into a section for individuals and a section for entities (company), can be found here:
https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-identification-numbers/
Choosing a broker
If you meet the requirements in the previous section, your first task is to choose a broker. A broker is a company that allows individuals to trade stocks, options and futures.
These are most commonly used brokers:
Globally available:
Interactive Brokers (IBKR) https://bit.ly/HU2IBKR
Tastyworks/Tastytrade https://bit.ly/HU2Tastyworks
Tradestation Global
Tradestation
Ninja Trader
United States (US) only:
TD Ameritrade (Think or swim)
For people trading CFDs [restricted in US]
Interactive Brokers (IBKR) https://bit.ly/HU2IBKR
Tradestation Global
Capital.com
XTB
eToro
To make sure the broker in available in your country and offers the services you require:
1. Go to the BrokerChooser website. https://brokerchooser.com/
2. Click “Find my Broker”
3. Select your country
4. Select "I am professional, fully confident"
5. Select "Trading on a daily basis"
6. Select "Options and futures"
7. Click “Compare these brokers”
FYI Aayush uses ETrade, Interactive Brokers (IBKR), and Tradestation.
Most students use their broker’s mobile app which you can download on your phone.
Tip: If your broker is ETrade, download the Power ETrade app! If you are on PC or Mac, you could also use the broker's web app or download the desktop app. The look and feel of each broker may be different, but they all provide the same functionality. One broker is not necessarily better than another; you should choose one that is suitable for your age and the country you reside in.
Account setup
There are two types of accounts: CASH or margin.
All of our recommended brokers allow you to trade options using a CASH account. Creating a cash account allows you to deposit your money and use that money to trade. On the other hand, a margin account is trading on credit, like using a credit card. Select cash account, DO NOT select margin for options trading unless you have more than $25 000.
If you are a minor, ask your parents to help you set up a Custodial account for your broker. We cannot help you do this. If you are an adult your information may vary, but here is an example of some of the required information that a broker will ask for when setting up your account:
Account type: Individual
Annual Net Income: 50k-100k
Net Worth: 100-200k
Liquid Net Worth: 100k-200k
Objective: Profits from Active Trading and Speculation
Source of funds/income: 100% Employment, or 90% employment and 10% trading
3-5 years of experience
50-100 trades per year
Good Knowledge
DO NOT select Inheritance for source of funds/income, unless you can back it up with genuine legal documents. If you happen to select the wrong option, your broker will let you know so you can update it. When you have no error messages left, you can proceed with the application to create your account.
Paper trading accounts
Before you risk your own money, we recommend you start learning how to trade while using a paper trading account. A paper trading account is an account that you can use to practise trading while using fake money. Some brokers call this a demo account.
Use the paper trading account for a few weeks to familiarise yourself with how your broker’s trading platform works and test your strategy. It is very common for beginner traders to make dumb mistakes that cost them tens, if not hundreds, of dollars on one trade.
Real-time data
In order to trade effectively, you MUST have real-time data from your broker. If you do not have real-time data, your pricing will be delayed by 15 minutes or more. This delay will cause you to lose money on your trades.
Options Price Reporting Authority (OPRA) is what we commonly call real-time data.
If asked, make sure that as a retail trader, you are a non-professional data subscriber [relevant for IBKR].
For more information make sure to visit your brokers official webpage.
Pattern day trader (PDT) rule
A day trade is when someone buys and sells the same stock on the same day. A pattern day trader is someone who executes four or more day trades within five business days. If you get marked as a pattern day trader, your broker will lock your account, preventing you from making trades.
CASH accounts are not subject to the PDT rule, so if you get a PDT strike change your account from margin to cash immediately.
Unsettled cash
After you fund your account and you begin to trade, you may notice a difference between your account balance and your available trading balance. While your funds remain unsettled until the completion of the settlement period you can use the proceeds from a sale immediately to make another purchase in a cash account, as long as the proceeds do not result from a day trade.
Put simply, proceeds from a day trade can only be used on the following trading day. It takes 24 hours for funds to settle.
When you use unsettled sale proceeds to purchase another option, you agree in good faith to hold the new purchase until the funds from the original sale settle:
After every trade you place, the money used for that trade needs to settle before you use it for another trade
After money is deposited in your account it needs to settle before you can use it for trading
After currency conversion on your account balance, your money needs to settle before you can use it for trading
Good Faith Violations (GFV)
If you purchase a stock or option using unsettled funds and then sell it before the funds are settled, you may get a good faith violation. Most brokers give you four GFV strikes before your account will be restricted to sell only for the next 90 days. To prevent this from happening, make sure you keep notes of your unsettled cash on each trading day and act accordingly.