E*TRADE Level 2: Everything You Need to Know

by Gavin in Blog

July 7, 2021 • 4 comments

This article will discuss Etrade level 2.

We’ll look at what options your can trade on level 2 and the costs. Let’s get started.

Contents

• Introduction
• Does E*TRADE Have Options Level 2?
• How do I Upgrade My Options Trading Level?
• What are the Different Options Trading Levels?
• E*TRADE Level 2 Option Quotes
• What are the Costs Associated with Options Trading?
• In Conclusion

Introduction

This article will assist you if you’re a little lost when it comes to options trading in your E*TRADE account.

Options trading in E*TRADE is a great way to boost your stock portfolio’s income while also providing additional protection.

Option level approval is a frequently overlooked aspect of options trading.

Options level 1 allows you to trade only covered calls, as well as buy-writes and covered call roll-ups and roll-downs.

We will discuss what options trading level you can apply for, what are the costs, and how to apply or upgrade your options trading level.

Does E*TRADE Have Options Level 2?

Most traders who have recently learned options trading strategies had no idea what level of approval they had, and some were completely unaware that different options trading levels existed at all.

To start, E*TRADE offers two different options trading levels for cash-approved brokerage accounts.

These are Individual accounts, Joint accounts, Investment club accounts, Business/corporate accounts, Trust accounts, and Custodial accounts.

If you are on a margin-approved brokerage account, you can apply up to level four options trading.

The margin accounts eligible are Individual accounts, Joint accounts, Investment club accounts, Business/corporate accounts, and Trust accounts.

How Do I Upgrade My Options Trading Level?

You can upgrade your options trading level online or by sending an application by mail.

If your account is a Brokerage Account, go to this link but if your account is an IRA Account, go to this link.

For any other type of account such as a corporate account, you will have to submit your application by mail.

The paper form can is on the Forms & Applications page or go to this link.

Next to Brokerage Account or IRA Options Upgrade, select Download PDF, and then print out the form.

And don’t forget to have all account holders or agents complete and sign the required sections and then send your completed form by regular U.S. mail to:

E*TRADE Securities LLC
PO Box 484
Jersey City, NJ 07303-0484

By overnight mail

E*TRADE Securities LLC
Harborside Financial Center
501 Plaza 2
34 Exchange Place
Jersey City, NJ 07311

It usually takes E*TRADE about five business days from the time they receive your request before they can begin reviewing it.

As soon as this is completed, you will receive a Smart Alert message to let you know the outcome of the review.

The level of options trading approval will also be revealed at this point.

What Are The Different Options Trading Levels?

Here are the Options trading levels you can apply in your E*TRADE account:

Level 1 options trading

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), and

Covered call roll-ups/roll-downs.

Level 2 options trading

All Level 1 strategies and the following:

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 3 options trading

All Levels 1 and 2 strategies and the following:

Debit spreads
Credit spreads
Calendar spreads
Diagonal spreads
Naked Short Puts
Butterfly spreads
Iron condors

Level 4 options trading

All Level 1, 2, and 3 strategies plus naked Short Calls.

Be careful in choosing what options trading level you want to have in your account.

Options trading is inherently risking.

You might burn your account if you place the wrong options strategy.

You can even get margin calls if you are on a margin trading account in which you may have to deposit more money or securities to cover trading mistakes.

E*TRADE assesses your options trading level based on the information you provide in your Options Upgrade Request form.

E*TRADE Level 2 Option Quotes

Etrade also has level 2 option quotes.

This should not be confused with level 2 options trading.

When it comes to the level 2 quotes, it is all about the specific real-time prices of the equity options you are trading.

Level 2 options trading permissions concerns the types of equity option strategies that you are permitted to use in your E*TRADE account.

What Are The Costs Associated With Options Trading?

With most large brokers reducing their trading costs down to zero, E*TRADE has shifted from being one of the most affordable brokers.

The fee with stocks, options, and ETFs is zero but there is an option contract fee that costs $0.65.

The options per contract fee is reduced to $0.50 if you place 30+ trades per quarter.

In addition, there is a regulatory pass-through fee called the “Options Regulatory Fee”.

It is a fee that national options exchanges assess with options transactions.

This fee appears on your trade confirmations as “OPT REG FEE,” and will be reflected in your estimated totals on order preview screens.

In Conclusion

E*TRADE is a good choice for options trading with their robust trading platform.

Fun fact, their trading platform came from their merger with Optionshouse.

Optionshouse was a broker that offered the best options trading platform for retail traders.

You can easily apply or upgrade your options trading level online or by mail.

Options trading is also available on other types of brokerage accounts, including corporate, custodial, and trust accounts, among others.

There are four different levels of options trading that you can apply for, and the information you provide on your options trading application is reviewed by the options trading department to determine which level of options trading you will receive.

The higher the level of options trading, the riskier it is.

Therefore, you’d be wise to educate yourself about the options trading strategies discussed above and their inherent risk before implementing them on your E*TRADE account.

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.