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FAQs

  What is an option?

An option is a contract that entitles the buyer to buy (call) or sell (put) a predetermined quantity (usually 100 shares) of an underlying security for a specific period of time at a pre-established price. It is called a derivative investment, since the value of the option is derived from the price of the underlying security.

  How do I apply for options trading?

In order to trade options, we require investors to submit an Option Application & Agreement. A completed application can be uploaded to Customer Service-Form Center-Upload Form; or emailed to service@firstrade.com.

  What are the Minimum Account Requirements to place option trades?

While Firstrade does not require a minimum balance to open an account or invest in equity securities, we do require minimum equity in order to place certain option orders. The following table lists the option strategy and the minimum equity required to place option orders:

Option Strategy Minimum Equity Required
Covered Calls No Minimum
Cash-Secured Equity Puts No Minimum
Buying Puts & Calls No Minimum
Spreads, Straddles, Butterfly, & Condor $10,000 + Margin Required
Uncovered Puts $25,000 + Margin Required
  Why am I not allowed to write uncovered calls?

Currently, Firstrade does not offer uncovered (naked) calls trading. Uncovered calls involve high levels of risk. For example, if you write a naked call and the price of the underlying security rises, there's no limit as to how much you can potentially lose if the stock keeps rising.

  Can I trade same-day-expiring options?

Firstrade allow opening position(s) in same-day-expiring options up to 2PM EST., 2 Hours before market close. Un-executed opening-position same-day-expiring options orders will be automatically cancelled at 3PM EST., 1 Hour before market close.

  What are the commissions for option trading?

Option trading commission is $0, per contract fee is also $0.

  How do I exercise my option contract?

To exercise your option contract(s), simply send an email to service@firstrade.com, detailing the below:

  • Your full name, and Firstrade account number
  • The number of contracts you would like to exercise
  • The underlying symbol, expiration, and strike price

Please note that exercise-requests can be submitted until 4:30PM EST. on the trading day prior to the last trading day of the option contract. Option exercise/assignment fee is $14.95.

  How do I request a do-not-exercise?

To request a do-not-exercise for your long-option-contract(s), simply send an email to service@firstrade.com, detailing the below:

  • Your full name, and Firstrade account number
  • The number of contracts you would like to do-not-exercise
  • The underlying symbol, expiration, and strike price

Please note that do-not-exercise-requests can be submitted until 4:30PM EST. on the last trading day of the option contract.

  What happens if I don't exercise my options?

If the premium is $0.01 or above (in the money) on the last day of trading, and there is sufficient account equity, generally the option contract will be automatically exercised. If the premium is below $0.01 (out of the money), generally the option will expire (out of the money options short-positions could potentially still get assigned). Firstrade reserves the right to close an option position that may be subject to exercise or assignment, depending upon account equity, buying power, and market conditions.

  In what price increments are equity and index options quoted?

Options related to equities and indexes are quoted in increments of $0.05 for option series with a premium below $3, and $0.10 for all option series with a premium of $3 and above. Exceptions are those options whereby the related security or index is in the Penny Pilot Program.

  What is the Options Penny Pilot Program?

The Penny Pilot Program allows options for some related stocks and indexes to trade in increments of $0.01. The minimum increments for all classes in the Penny Pilot (except for QQQ, IWM and SPY) are: $0.01 for all option series with a premium below $3, and $0.05 for all option series with a premium of $3 and above. The minimum increment for all option series in QQQ, IWM and SPY is $.01.

  What must I read before option trading?

Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD) and the Supplement. It explains the characteristics and risks of exchange traded options. https://www.theocc.com/about/publications/character-risks.jsp

  Where can I obtain a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD) and the Supplement?

Both ODD and the Supplement is available at Form Center > Disclosures section.

Options involve risk and are not suitable for all investors.


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