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Chapter 3. Options in Context > Margin Requirements and Trading Restrictions

Margin Requirements and Trading Restrictions

There are two areas in which option investors have to live with special rules: taxes and trading rules. The tax rules are covered later; a more immediate concern involves the special rules that apply once you move beyond the status of stockholder and begin to make actual option trades.

The first rule to be aware of involves the very basic qualifications to trade. You are required to complete a questionnaire and to advise your brokerage firm that, in fact, you know enough about options and their risks to enter into trades. The brokerage firm is required to establish your qualifications. So, you probably could not begin trading tomorrow for the first time. Because options can involve considerable risks, you have to go through a special screening process by the brokerage firm.


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