Opening an options account on Fidelity

To buy options on Fidelity, you need to request options trading permission on your account. Fidelity does not turn on options trading by default — you have to ask for it, and Fidelity will review your request based on your experience and account details.

Log into your Fidelity account online or in the mobile app. Go to Account, then Brokerage & Trading, then Trading Permissions. Look for the options trading section and select the level of options trading you want. Fidelity offers four levels: Level 1 (covered calls and cash-secured puts only), Level 2 (spreads), Level 3 (all strategies except naked calls), and Level 4 (naked calls and all other strategies). Most new traders start with Level 1 or Level 2.

Fidelity will ask you questions about your investment experience, annual income, and net worth. Answer honestly — Fidelity uses this information to decide whether to grant your request. You should hear back within one business day, though approval can take longer if Fidelity needs more information from you.

Key Takeaways

  • Options trading is not turned on automatically; you must request it through your Account settings under Trading Permissions.
  • Fidelity offers four permission levels, with Level 1 (covered calls and cash-secured puts) being the most restrictive and Level 4 allowing all strategies.
  • Your approval depends on your experience, income, and net worth, which you report when you submit your request.
  • Once approved, you can place an options order through the Trade tab by selecting an options contract and entering your order details.
  • Options contracts expire on a set date, and Fidelity will notify you if you have open positions approaching expiration.

Finding and selecting an options contract

After your options permission is approved, go to the Trade tab in your Fidelity account. Search for the stock or ETF you want to trade options on — for example, if you want to buy a call option on Apple, search for AAPL.

Once you find the stock, click on it and look for the Options link or tab. This will show you all available options contracts for that stock. You will see a table with columns for strike price, expiration date, bid price, ask price, and volume. The strike price is the price at which you can buy (for a call) or sell (for a put) the stock. The expiration date is when the contract stops trading and either settles or expires worthless.

Click on the contract you want to buy. Fidelity will show you the current bid and ask prices. The bid is what buyers are willing to pay; the ask is what sellers are asking. You will place an order at or between these prices.

Placing your options order

Click the contract you want and select Buy to Open (if you are buying the option for the first time) or Buy to Close (if you are closing out a short position). Enter the number of contracts you want to buy. One options contract represents 100 shares of the underlying stock.

Choose your order type. Market order buys at the current ask price when ready. Limit order lets you set a maximum price you are willing to pay; the order fills only if the price drops to your limit or lower. For options, limit orders are often better because bid-ask spreads can be wide, and you may save money by waiting for a better price.

Review the order summary. It will show the contract details, the number of contracts, your order type, and the estimated cost (the premium you will pay times 100 times the number of contracts). Click Preview Order, then Place Order. Fidelity will send you a confirmation with your order number.

Understanding options costs and margin requirements

When you buy an options contract, you pay the premium — the price of the contract itself. If you buy one call contract at a premium of $2, you pay $200 (because one contract covers 100 shares). This is the maximum you can lose on that trade.

Some options strategies, like spreads or selling options, require margin — borrowed money from Fidelity. If your account does not have margin turned on, you can only buy options outright (paying the full premium upfront). To use margin for options, you must have a margin account and sufficient buying power. Fidelity will show you your available buying power before you place the order.

Options are also subject to buying power reduction, which means Fidelity sets aside money in your account to cover potential losses. For a long call or put, this is just the premium you paid. For more complex strategies, the reduction is higher. Fidelity calculates this automatically and shows it in your order preview.

Monitoring and closing your options position

Once your order fills, your position will appear in the Positions section of your account. You will see the contract details, your entry price, the current market price, and your unrealized gain or loss. Options prices change throughout the trading day as the stock price moves and as the expiration date approaches.

To close your position before expiration, go to your Positions, find the options contract, and click Sell to Close. Enter the number of contracts and choose your order type (market or limit). When the order fills, your position closes and any profit or loss is realized.

If you do nothing and hold the contract until expiration, Fidelity will automatically exercise or let it expire. For a call, exercise means you buy 100 shares at the strike price. For a put, exercise means you sell 100 shares at the strike price. Fidelity will notify you before expiration if you have open positions, and you can choose to close them or let them expire.

Common mistakes to avoid when buying options

Do not confuse bid and ask prices. The bid is lower; the ask is higher. When you buy, you pay the ask (or better with a limit order). When you sell, you receive the bid (or better with a limit order). Placing a market order on a wide bid-ask spread can cost you money.

Do not forget that options expire. Mark your calendar or set a reminder for expiration dates. If you want to keep a position open, you must close it and open a new one with a later expiration date — you cannot straightforward roll it forward automatically through Fidelity's standard interface.

Do not buy options on stocks or ETFs you do not understand. Options amplify both gains and losses. A small move in the stock can mean a large percentage loss in the option premium. Start with covered calls or cash-secured puts (Level 1 strategies) if you are new to options.

Frequently Asked Questions

How long does it take to get options trading permission on Fidelity?

Fidelity usually approves or denies your request within one business day. If Fidelity needs more information about your experience or finances, it may take longer. You can check the status of your request in the Trading Permissions section of your account.

What is the minimum amount of money I need to buy options on Fidelity?

There is no set minimum, but you need enough cash or buying power to cover the premium. One options contract costs the premium times 100. If a call costs $3 per share, one contract costs $300. You also need enough buying power for margin requirements if you are using a strategy that requires margin.

Can I buy options on any stock or ETF through Fidelity?

Most stocks and many ETFs have options available, but not all. Fidelity will show you whether options exist for a security when you search for it. If the Options tab does not appear, that security does not have options trading available.

What happens if I do not close my options position before expiration?

Fidelity will automatically exercise or let the contract expire based on whether it is in the money. For a call, in the money means the stock price is above the strike price. For a put, it means the stock price is below the strike price. Fidelity sends notifications before expiration so you can decide whether to close the position yourself.

Can I use a limit order to buy options on Fidelity?

Yes. Limit orders are often recommended for options because bid-ask spreads can be wide. Set your limit price between the current bid and ask, and your order will fill if the price reaches your limit. This can save you money compared to a market order.