Opening an options account and getting approval

Before you can trade options on Fidelity, your brokerage account must be approved for options trading. This is not automatic — Fidelity reviews your account based on your investment experience, income, and net worth, and assigns you an options approval level that determines which strategies you can use.

To request options trading, log into your Fidelity account, go to Account Settings, and select "Brokerage & Trading." Look for "Options Approval" and click "Request Options Trading." Fidelity will ask you questions about your investment experience, how long you have been investing, and your financial situation. Answer honestly — if you misrepresent your experience, Fidelity can revoke your approval and restrict your account.

Approval levels range from Level 1 (covered calls and cash-secured puts only) to Level 4 (spreads, straddles, and other multi-leg strategies). Most new traders start at Level 1 or 2. You will receive a decision by email within one business day, though complex applications may take longer.

Key Takeaways

  • You must request and receive options approval from Fidelity before placing any options trade, and approval level determines which strategies you can use.
  • The options chain on Fidelity shows strike prices, expiration dates, bid-ask spreads, and Greeks (delta, gamma, theta, vega) for every contract available.
  • To place a trade, select a contract, enter the number of contracts and order type (market, limit, or stop), then review the order summary before submitting.
  • Options orders settle in one business day, and you can close a position before expiration by selling the contract back or buying it to close.

Finding and reading the options chain

Once approved, you can view options chains in Fidelity's trading platform. Search for the stock you want to trade, click on it, and select the "Options" tab. The chain displays every available contract for that stock, organized by expiration date and strike price.

Each row shows the strike price, bid price (what buyers will pay), ask price (what sellers want), last price (the most recent trade), volume (number of contracts traded that day), open interest (total contracts still open), and the Greeks. Delta tells you how much the option price moves when the stock moves $1. Theta shows how much the option loses value each day due to time decay. Gamma measures how fast delta changes, and vega measures sensitivity to volatility changes.

The bid-ask spread — the difference between what buyers offer and what sellers ask — matters because it is the cost of entering and exiting the trade. A wide spread means you may pay more to buy or receive less when you sell. Contracts with high volume and open interest usually have tighter spreads and are easier to exit quickly.

Placing a buy-to-open or sell-to-open order

To enter an options position, click on the contract you want. Fidelity will open an order ticket showing the current bid and ask prices. Choose whether you are buying to open (you own the contract and profit if it gains value) or selling to open (you receive a premium upfront and profit if the contract loses value).

Enter the number of contracts. One contract represents 100 shares of the underlying stock. If you buy one call contract at a $2 premium, you pay $200 total (plus any commissions, though Fidelity charges no commission on options trades). Select your order type: market order (fills immediately at current prices), limit order (fills only at your specified price or better), or stop order (becomes active only if the stock hits a trigger price).

Review the order summary carefully. It shows the contract details, the number of contracts, the estimated cost or credit, and the expiration date. Once you submit, the order goes to the market. Market orders usually fill within seconds. Limit orders may take minutes, hours, or never fill if the price never reaches your limit.

Understanding assignment and early exercise

If you sell a call or put, the buyer can exercise the contract at any time before expiration — they are not required to wait until the last day. This is called assignment. If you sell a call and the stock rises above the strike price, assignment is likely because the buyer will exercise to buy the stock at the lower strike price and sell it at the higher market price.

When assignment happens, Fidelity will notify you by email. If you sold a call, you must deliver 100 shares per contract (or buy them at market price if you do not own them). If you sold a put, you must buy 100 shares per contract at the strike price. Assignment settles the next business day, and the cash or shares appear in your account then.

To avoid assignment, you can close the position before expiration by buying the contract back (if you sold it) or selling it (if you bought it). This locks in your profit or loss and removes the assignment risk.

Closing a position before expiration

You do not have to hold an options contract until expiration. To close a position, go back to the options chain, find the same contract you opened, and place the opposite order. If you bought a call, you sell it to close. If you sold a put, you buy it to close. Enter the number of contracts and choose your order type.

The profit or loss depends on the price difference between when you opened and closed the position. If you bought a call for $2 and sell it for $3, you profit $100 per contract (minus any commissions). If you sell it for $1, you lose $100 per contract. Fidelity shows your unrealized gain or loss in real time in your positions list.

Closing early is useful if the trade moves in your favor faster than expected, if you want to lock in a profit before expiration, or if the trade is moving against you and you want to cut losses. Most traders close positions days or weeks before expiration rather than holding to the last day.

Monitoring Greeks and managing risk

The Greeks help you understand how your position will behave as the stock price, time, and volatility change. Delta tells you the direction risk — a delta of 0.50 means the option price moves $0.50 for every $1 the stock moves. Theta tells you the time decay — a theta of -0.05 means the option loses $0.05 per day just from time passing, regardless of stock price movement.

Check your Greeks regularly in the Fidelity platform. Click on any position in your portfolio to see its current Greeks. If delta is moving against you (your position is losing money as the stock moves), you may want to close it or adjust it by buying or selling another contract to hedge. If theta is working in your favor (you sold the option and time decay is helping you), you can hold and let time work for you.

Set a stop loss before you enter a trade — decide in advance how much you are willing to lose. If the trade hits that loss level, close it. Do not wait hoping it will come back. Most options traders lose money by holding losing positions too long.

Frequently Asked Questions

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

Fidelity does not publish a minimum, but most brokers require at least $2,000 in your account to trade options. The actual cost of each trade depends on the premium you pay or receive. A single call contract might cost $100 to $500, depending on the stock and strike price. You also need enough cash or buying power to cover assignment if you sell puts or calls.

Can I trade options on a Roth IRA or 401(k) at Fidelity?

Yes, but with restrictions. Fidelity allows options trading in IRAs and 401(k)s, but only covered calls and cash-secured puts (Level 1). You cannot use spreads, straddles, or other multi-leg strategies in retirement accounts. The rules exist because retirement accounts have tax advantages that the IRS wants to protect.

What happens if I do not have enough cash to cover assignment?

If you sell a put and the stock falls below the strike price, you are assigned 100 shares per contract at the strike price. If you do not have enough cash, Fidelity will use your margin buying power to cover the purchase. You will owe interest on the margin loan until you deposit cash or sell the shares. If you do not have margin enabled, the order to sell the put will be rejected.

How long does it take to close an options position?

A market order to close usually fills within seconds during market hours. A limit order may take longer or never fill if the price does not reach your limit. Once the order fills, the position closes immediately and the profit or loss is locked in. The cash settles the next business day.

Can I roll an options position to a later expiration date?

Yes. Rolling means closing your current position and opening a new one with a later expiration date, usually at a different strike price. On Fidelity, you do this by placing two separate orders: sell to close the current contract, then buy to open the new one. Some traders use rolls to extend a winning position or to reduce losses by moving to a lower strike price.