How old to open a margin account?

So I've done my research and I'm ready to start trading a combination of options and stocks. I would much prefer to trade out of a margin account as opposed to a cash account so that I don't have to wait 3 days for each transaction to settle. But unfortunately I'm only 19 and when I applied for a reg t margin account on interactive brokers, it said the minimum age was 21. So what I want to know is if this is a federal stipulation or if this age limit is only upheld by some brokerages. I assumed I could open a margin account when I was 18. Also, If anyone has a suggestion for a good but low cost online brokerage (preferably one that charges per share and per contract like IB) I would really appreciate it. Thanks!

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  • OPM
    Lv 7
    5 years ago
    Favorite Answer

    In all 50 states, as far as I know, you do not finish becoming a legal adult until you are 21. For example, a nineteen year old cannot be a notary in most if not all states and cannot adopt children. Likewise, Federal law requires that you have observable experience in simpler types of accounts for a period of years before you can open an options account. There are a boatload of exceptions, but there are few ways a 19 year old would qualify. In fact, if you have to ask this question on the internet, I can guarantee you won't meet the qualifications.

    In option contracts you can lose in excess of 100% of your investment and they can take everything you currently own if you default and can take your future wages, in some states around 32% of your wages. Brokerages can be sued by you if they do not believe you have the skills necessary to safely operate such an account but let you open it anyway.

    Having been a professional investor, officer of a securities firm, and a professor of finance, I would be willing to bet a lot of money that you lack the skills to invest in option contracts except maybe covered calls or protective puts. I rarely meet people with the skills to do well in it. I meet a lot of people who think they have the skills, but an extended conversation shows they do not. A review of their outcomes also shows that.

    Indeed, in a similar matter, the State of Georgia did a study of all Georgians doing day trading and found that 90% lost 100% of their money. New option investors most likely follow this same pattern.

    It takes a lot of experience and skill to do better than buying the stock and holding it.

    This isn't personal, but you are not ready. If you have to ask as basic a question as this in an online forum, you are missing 99.9999% of the knowledge you need.

  • Anonymous
    5 years ago

    That is a good question. If you are a reasonable person, don't like to play with other peoples money, or are not comfortable paying interest on borrowed cash, then there is no good reason not to have an options account. You hog-tie yourself with a regular account. If you want to get out of something quickly, and buy something else then a margin account is the way to avoid the frustration of a potentially costly 3 days wait for settlement.

  • 5 years ago

    So what I want to know is if this is a federal stipulation or if this age limit is only upheld by some brokerages.

    This is up to the brokerage. But they are likely all to have this requirement. If your options go south, they don't want to be holding the bag.

  • Anonymous
    5 years ago

    you do not want a margin account, you really dont understand them.

    you run the risk of violating the day trading margin rules without knowing it.

    do you know the day trading margin rules?

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  • 5 years ago

    Suretrader.Com

  • 5 years ago

    you should be above 18

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