ESPP Options – Account Configuration

Ok, I get it. The account you have at Fidelity where your ESPP shares are dumped each quarter doesn't allow option trading. Now you read my post on how to sell covered calls against your shares and are lost as to how to make that happen in your account. I thought about this and have been pretty hesitant to walk through the steps to make this work for everyone... If I have to walk you through how to make this happen in your account, are you really ready to start trading options? Well,. being a consultant though I guess I can't help myself. Selling covered calls isn't exactly putting on an Iron Condor or Butterfly option strategy. It is simply saying that you already own shares of a firm and are specifying the exact price that you are willing to sell them for in the future. You don't really need in-depth knowledge of the markets, option trading, or how to configure your Fidelity account to figure out what price you would be willing to sell the shares of stock that you own at. So I am caving in. I will walk through all the details. Screen shots, screencasts, whatever it takes.

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This is NOT complex! This is something that anyone with enough brain power to get a job where they have an ESPP can do, so I will walk through the steps in a few posts. The first was the last one - You Have an ESPP Now What - this is the second - Configuring Your Account to Trade ESPP Options, and third will be actual execution of the trades - Selling Covered Calls in your ESPP Account. All of these will be based on accounts at Fidelity as the three major firms I have worked for in the last ten years have all used Fidelity for this sort of thing (Microsoft, EMC, & Washington Mutual). I am sure there are other firms out there (Morgan Stanley Smith Barney, Bank of America, etc.) I may touch on the specifics of those after I get through the Fidelity configuration - or not.

So here is the step by step... Once you sign into your fidelity account, go to the "Update Accounts/Features" link in the lower left hand corner.

 

 

 

 

 

 

 

This will lead you to a page with a bunch links that allow you to turn on margin, configure your address, etc. At the bottom left of the page, there is a link to "Margins and Options". If you follow this link...

 

 

 

 

 

 

 

You will get to a page that allows you to configure Options for your account. I know it seems a little out of place and complex, but the series of questions and pages that follow are pretty straight forward. Click the "Add" Button in the lower right and corner to get into the configuraiton wizard.

 

 

 

 

 

 

 

After clicking Add, you get the first screen - birthdate, spouse, kids...

 

 

 

 

 

 

The next page is employer, and the basic question of whether or not you own a significant amount of any publicly traded firm.

 

 

 

 

 

 

 

 

 

After these is the basic net worth and income numbers. I'm not sure these have much bearing on the actual approval of options trading, but they are there and I believe that most any answer would be fine.

 

 

 

 

 

 

 

Next up is a brief survey of your trading experience (number of equities, options, bonds, etc) that you have experience trading. Put in honest answers. Even if that is zero for options trading and 1 for equities. The goal here is to put in the honest details of your experience, later we will specify what we are looking to trade.

 

 

 

 

 

 

 

Afer we put these in, the next screen is shown. Here, click the link and read through the popup material. The popup covers things such as conservative vs agressive risk and short vs. long term time frames. Definitely good to read through the popup and then select the first option "Covered Call Writing of Equity Options"

 

 

 

 

 

 

 

We get to the screen where we specify what kind of option trading we are interested in doing. The first step is to click the link to see the risk profile, then select "Covered Call Writing of Equity Options" - this is what I described in my last post and all we need to do to earn the extra return we are looking for. Once we select these options, the next screen

 

 

 

 

 

 

 

There is a brief survey of what your history is of each of the option trading strategies - again be honest. The more honest you are here the better. This leads you to a summary page for you to accept and once you do there is a final thank you page.

 

 

 

 

 

 

 

This gets into the system at Fidelity and will eventually result in approval. Once we get approval we can look at putting on trades for the ESPP shares that are dumped into the account. While we wait for the approval I will put together a screencast of the options and post the video. If you have any questions about the options to select - feel free to ask!!

Want access to all of my ESPP content? Book, spreadsheets, training videos, and so on? Sign up for the ESPP Wealth mailing list today!

Comments (5)

  1. Peter Evanson

    Thanks for such an informative blog. This is just an amazing tips for specially newbie investors. Covered call writing is usually considered to be a low-risk, income generating strategy. The Covered Call strategy, or Buy Write, is one of the key strategies professionals use to manage Risk, Get better details http://australianinvestmenteducation.com.au/articles/trading-covered-calls-on-the-us-market-why-i-believe-it-is-the-opportunity-of-a-lifetime/

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