How to Set Up and Execute Options Trades on Fidelity

Getting Your Fidelity Account Ready for Options Trading

Before you can trade options on Fidelity, you need to request options approval from Fidelity itself. This is not automatic when you open a standard brokerage account. You must go into your account settings, find the Options Trading section, and submit a request that tells Fidelity what level of options trading you want to do.

Fidelity grants approval in tiers. Level 1 lets you buy call and put options only. Level 2 adds covered calls and cash-secured puts. Level 3 adds spreads. Level 4 adds naked calls and other advanced strategies. Most new traders start at Level 1 or 2. Fidelity reviews your request based on your investment experience, net worth, and risk tolerance — they may approve you for a lower level than you requested, or deny the request entirely if your account does not meet their standards.

The approval process usually takes one to three business days. You will receive an email confirming your approval level. Do not attempt to place an options trade before you receive this confirmation; the order will be rejected.

Key Takeaways

• You must request options approval from Fidelity before placing any options trade, and approval comes in four levels based on your experience and account size.
• Once approved, you access the options chain through the stock quote page by clicking the Options tab, which shows all available contracts for that stock.
• A single options contract represents 100 shares, so when you see a premium of $2.50, you pay $250 per contract ($2.50 × 100).
• You place an options order the same way you place a stock order: select buy or sell, choose your strike price and expiration date, set your price limit, and submit.
• Fidelity charges no commission on options trades, but you pay the bid-ask spread, which is the difference between what buyers will pay and what sellers will accept.

Finding and Reading the Options Chain

Once you have approval, navigate to any stock quote on Fidelity's website or in the Active Trader Pro desktop platform. Below the stock price and chart, you will see tabs for News, Research, Earnings, and Options. Click the Options tab.

The options chain displays every available contract for that stock, organized by expiration date. Each row shows a call option on the left and a put option on the right, both at the same strike price. The columns show the bid price (what buyers will pay right now), the ask price (what sellers will accept right now), the last price (the most recent trade), volume (how many contracts traded today), and open interest (how many contracts are currently held by traders).

Read the bid-ask spread carefully. If a call option shows a bid of $2.40 and an ask of $2.60, you will pay $2.60 per share ($260 per contract) if you buy immediately at market price. If you sell, you receive $2.40 per share ($240 per contract). The wider the spread, the more it costs you to enter or exit the trade. Contracts with high volume and open interest usually have tighter spreads.

Placing Your First Options Order

Click on the specific contract you want to trade — for example, a call option at the $150 strike expiring in two weeks. A trade ticket will open. Select Buy or Sell at the top. Enter the number of contracts (remember, one contract = 100 shares). Then choose your order type.

Market orders execute immediately at the current bid or ask price. They may provide execution but not price. Limit orders let you set the maximum price you will pay (if buying) or the minimum price you will accept (if selling). Limit orders may not fill if the price never reaches your limit, but you control the cost. For options, limit orders are usually the better choice because the bid-ask spread can be wide, and waiting a few minutes for a better price often saves money.

Set your order duration. Day means the order expires at the end of today's trading session if it has not filled. Good-Till-Cancelled (GTC) means the order stays active for up to 60 days. Most options traders use Day orders because prices and spreads change constantly, and a limit order from yesterday may be far from today's market.

Review the order summary — it will show the contract details, the number of contracts, your price limit, and the estimated cost or credit. Click Submit. The order goes to Fidelity's system and attempts to fill.

Understanding Contract Pricing and Costs

Options prices are quoted per share, but you always trade in multiples of 100 shares. When Fidelity shows a call option premium of $3.50, that means $3.50 per share, or $350 per contract. If you buy 5 contracts, your total cost is $350 × 5 = $1,750, plus any applicable fees (though Fidelity charges no commission).

The bid-ask spread is your real cost. If you buy a call at the ask price of $3.50 and sell it later at the bid price of $3.40, you have lost $0.10 per share, or $10 per contract, even if the stock price has not moved. This is why tight spreads matter: a spread of $0.05 costs you $5 per contract, while a spread of $0.30 costs you $30.

Fidelity will show you the buying power required to hold the position. For a long call or put, this is simply the cost of the contract. For a cash-secured put (Level 2), Fidelity reserves the strike price × 100 in your account. For spreads and other multi-leg strategies, the requirement is the maximum loss you could take on the trade.

Monitoring and Closing Your Position

Once your order fills, the contract appears in your Positions section. Fidelity shows the current bid and ask prices, the last price, your entry price, your unrealized gain or loss, and the days until expiration. The Greeks — delta, gamma, theta, and vega — are available if you enable them in your settings; these measure how the option price will change with stock price, time, and volatility.

To close a position before expiration, go to your Positions, find the contract, and click Sell (if you own it) or Buy to Close (if you sold it). You will see the current bid and ask prices. Place a limit order at a price you are willing to accept, or use a market order if you want to exit immediately. The trade settles in one business day.

If you hold a contract until expiration and it is in the money, Fidelity will automatically exercise it. A call gives you 100 shares of the stock at the strike price; a put requires you to buy 100 shares at the strike price. Make sure you have enough cash or buying power in your account, or set up an alert so you can close the position before expiration if you do not want to take assignment.

Using Fidelity's Options Tools and Research

Fidelity's Active Trader Pro platform includes an Options Strategy Builder that lets you construct multi-leg trades visually and see the profit-and-loss diagram before you place the order. This is useful for spreads, straddles, and other complex strategies. You can also backtest a strategy against historical data to see how it would have performed.

The Research tab on the options chain page links to analyst reports, earnings dates, and implied volatility data. Implied volatility (IV) tells you how much the market expects the stock to move; high IV means option premiums are expensive, and low IV means they are cheap. This matters because you want to sell options when IV is high and buy them when IV is low.

Fidelity also offers paper trading (a simulated account with fake money) so you can practice options trades without risking real capital. This is available through Active Trader Pro and is useful for learning how orders fill, how spreads work, and how your positions move with the stock price.

Common Mistakes and How to Avoid Them

The most common mistake is placing a market order on a wide-spread option and paying far more than necessary. Always use a limit order and be patient. If the bid-ask spread is $0.50 or wider, the contract is illiquid; consider trading a different expiration date or strike price instead.

Another mistake is holding a contract into expiration without a plan. If you own a call that is in the money on the last day, Fidelity will exercise it automatically, and you will own 100 shares. If you do not have the cash or do not want the shares, close the position the day before expiration.

A third mistake is underestimating the cost of the bid-ask spread. On a $2 option with a $0.30 spread, you are paying 15% of the option's value just to enter and exit the trade. This is why options with high volume and open interest are better for most traders — the spreads are tighter, and you lose less to the bid-ask.

Frequently Asked Questions

Do I have to pay a commission to trade options on Fidelity?

No. Fidelity charges no commission on options trades. You pay only the bid-ask spread, which is the difference between what you pay to buy and what you receive to sell. This spread varies by contract and can range from a few cents to several dollars per contract.

What happens if I do not close my option before it expires?

If your option is out of the money (worthless), it expires and disappears from your account. If it is in the money, Fidelity automatically exercises it. A call gives you 100 shares at the strike price; a put requires you to buy 100 shares at the strike price. You must have enough cash or buying power, or you can close the position the day before expiration to avoid assignment.

Can I trade options on any stock in Fidelity?

No. Options are available only on stocks that have an active options market. Most large-cap stocks and many mid-cap stocks have options, but small-cap and penny stocks usually do not. If you search for a stock and the Options tab does not appear, options are not available for that stock.

What is the difference between a call and a put?

A call gives you the right to buy 100 shares at a set price (the strike) by a set date (expiration). You buy a call if you think the stock will rise. A put gives you the right to sell 100 shares at a set price by a set date. You buy a put if you think the stock will fall. Both are bets on direction and time.

How do I know what approval level I need?

Start with Level 1 (buying calls and puts only) if you are new to options. Level 2 (covered calls and cash-secured puts) is appropriate once you understand how options move. Level 3 (spreads) and Level 4 (naked calls) are for experienced traders. Fidelity will tell you what level they approve you for based on your account and experience.