Options Levels

[josh6286]

Hello, new here. My question is:

I am approved for Level I options at Scottrade. Level I allows for cash covered puts and covered calls. I want to purchase calls and puts outright, without an underlying asset, which I am supposed to have a Level II options account to do.

It appears I would still be able to purchase calls and puts on Scottrade, even though my Level I clearance technically forbids me.

My question is: what are the consequences if I do purchase long puts and calls without holding the underlying asset?

Thanks

-Josh

 

[marsman]

My question is: what are the consequences if I do purchase long puts and calls without holding the underlying asset?

That's very normal. Most option traders do exactly this.
Your risk is limited to the premium you paid for the options, and the win is theoretically unlimited.
For such long options you even don't need a margin account; a cash account suffices. But can depend on the broker.