RRSP, TFSA, Margin and option strategies.

I decided that I want to start selling option contracts so I figured that I better know what I can and cannot do within my various accounts.

MARGIN ACCOUNT:

I can do pretty much anything although the complexity of some of the strategies somewhat restricts my activities only due to the platform being not as options strategy friendly as it could be. I might review the Elite platform and see how it fairs compared to the Pro package.

Level 1

I can buy options with a $1000 account startup and can continue to do so as long as the net worth of the account remains above $250.

Level 2

I can sell covered calls as long as the account balance is $2500. For this I have to already hold the underlying stock so it is a bit of a cash creation strategy only based on a core position. The difference between 2 and 3 are slight but are delineated for the purpose of taxation and registered accounts.

Level 3

Spreads and straddles are allowed, although I can trade a straddle without being "authorized" as it is really just two long trades. I think that perhaps the trades are somehow tied together when done as an official "straddle" as it specifies the simultaneous call and put at the same strike price.
The Spread is buying one option and selling another against it. Buy the 20 strike call and sell the 15 strike put for example. The call is a long position that is the same as holding the stock so that if the put is exercised and you are forced to buy the stock, my call is also exercised to cover this as I buy the stock at the call strike price. In that case the premium I made selling the put goes against the loss off being put the stock and executing the option at the higher strike, creating a loss. The spread is a limited risk scenario without holding stocks as even if the stock hit zero my total loss is fixed.

Level 4

$25,000 minimum account size.

Uncovered writing. Basically I can sell calls and puts without any safety net as I may have them exercised at whatever the going prices are. This is a very risky trade plan and not something I would even consider unless I wanted to sell puts and I didn't care if I ended up owning the stock. Selling naked calls is just plain dumb, in my opinion, as if a call gets exercised I don't end up with anything other than a an uncontrolled loss.

Now, in a registered account, RRSP or TFSA, I know I cannot short stocks so I would expect that level 4 is not an option, uncovered writing. Level 3 might not be because the option trades are setup as a money making venture as opposed to a position protection measure. This I was not certain of but I have confirmed it.

Registered accounts can only trade level 1 or 2.

OK, this puts me at a disadvantage in my plans going forward. I would like to be able to trade a variety of strategies that are not allowed in a tax sheltered account so I will have to accommodate the eventual taxation of a portion of my trading activities.

Jeff.