In a Questrade TFSA, the "option level" refers to the trading complexity and risk associated with the option strategies you can use. A TFSA is limited to a maximum of Option Level 2, which restricts you to certain strategies but allows for more flexibility than you might find with basic investing. You cannot access Level 3 or Level 4 options, as they are restricted to margin accounts due to their higher risk.
What you can trade in a TFSA (Level 2)
- Buying calls or puts: Purchasing options contracts.
- Covered calls: Selling a call option on a stock you already own. This is a common strategy for generating income in a TFSA, as you are not allowed to sell stocks short.
- Selling cash-secured puts: Selling a put option on a stock you have enough cash to buy if assigned.
- Spread strategies: Buying and selling options with different strike prices or expiration dates, with specific limitations on the expiration dates of the options.
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