"OldFart", TK is following federal regulations. The requirements for each level are federally mandated, so it's not just TK. I personally think the rules are kind of strange. I think it's more appropriate for some people to have level 3 than level 1. I applied as a level 2 and got it, but now that I've read some more books, and have really developed a style I am confortable with, I realize that I usually sell at or before a target price. I know that bull call spreads are much more appropriate, and not only will provide better returns, but provide a limited form of protection against my call. If I lose my premium on my lower strike price call, I can collect the premium on the higher price getting a "rebate" or insuring my losses up to X. Also, the breakeven point is a lower price, and I'm also protected against theta(time) decay or paying too much on a stock with high IV. What's more, it will give me more conviction and confidence as it will help prevent me from selling too early as I would with just a call, due to my worries about theta(time) decay.
In my situation, A level 3 is much better. I'll probably apply for a level 3, but I'm not sure whether or not I would qualify based on federal qualifications, even though I completely accept all risks.
I know that the regulations are probably in place to protect people who don't know what they're doing from losing a lot and suing, but personally I think that IF you don't meet the qualifications, you should still be given the chance to take some test to prove your knowledge is adequte. Not to mention, the applications are really no different then half the California bank loan application pre bubble crash, "stated net worth" and income, etc...newsflash, people out there do lie. I don't intend on doing so, but the real unfair thing is that this so called "fair" rule, punishes the honest who are well informed, and perhaps also punishes the uninformed and unprepared investor anyways, particularly those that lie about their net worth. Not to mention so called net worth can easily be manipulated. I could probably get a loan and buy a house rather than live with my parents and my net worth would go up. However, the income that I get to keep in my pocket at the end of the month goes down, and although I have more available credit, I'm in a worse position financially, particularly if I overpaid for the house. I could buy a deprecciating asset like an expensive new car on credit and my net worth goes up, but the real value goes down. In my opinion, that means nothing as to whether or not it's financially appropriate for me to be a level 2 3 4 or 5.
But I digress. Does anyone know if there's anywhere that says the general requirements are for each level of option account? I'd really rather not spend the time to send in more information requesting a level 3 option account if I'm not going to qualify, and if I don't, I want to know how much more "networth/time investing/etc" I need before I try again.