Stock Markets Exposed

Can you help me with signing up for scottrade (margin borrowing vs. options trading privileges)?

I am in the process of opening a scottrade account. During one step of the process a screen came up with two options: "margin borrowing privileges" and "options trading privileges." I do not fully understand what either means, but what I want is a simple account--I am not ready to implement more sophisticated tools. Do I have to choose one of the two "privileges?" I have a basic understanding of what options trading entails, but I really do not understand margin borrowing. I see that the interest rate for margin borrowing on scottrade is at 8.75%, but I do not see how this works. Is it that scottrade lends money for the purposes of buying a stock, and then charges an interest rate on the money that was borrowed? I do not see myself borrowing money to buy stock...

Public Comments

1. If you do not plan on using margin, or trading options, why not just click on NO for these 2 screens & move on?? Unless you plan on shorting (or going long) a stock or ETF, I don't know why you would need margin borrowing. I opened a brokerage account with Fidelity some years ago, and I vaguely remember these questions coming up. Since I was not interested in these, I just said no. But Scottrade should be able to answer your questions.
2. You should definitely check no on both. If you do not have a good understanding of margin, do not make it available. You will be taking an unwise risk. You can add both of those to your account at a later date after you understand them.
3. If you don't understand margin or the margin agreement you should not open a margin account. Margin interest is charged on your debit balance, they are showing you the annual rate, but interest is calculated on the daily debit balance and posted to the account monthly Before you open either a margin account or an option account it would be in your best interest not to do it until you understand what you're doing, why you're doing, and how you're going to do it. You can always open either account later when you know what you;re doing.
4. A Nobody nailed it for you