Types of Brokerage Accounts
The most common types of brokerage accounts are cash accounts, margin accounts and option accounts. The different accounts basically reflect your credit and background as an account holder.
A cash is a traditional brokerage account where you pay for all of your purchases in full by the settlement date - you have to have enough cash in your account to cover all of your trades and expenses. With a margin account you can take out loans against securities you own. In order to open a margin account you have to go through a screening process first because the brokerage house is in essence giving you credit. An option account is a type of brokerage account that allows you to trade stock options like puts and calls. In opening this type of account you will have to sign a statement indicating that you are aware and understand the risks that go along with derivative instruments.