Options trading brokerage account for non us resident

The Internal Revenue Services defines an ‘alien’ as someone who is not a U.S. citizen. They are broadly classified into two categories - resident alien and nonresident alien. An individual who doesn’t have a green card (is not an immigrant), hasn’t stayed in the U.S. for more than 183 days in the past 3 years or more than 31 days in the current year (substantial presence test) and who doesn’t have any other business or trade interest in the U.S. (other than trading in U.S. securities like options) is considered a non-resident alien.

Conversely, someone who holds a green card, fails the criteria of the substantial presence test or has business or trade interest in the U.S. other than trading U.S. securities is regarded as a resident alien.

For a resident alien the requirements for trading U.S. options are very similar to that of a U.S. citizen. One needs to select a broker of one’s choice and provide the details the broker requires. This generally includes the Social Security Number or a Taxpayer Identification Number (issued by IRS) , driver license number, statement information of assets or cash one wants to transfer to the brokerage account and employer’s name and address (applicable only in certain cases). The tax implication for money that a resident alien earns through trading in U.S. securities is exactly the same as it is for a U.S. citizen.

Of course, a nonresident alien can trade U.S. options by opening an account with a U.S.-based online broker. However, the requirements for opening an account vary from broker to broker. Many brokers don’t allow nonresident aliens to open an account at all, while some allow citizens of only a few countries that they prefer to open an account.

The most crucial factor for a broker to open an account for a nonresident alien is his or her nationality. One will need to check with broking firms to ensure if they allow the citizens of their country to open an account. Another important point to note is that even if a broker allows one to open an account, most brokers require the application and necessary documents to be submitted through mail (or fax), in physical form, rather than electronic submission.

Moreover, there can be other compliances and regulations to be followed that may differ from broker to broker. For example, all the transactions could only be done through wire transfers or all the important notifications related to the account will only be sent electronically.

Once one has found a broker, the requirements for opening an account may again vary from broker to broker. However, some of the general requirements include;

1. Application form – Details such as name of the applicant, date of birth, nationality, address, profession etc. needs to be filled.
2. Copy of applicant’s passport for identification purposes.
3. Copy or original of most recent financial/bank statement (Generally not more than 6 months old)
4. Copy or original of a utility bill (Electricity, Gas, Water etc.)
5. Minimum deposit to open the account 
6. W-8BEN Form
7. Traders who wish to trade in options might also need to fill a separate form stating the same.

Though there are only few broking firms in the U.S. that entertain international clients, some of the best brokers for a non-U.S. retail option trader includes the following:

• TD Ameritrade,  Interactive Brokers – difficult to open
• SureTrade-  Coupon Code: 50ONUS: Friendly for international citizens
• Firsttrade: Low respond for non us clients
• Some other brokers have poor reputation we not mention here
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