Lowest option trading fees

Best Brokers With Lowest Options Fees, Cheapest Options Trading Commissions


Cheapest options trading commissions and lowest options trading fees. 2020 best options brokers and platforms. Low cost option trading.


Low Cost Options
Broker
Options Trading
Commissions

Interactive Brokers rating

Interactive Brokers
$0.70 per contract if Premium => $0.10 + exchange fees
$0.50 per contract if $0.05 =< Premium < USD 0.10 + exchange fees
$0.25 per contract if Premium < $0.05 + exchange fees


Interactive Brokers Options Trading

Interactive Brokers is one of the cheapest brokerage firms to trade options. Based on their pricing, trading 5 contracts costs anywhere between $1.25 and $3.50 depending on premium plus exchange fees. This low pricing is a huge advantage for those clients who don’t want their profits eaten up by commissions.

Another huge plus of Interactive Brokers is that they have the lowest published margin rates we’ve seen: 3.20% for debit balance of $0 - $25,000; 2.41% for debit balance of $25,001 - $300,000. That’s between 4 and 6 points below most other brokers and this low rate allows you to use leverage to amplify returns more successfully.


Best options commissions


The word of caution: Interactive Brokers has a $10 monthly minimum commission requirement to avoid the $10 monthly inactivity fee and $10 monthly market data fee. This means that clients who trade only infrequently might pay up to $240 per year in fees (or $360 if their account holds less than $2,000)! Minimum to open most accounts is steep $10,000. Also, margin calls at this brokerage are merciless. A good amount of customers are getting wiped out.

Read full Interactive Brokers review »


Interactive Brokers Website

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Low Cost Options
Broker
Options Trading
Commissions

Firstrade rating

Firstrade
$0 per contract

Firstrade Options Trading

Firstrade is the lowest priced online broker in the industry. Their options commission is $0 base charge and $0 per contract.

There are three ways options can be traded on Firstrade’s user-friendly website. The first is to click on the “Trading” tab in the top menu and then select “Options” in the lower menu. Doing so creates an order ticket. There are no other tools on this page; so you really need to know what you’re doing before you try to fill out the order ticket. Fields that need to be completed include strike price, number of contracts, buy or sell to open or close, and call or put. On this page, there are links to chains and a helpful options expiration calendar.

The next place derivative orders can be submitted is through the broker’s trade bar. It appears at the bottom of the screen. Clicking on the two blue arrows on the right side enlarges the trade bar so that the order form will be shown. On the left side, you’ll want to click on “Option” instead of “Stock.”

Option chains can be expanded above the trade bar for an overview of current prices of contracts. Besides calls and puts, there are selections for spreads and straddles. Greek values are automatically calculated as well. Clicking on a hyperlinked bid or ask price automatically populates the order ticket below.


Cheapest options commissions


The third and final method of trading options on the website is with OptionsPlay. This is a very useful piece of software that offers derivative traders many great features. There are trade ideas presented on any entered company. Clicking on a green “I’m Bullish” button generates one set of trade ideas, while a red “I’m Bearish” button will produce a different set. Profit-loss diagrams are included. Clicking on one of these trade ideas produces an order ticket.

During our research, we found OptionsPlay to be the best method of trading derivatives at Firstrade. To access the software, you need to click on “Options Wizard” within the chains window.


Trading Options on the Mobile App


Although there is no desktop program or browser platform at Firstrade, the broker-dealer does have a mobile app where options can be bought and sold. On a stock’s profile page, there are two buttons at the bottom of the screen: “Trade Options” and “Trade Stock.” Tapping on the first choice generates a list of expiration dates. Tapping on a date generates calls and puts with bid and ask prices. Tapping on a bid or ask price creates a trade ticket with some data filled, but other data, such as order type, not filled. There are no multi-leg strategies on the mobile system.


Firstrade Promotion Offer

$0 commissions + up to $200 in transfer fee rebates.

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How to Trade Options Before Earnings or News Release


Like a sexy gal that can cook or an inside source at the racetrack, an actionable option strategy prior to an earnings release is something that traders know must be out there, yet it remains elusive. Most investors looking to capitalize on an earnings beat or miss simply buy calls or puts. Some of the more sophisticated speculators even get long both a call and a put (straddle/strangle), thinking that if the stock moves enough one way or the other, they'll come out at least a little bit ahead.


Limited Risk – High Reward


The allure of only being long calls and/or puts is that a trader knows their maximum risk as soon as they enter the order. If a call on Apple costs $100, then $100 is the most you can lose, plus you have the chance to "rake it in" if Apple moves significantly before the option expires.

Therein lies the trouble with most long-side option strategies prior to earnings announcements...since no one knows what the earnings report will hold, or how the underlying stock will react; the demand for options goes up markedly before the announcement. Both speculators and shareholders looking to insure against volatility are clamoring for options which dramatically increases the premiums, making puts and calls overpriced.


Being the Bookie


Everyone knows that taking bets is more profitable long-term than making bets. Especially if the wager has very favorable odds for the house. This is exactly what overpriced options are for the seller – a game that stacks the deck against the buyer. In general, immediately after earnings are released, the demand for - as well as the volatility premium built into - calls and puts, evaporates. Even those that theoretically have both upside and downside covered find it difficult to profit once that "premium of the unknown" is gone from their asset.

So the obvious solution would appear to be: become a seller of options. If only it were that easy! Unless you have the bottomless pockets of a Goldman Sachs, the unlimited risk part of being a naked option seller will be too much for you and your broker's heart to take.


Cheapest options trading


Credit Spreads


In order to take advantage of the inflated premiums in the option market prior to an earnings announcement, yet mitigate the risk of selling uncovered (naked) puts/calls, the go to strategies are "bull put credit" and "bear call credit" spreads.

Rather than getting bogged down in the stock XYZ trading at $50 - type explanation, I'll leave it to a google search for those wanting the nuts and bolts of how to construct the option spreads mentioned above. The focus here is how to maximize the profit from these spreads and that is accomplished in the unwinding.


Unwound


Once the earnings report comes out and the market is digesting and reacting to the numbers, option prices revert to a more realistic reflection of future prospects. This allows the options trader to unwind his pre-earnings position and cash in on the uncertainty that was prevelant prior to the announcement. Does it work every time? No. Does it provide enough profit to get an address on easy street if it's all a trader does? No. But it works often enough and provides a boost to the bottom line to make it a worthwhile play to investigate further.


Lowest Options Commissions reviewed by Brokerage-Review.com. Rating: 5