|
The Lowest Options Trading Fees Brokers in 2024
|
|
$0 per contract and $0 base
|
Webull is one of the most affordable brokers for trading options. They charge no base commission, no per-contract fees, and no costs for assignment or exercise. This makes Webull an excellent choice for traders who want to keep more of their profits instead of losing them to fees.
Another advantage of Webull is its low margin rates, which range from 5.24% for large balances to 9.24% for accounts under $25k. These rates are 2 to 4 percentage points lower than many other brokers, allowing traders to use leverage more effectively to increase returns.
Setting up options trading can be done using the mobile app. Open the Webull app, tap the center icon with the bull’s horns, and then select the circle with three dots labeled “More.” Under the “Account” menu, tap “Options Trading” and follow the steps. Approval usually takes less than a day.
Read the full Webull options trading review »
Up to 40 FREE fractional shares when you make a deposit at Webull.
Visit Webull Website
|
|
$0 per contract and $0 base
|
Firstrade is the most affordable online broker for options trading. It charges no base fees and no per-contract costs.
There are three ways to trade options on Firstrade’s user-friendly website. First, click the “Trading” tab in the top menu, then select “Options.” This opens an order form. This page lacks additional tools, so it’s best for experienced users. Required fields include strike price, number of contracts, buy or sell to open or close, and call or put. Links to chains and an options expiration calendar are also available.
The second way to place orders is through the trade bar at the bottom of the screen. Clicking the two blue arrows on the right expands the bar, revealing the order form. Select “Option” instead of “Stock” to access options tools.
Option chains above the trade bar show real-time contract prices. Besides calls and puts, you can view spreads and straddles. Greek values are calculated automatically. Clicking a bid or ask price populates the order form below.
The third method is using OptionsPlay, a powerful tool with advanced features. OptionsPlay suggests trade ideas for any company. Clicking “I’m Bullish” or “I’m Bearish” generates ideas with profit-loss diagrams. Clicking an idea opens an order ticket.
We found OptionsPlay to be the best way to trade options at Firstrade. Access it by selecting “Options Wizard” in the chains window.
Trading Options on the Mobile App
Although Firstrade doesn’t have a desktop program or browser platform, its mobile app supports options trading. On a stock’s profile page, tap “Trade Options.” Select an expiration date to view calls and puts. Tapping a bid or ask price opens an order ticket. However, the mobile app doesn’t support multi-leg strategies.
Get 2% IRA match and up to $250 in transfer fee rebate.
Visit Firstrade Website
|
|
How to Trade Options Before Earnings or News Release
An effective option strategy before an earnings release is a valuable tool that many traders seek. Most investors who aim to profit from an earnings beat or miss often buy calls or puts. Some experienced traders even opt for both a call and a put (straddle/strangle), expecting that a significant price move in either direction will yield a profit.
Limited Risk – High Reward
The appeal of buying calls and/or puts is the ability to know your maximum risk upfront. For example, if a call on Apple costs $100, the most you can lose is $100, while the potential reward can be substantial if Apple’s price moves significantly before the option expires.
The challenge with this approach lies in the unpredictable nature of earnings reports and stock reactions. As demand for options increases before announcements, due to speculators and shareholders seeking protection from volatility, option premiums become inflated, making them expensive to buy.
Being the Bookie
Selling options often proves more profitable than buying them, as it favors the seller, similar to how the house wins in betting. Overpriced options give sellers an advantage. Once earnings are announced, demand for options and the volatility premium they carry usually drop significantly. This makes it challenging for buyers to profit, even if they hold both calls and puts.
The logical solution might seem to sell options, but the risks involved in selling naked options can be overwhelming unless you have substantial capital reserves. For most traders, the risk of unlimited losses makes this approach impractical.
Credit Spreads
To take advantage of high option premiums before an earnings report while reducing the risks of selling naked options, traders often use "bull put credit" and "bear call credit" spreads.
Rather than explaining these strategies in detail, a quick online search can provide the technical steps to set up these spreads. The key takeaway here is that the profit potential lies in the unwinding process.
Unwound
After the earnings report is released and the market reacts, option prices return to more typical levels. This allows traders to close out their pre-earnings positions and profit from the uncertainty that previously inflated option premiums.
While this strategy doesn’t guarantee success every time or lead to massive wealth, it is effective often enough to make it worth exploring for traders looking to enhance their returns.
Updated on 11/28/2024.
Arthur Chachuna is a professional personal finance blogger, and the owner of Brokerage-Review.com.
He has been an avid investor for 25 years, and has a background in both applied math and programming.
|
|