Firstrade Options Trading 4-star brokerage rating

Firstrade Options Trading in 2022



Firstrade Options Commissions


Firstrade is a great broker to trade with because they offer commission-free trading, and unlike many of their low-cost competitors, they don’t use their free platform as an excuse to offer fewer investment choices. Firstrade offers stocks, ETFs, mutual funds, bonds, and options on their platform, most of which are commission free. This article will focus on everything you would want to know about trading options on Firstrade’s platform, including how to actually place trades.


What Are Options?


Before we get started, if you are brand new to options trading, options contracts represent the option (but not the obligation) to either purchase or sell shares of the underlying stock or ETF (usually a single contract represents 100 shares of the underlying security) at a pre-determined price, called the strike price, up until a specific date in the future, called the expiration date. The buyer of a call option has the right to buy shares of the underlying stock whereas the buyer of a put option has the right to sell those shares. Options are complex instruments because there are additional factors that drive their price besides the fundamentals of the underlying stock, such as time to expiration and the stock’s volatility.


How Do Options Fit into a Portfolio?


Some investors like to buy options as an insurance policy against a position they have in the underlying stock. For example, if I am long AMZN at $1,000 and I want to protect my position from potential losses if the price drops below $950 I might buy an AMZN put with a $950 strike price that expires in a year so that if the price goes below $950 I still have the option to sell those shares at $950 and prevent further losses. Aside from investors, many traders like to take stand-alone positions in options (either buying or selling them) to utilize leverage and capitalize on large expected price moves in either direction.


Firstrade options trading


Options Fees


As we mentioned, trading options in your Firstrade account is commission-free. Most people that trade options close out their positions before they expire. If they do hold on to them until expiration they are automatically netted and settled in cash as opposed to the holder of an in-the-money call having to actually purchase the shares at the strike price from the counterparty and then sell them in the open market to realize their gains. That said, options holders do still have the option to exercise an options contract that is in the money and take ownership of the underlying shares, but Firstrade will charge you a $14.95 options assignment/exercise fee for this service.


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How to Buy Calls on Firstrade


You can create an options trade by going to “Options” within the Trading menu at the top of the screen. You can see in the below screenshot how we prepared a market order to buy (transaction type is called “Buy Open”) 100 contracts of the AAPL call with a strike price of $200. By clicking on the “Get Option Chain” link you can easily view all of the options contracts (all combinations of strike prices and expiration dates) that are currently available for AAPL stock.


Firstrade Options


How to Sell Puts on Firstrade


Selling puts on your Firstrade account is very similar. Using the same order ticket as above, we created the below order to sell (“Sell Open” transaction type) 100 contracts of AAPL puts with the $155 strike price. You can see from the current low price ($0.18) that the market is reflecting a very low likelihood of AAPL stock’s price dropping below $155 within the next month.


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About the Author
Arthur Chachuna is professional personal finance blogger, and the owner of Brokerage-Review.com. He has been an avid investor for 23 years, and has background in both applied math and programming.