Best Options Trading Online Brokers


Best options trading online brokerage firms for 2017. Top brokers for options traders with lowest commissions and cost.



Top 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

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.

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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Best Options
Broker
Options Trading
Commissions

Tradestation rating

TradeStation
$5 + $0.50 per contract
$4 + $0.30 per contract for IRA
TradeStation

TradeStation's direct-access platform is one of the best we've seen! It offers all the bells and whistles users expect from the professional trading software. Customers have an ability to trade equities, futures, options, and forex from one place. Firm's technical analysis and back-testing platform has been recognized as the most popular among traders for many years. The order entry and execution part of the software makes TradeStation a superior product. All the tools are fully customizable. TradeStation is one of the very few online brokers offering automated trading.

Perhaps the most interesting aspect of TradeStation is the TradeStation Simulator, which allows members to test their trading plans and ideas in real-life simulated scenario without actually risking anything. Users can create different custom trading strategies and do back testing to improve those strategies before trading. They can follow multiple market trends and plan strategies accordingly. All of this is possible through a comprehensive database, consisting of historical market data and analysis that the platform offers.

In the Barron's magazine broker survey TradeStation got the highest rating in both Best for Frequent Traders and Best for International Traders categories. It also got very high rating in Best for Options Traders category.

Read full TradeStation review »


TradeStation Promotion Offer

Get $5 per trade stock and ETF commissions. $4 per trade for IRAs.

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What Option Traders Should Look For in a Best Options Brokers


Buying and selling option contracts requires specific trading tools, which may not be available at all brokers. Traders who are interested in options would also benefit from educational resources, such as videos and webinars. These types of services for derivative investors can vary widely from one brokerage house to another. The following categories are particularly important for option traders.


Customer Service for Option Investors


Not all brokers provide the same level of customer support. Because option trading is a very esoteric financial strategy, having a brokerage firm that offers customer service specifically for derivative traders can be a big help.

Most brokers don’t have representatives who specialize in option trading. Capital One Investing, for example, does not offer option specialists over the phone. Other brokers do provide access to agents who specialize in derivative trading. Interactive Brokers, for instance, has a stock and option trading desk, although its number isn’t toll-free. optionsXpress has representatives who are licensed option specialists.

Derivative traders may also need customer service available over the phone and via on-line chat. While all brokers have customer service over the phone, not all of them offer an on-line chat feature. Vanguard, for example, does not; although E*Trade does.


Best Options Brokers


Option Pricing


If you’re going to trade options, obviously the commission schedule for derivatives will be an important factor to consider. Like the other topics in this article, there is wide variation from broker to broker on option commission schedules. Some firms are on the low end of the pricing schedule, charging just 65 cents for contracts on top of a base charge of only $4.95. This is Fidelity’s schedule.

Other firms, like Vanguard, are on the opposite end, charging as much as $1 per contract plus a per-trade fee of $20. This price is for small accounts. Clients who have more than $500,000 in assets receive an $18 discount on the base charge.

TradeStation, one of our Best Options Brokers in 2017, has a unique pricing schedule. It charges just 50 cents per contract plus a $5 base charge, but but gives lower rate for IRA accounts - $4 base charge and 30 cents per contract.

Many brokers also charge for option exercises and assignments. WellsTrade clients, for example, must pay $25 plus the broker’s regular equity commission, which is either $2.95 or $5.95. Schwab, on the other hand, charges just its regular stock commission, which is $4.95. Because wide variation exists in the industry on this issue, be sure to learn your broker’s pricing for assignments and exercises.


Option Research & Education


Having adequate learning materials is of paramount importance to trade any security, and derivatives are no exception. Some brokers have a large amount of educational and research materials for option contracts, while other firms have nothing. Robinhood, for example, does not even offer trading in options, so naturally the broker has no resources for option traders.


Best Options Brokers


On the flip side, optionsXpress, strong contender for Best Options Broker, offers its clients many opportunities to learn more about derivatives. The company offers webinars every week that discuss option trading strategies. There are also local live events that the broker occasionally hosts. optionsXpress clients can sign up for a daily newsletter that is free of charge. Not all brokers offer so many option resources. WellsTrade, for example, provides option chains and the ability to trade options, but not much else.

Fidelity has an extensive educational section on its website, and there are plenty of materials for option traders. The broker hosts articles, videos, and webinars that cover many derivative trading strategies. One article discusses seven common mistakes that option traders commonly make. A video demonstrates how to place a bull call spread, while a webinar covers income strategies with options. The broker has nearly 100 option materials. Beginning option traders would obviously be much better off at a broker like Fidelity rather than WellsTrade.


Option Trading Technology


Once you’re ready to start placing option trades, you’ll need a broker that has sufficient trading tools. Some brokers offer just a website with a simple order form that is produced after clicking on a price within an option chain. Vanguard is one example. Other brokerage firms will offer much more sophisticated trading tools.

TradeStation client, for example, have access to OptionStation Pro. This is a desktop platform designed to trade derivative contracts. It has advanced option analysis with 2-D and 3-D graphs. Option searches can be performed with results that are ranked by various characteristics, such as expiration date and strike price. A unique feature is SpreadMaster, which can open and manage multiple spreads simultaneously.

Other advanced derivative trading tools can be found at optionsXpress. The broker has several option tools that can find potential trades. One is called Idea Hub. This program scans the securities markets looking for trading ideas and returns a list with some important numbers, including the break even stock price, and percent change in static return, which is the gain or loss in the position assuming the underlying stock price doesn’t change. Unfortunately, optionsXpress brand will be discontinued by the end of the year.

Some brokers will also provide a paper trading platform where you can practice buying and selling options before committing real money. TD Ameritrade, for example, offers both a desktop and a mobile platform where option contracts can be traded with a virtual currency. Called thinkorswim, the software is very sophisticated, so learning to trade any product first is a good idea before placing real trades. optionsXpress also provides a virtual platform.


Best Options Brokers Summary


Having the right tools is an essential part of any investment strategy, and perhaps even more so with options. Make sure to do thorough research on any potential broker to determine if it has everything you need to be a successful trader.


Updated on 7/25/2017.





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