Options trading is a high-risk, high-return game involving big money. Options trading is available on leveraged money—a situation can multiply both wins and losses and expose (often ignorant) traders to higher risks. In the United States, the U.S. Securities and Exchange Commission (SEC) safeguards the interest of common options traders. It is important to select a fully authorized options broker that abides by SEC rules and regulations. This article provides a list of SEC-regulated options brokers. (See related US Options Market Regulations)

The business of investing and trading can often lead to intermediaries (such as banks, brokers, and advisors) engaging in financial irregularities, ponzi schemes, and financial scams; playing with client money; and unscrupulously hitting clients with high charges, hidden fees, and high risk exposure. Laws and regulations attempt to prevent financial malpractice, shield the common investor, and maintain investor trust in the workings of the market. The United States has two major government bodies regulating the financial markets: the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Both organizations have a similar goal—to prevent fraud and other malpractice in the financial markets and to safeguard investor interests. Two nongovernmental self-regulatory industry organizations, the Financial Industry Regulatory Authority (FINRA) and National Futures Association (NFA), also help oversee the industry. All option contracts traded on stock/index as underlying are overseen by the SEC and FINRA whereas options contracts on forex/commodity/futures as underlying are overseen by the Commodity Futures Trading Commission and the National Futures Association.

With the advent of online trading, local or overseas options brokers can offer services globally, but may not necessarily be licensed to operate in the client's country. An overseas broker can offer option trading services through its website to U.S. residents at very low brokerage rates. But what if such a broker suddenly shuts down shop and absconds with all their investors’ money? If the broker is not registered with the SEC, the U.S. trader can lose all his money and have no way to recover the money. 

The following is a list of SEC-regulated option brokers based in the United States. Please note that this list is not presented in any particular order and is not exhaustive. There are many legitimate SEC-approved options brokers not included on this list.

  • OptionsHouse: Founded in 2005, OptionsHouse offers anytime, anywhere access to its trading platform from its web browser and mobile app. It has no maintenance costs and doesn’t require traders to maintain a minimum balance. There is a base fee of $4.95 per option contract, and above that the trading fee starts at $0.50 per contract for single leg trades. The same fee structure applies to option spreads, straddles, and combinations. Covered calls/puts are treated under the same fee structure, plus there is a $4.95 fee for stock position. See the full details of the different fees here.
  • FidelityFidelity offers options trading at a base fee of $7.95 plus $0.75 per contract ($12.95 for FAST trades, and $32.95 for representative-assisted trades). The trading package offers advanced features and tools for monitoring stocks, receiving news, and researching trades.
  • ScottradeScottrade offers an online options trading platform along with tools to compute real-time profit and loss. Options strategies including income, growth and speculative strategies, as well as mini-option contract trading. The online options trading mode remains the cheapest at a $7 base fee plus $1.25 per contract. Option exercises and assignments have a flat cost of $17.
  • Interactive Brokers (IB): IB offers a tiered structure for option trading based on option premium value and total monthly contracts traded. The more options one trades in a month, the less per contract brokerage is charged. Charges start from $0.25 per contract. The IB trading account comes with good educational content under “Trader’s University,” comprehensive reporting, global access, risk management tools, and low cost of execution.
  • CharlesSchwabCharles Schwab offers rich content and tools for options traders. These include options charting, options chains, options screener to select the options based on set criteria, and a powerful platform to allow placing multi-leg orders. Option trading charges start at $0.75 per option contract on top of a base price of $8.95, and apply on single and multi-leg orders, including spreads, straddles, and rollout.
  • E*TradeE*Trade offers many innovative tools, smart technologies with best-in-class analytics, greeks, ability to combine multi-leg trades involving multiple options and stocks under one ticket, and mobile trading apps. It offers a two-tiered fee structure based on the number of options trades--trades below 150 will be charged $9.99 plus $0.75 and those above 150 will be charged $7.99 plus $0.75. Option exercise and assignments will cost a flat fee of $19.99.
  • TradeStation: Full of features, the OptionStation Pro trading platform from TradeStation offers 3D graphs, real-time position spread management, real-time data analytics, and low cost of trading options. Depending upon the selected package, the option trading charges start from $1 per trade contract or $4.99+$0.20 per contract (for more than 200 trades per month). Up to 9 trades per month are charged at $9.99+$0.70 per contract.
  • QuestradeQuestrade offers options trading on all of its four different platforms (IQ Essential, IQ Web, IQ Edge, and IQ Mobile). IQ Web and IQ Edge allow placing multi-leg option trading strategies. All the platforms are complemented by built-in charting, research tools, and market data. Different brokerage plans are available for active option traders which start from $4.95 plus 75¢ per contract.
  • TradeKingTradeking offers a new age technology streaming platform "TradeKing LIVE,” plus tools like options scanners, options chains, probability calculators, profit and loss calculators, and an online education center. Option trading charges start from $0.65 per contract with a base fee of $4.95
  • TD AmeritradeTD Ameritrade offers options trading with no platform fees or trade minimums. An options trading account comes with thinkorswim's professional-level research, trading platform, mobile apps, and a variety of research tools to assist the trader in option strategies. Option brokerage starts at base fee of $9.99 plus $0.75 per option contract.

The Bottom Line

Regulations play an important role in building and maintaining trust in any financial market. Options trading involves a high level of volatility. The risk exposure in trading options is multiple times the traded amount. In the United States, it is absolutely necessary to trade options only through an SEC-regulated broker. This helps safeguard the traders interests and provides a recourse to a higher authority should the brokerage firm default.

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