Options trading has become extremely popular with retail investors over the past 15 years. Our best options brokers have a wealth of tools, including portfolio margining, that help you measure and manage risk as you determine which trades to place. They also include valuable education that helps you grow in sophistication as an options trader.
The commission structure for options trades tends to be higher and more complicated than its equivalent for stock trades. Typically, there is a base fee, plus a commission per contract being traded. Certain strategies involve 2 to 4 legs (or even more), which can get expensive on a per-trade basis, as it includes several base charges. Investors with fairly large portfolios can take advantage of portfolio margining at certain brokers, a practice that assesses the total risk inherent in a portfolio that contains stocks and derivatives.
Best for Options Trading:
- Interactive Brokers
- TD Ameritrade (thinkorswim)
- E*TRADE (Power E*TRADE)
- Charles Schwab (StreetSmart platforms)
- Account Minimum: $0
- Fees: $0.005 per share for the standard platform, $0 for IBKR Lite
Interactive Brokers had a long-standing reputation for low costs, a difficult platform and terrible service that catered to hyperactive traders. That reputation has changed considerably in the last three to four years as the firm began to pursue less active and less sophisticated customers. The company's Trader Workstation platform, available as either a downloadable package or a website, has become friendlier and more customizable. Their mobile apps are designed to operate with minimum typing, instead, utilizing wheels and voice commands.
A relatively new feature, IBot, lets you ask questions in plain English and get a quick answer, rather than digging around the platform. For example, you can ask IBot to display a particular strike and expiry date by typing (or saying) “Show options chain for GOOG for the next three expirations.”
Options traders can set up a spread quickly and roll it to a future expiry with just a couple of clicks. IB’s Probability Lab lets you simulate a potential trade before using real money.
You can only display streaming quotes on one device at a time, so if you’ve got the website up on your computer and then log in to your mobile app, one platform will be automatically restricted to snapshot quotes. Accounts with less than $100,000 in assets pay a minimum fee of $10/month and may have to pay additional fees for real-time data. The web version of Trader Workstation lacks some of the features in the downloadable platform, but all watchlists and alerts are shared.
No account minimum and no per-leg base fee
Margin rates are the lowest of all brokers surveyed
Dozens of options-oriented lessons
Streaming quotes display on one device at a time
Customer service is improving but still has a reputation for being lackadaisical
- Account Minimum: $10,000 (web), $25,000 (software)
- Fees: Max $4.50/stock trade, $0.65/options contract. No charge per leg
- Best for: Cost-conscious & active traders
Lightspeed is a broker designed to meet the needs of experienced and very active options traders. Lightspeed provides a dedicated options-trading platform (Livevol X) and several options analytical tools – such as historical options Greeks and skews data – not offered by other brokers. An array of scanners in the Lightspeed Trader platform helps spot trading opportunities, and the platform's advanced charting features are extremely customizable.
For portfolio analysis, you can group your positions by underlying symbol, which helps prolific traders determine which strategies are working. You’ll also find a profit-and-loss risk graph for complex strategies. The platform performed very well during the recent trading surges.
Mobile and web-based apps, however, do not allow futures trading or direct market access. This is not an appropriate platform for new options traders.
Low per-contract commissions (with no per-leg base charge)
Terrific order execution software generates price improvement
Livevol X platform has no monthly charge
High balance required to open an account
Lightspeed Trader platform has a minimum $100/month charge
Limited educational offerings
TD Ameritrade (thinkorswim)
- Account Minimum: $0
- Fees: Free stock, ETF, and per-leg options trading commissions in the U.S., as of October 3rd, 2019. $0.65 per options contract.
New options traders can get started on TD Ameritrade’s website, and then grow into the amazing tools built into their thinkorswim platform. You’ll find educational content galore on both platforms, along with live coaching and video updates. You can watch nine hours of video webcasts every trading day, much of which is devoted to options, on TDAmeritradeNetwork.com. The TDA site offers basic education and on thinkorswim, you’ll find options-specific education to qualify you to trade more complex spreads. If you tick off the concepts that you want to learn, you’ll get a personalized education menu.
The thinkorswim platform has tools for selecting options strategies, assessing their risk, and rolling spreads quickly to future expiration dates.
The thinkorswim platform is best suited for more advanced options traders, with a variety of options selection tools and risk management. You can build your own technical studies from over 500 indicators in both the downloadable platform and its accompanying mobile app.
High-quality education, including live content on TDAmeritradeNetwork.com
Practice options trading strategies using a trading simulator
thinkorswim platform has terrific tools for selecting options strategies
Streaming data available on all platforms
Very high margin rates
The complexity of the thinkorswim platform makes some features difficult to find
Having options tools spread over two different platforms is inconvenient
E*TRADE (Power E*TRADE)
- Account Minimum: $0
- Fees: No commission for stock/ETF trades. Options are $0.50-$0.65 per contract, depending on trading volume.
Options traders at E*TRADE saw their analytical and charting tools expand considerably after the company’s acquisition of the OptionsHouse platform, which has been relaunched as Power E*TRADE. The platform includes streaming strategy options chains, a fairly unique feature. It also has education content that helps you grow from newbie to advanced options trader.
If you set up an iron condor strategy, for example, you can define how wide you want the spread to be, and only the relevant data will stream. A performance risk tool lets you evaluate your risk on an individual holding or your entire portfolio, so you can run a stress test based on six preset risk ranges.
The charting capabilities of the Power E*TRADE platform are much improved over previous E*TRADE tools. You can use the Technical Insights feature to learn about technical analysis. TradeLab includes spectral analysis charts, which forecast how a spread might behave in the future. The LiveAction scanners give you an up-to-the-second display of potential trades, based on your criteria, in real time.
Though you have access to a wealth of analysis and research on the classic E*TRADE platform, you'll have to toggle over to find those features.
Charting and forecasting tools in the Power E*Trade platform are top-notch
Customizable options chains and trading ladders
Very high margin rates
Multi-leg spreads incur an additional base commission charge
Charles Schwab (StreetSmart platforms)
- Account Minimum: $0
- Fees: Free stock, ETF and options trading commissions in the U.S., as of October 7th, 2019. $0.65 per options contract.
Schwab’s StreetSmart Edge, which you can access in a browser or by downloading to your desktop, has absorbed all of the tools and content created by optionsXpress, which Schwab acquired in 2011.
The All-in-One Trade Ticket helps you build a spread by selecting the type of trade you want to place from a drop-down menu and then picking the legs from the options chain display. The Idea Hub lets you browse possible options contracts sorted by market activity or potential profitability in four options-specific categories: big movers, earnings, premium harvesting, and covered calls. You can analyze the idea presented and then click on Trade to fill an order ticket.
This is a good platform for the emerging options trader, with plenty of support and education. The fees are on the low side as well. For more sophisticated options traders, a tool shows how a hypothetical transaction would affect your margin balance.
The Idea Hub in the StreetSmart platforms displays actionable trading ideas
Options-oriented trading lessons that grow with you
A wide array of asset classes can be traded on any of the available platforms
The proliferation of platforms scatters options selection tools in different places
Customizing portfolio analysis pages to display options-specific performance is clumsy
Margin rates are higher than average
- Account Minimum: $0
- Fees: $0.00 stock trades, $1.00 to open options trades $0.00 to close
A platform built for frequent options traders, tastyworks is the brokerage companion to tastytrade, a sassy financial news and education platform. There are three ways to access the platform: a powerful downloadable package, a website, and mobile apps. The firm charges commissions only for opening a position.
There are a few more bells and whistles in the downloadable version, but the others aren’t missing much. All of the tools are designed to get you focused on liquidity, probability, and volatility. Company founder Tom Sosnoff believes you should consider volatility your best friend when it comes to making profitable trades.
This brokerage opened in January 2017, so it’s not saddled with legacy systems that bog down many of the older brokerages. Executions are fast and the costs are low, especially with the pricing change announced in July 2018 that caps equity option trade commissions at $10 per leg. Though a newcomer to options trading might be initially uncomfortable, those who understand the basic concepts will appreciate the content and features.
Very stable platform
All the tools are accessible from a single page
The platform is focused on derivatives trading
Newcomers may be overwhelmed
Some asset classes are unavailable
Limited portfolio analysis
What Kind of Options Trader Are You?
The first and most important piece of information to consider before selecting an options trading account is what kind of trader you are. What is your trading style and risk appetite? Which tools would you like to have handy?
Options are complex products to understand and trade. All of the brokers listed above allow customers to build complex options positions as a single order. Some brokers, such as Vanguard and Robinhood, only allow one position per order, leaving it to the individual trader to place multiple orders one at a time to create a combination position. Merrill Edge lets you place two-legged spreads, but anything more complex will require an additional order.
If you're just getting started with options trading, the quality of education and help offered by your broker is important. Frequent traders and those who trade a large number of contracts will be more sensitive to commissions and fees, so check out your prospective broker's charges and make sure you understand them.
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