Best Online Brokers for Options Trading 2018

August 17, 2018 — 3:38 PM EDT

Options trading has become extremely popular with retail investors over the past 15 years. The key to this growth is that online brokers have greatly improved their education offerings around trading derivatives, and provide tools to help traders select and analyze their trades. 

If used correctly, options can help traders manage the overall risk in their portfolios while potentially enhancing their returns. 

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. Some options trades include multiple legs, which can get expensive on a per-trade basis, as it includes several base charges.

If you trade using margin – essentially a loan from your broker to purchase assets – options can help lower the amount you borrow. Investors with fairly large portfolios can take advantage of portfolio margining, a practice which assesses the total risk inherent in a portfolio that contains stocks and derivatives. The standard for determining how much margin you can use evaluates the requirements for each individual position. Sophisticated brokers who can calculate margin requirements in real time can offer portfolio margining. They also include tools that show how much a potential trade will affect your entire portfolio, including your margin balance. 

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.

Investopedia’s Top Online Options Brokers

 

See Full Interactive Brokers Review

  • Commission: $0.70 per contract, $1 minimum per trade
  • Account Minimum: $0
  • Best for Low-Cost

Open Account

Interactive Brokers had a long-standing reputation for low costs, a difficult platform and terrible service, and being geared only 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 a minimum of 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.”

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.

✓  Pros

 

❌  Cons

• No account minimum and no per-leg base fee.  

• 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.

• Margin rates are the lowest of all brokers surveyed.   • The web version of Trader Workstation lacks some of the powerful features of the downloadable platform.  
• Traders Academy has dozens of options-oriented lessons, which evaluate your progress with short quizzes at the end of each topic.   • Customer service is improving but still has a reputation for being lackadaisical.
• Options traders can set up a spread quickly and roll it to a future expiry with just a couple of clicks. At most other brokers, rolling a spread involves closing the current position and opening a new one, which is considerably more complex.   • Accounts with less than $100,000 in assets pay a minimum fee of $10/month if they don’t generate that much by trading.  
• IB’s Probability Lab lets you simulate a potential trade before using real money – a great learning tool for constructing options trades.    

 

 

See Full Lightspeed Trading Review

  • Commission: $0.60 per contract for monthly trades of fewer than 500 contracts. Scales as low as $0.20 per contract for monthly trades of over 100,000 contracts.
  • Account Minimum: $10,000 for Web Trader, $25,000 for Lightspeed Trader or LivevolX, portfolio margining available
  • Best in Professional Tools.

Open Account

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 skew data – not offered by other brokers.

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.

✓  Pros

 

❌  Cons

• Low per-contract commissions (with no per-leg base charge) keep overall costs low.   • High balance required to open an account, with an even higher requirement for LivevolX or the advanced Lightspeed Trader platform.
• Terrific order execution software generates price improvement, even on complex spreads, which can increase your profits.   • Lightspeed Trader platform has a minimum $100/month charge.
• An array of scanners in the Lightspeed Trader platform helps spot trading opportunities. These can help you locate market imbalances and mispriced options (as well as equities).   • Mobile and web-based apps do not allow futures trading or direct market access.   
• Extremely customizable advanced charting features.   • Limited educational offerings.   
• Livevol X platform has no monthly charge.   • Not the best spot for new options traders.   

 

 

See Full TD Ameritrade Review

  • Commission: $6.95 per leg plus $0.65 per contract
  • Account Minimum: $0, portfolio margining available
  • Best in Options Education

Open Account

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. The TD 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 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.

✓  Pros

 

❌  Cons

• Loads of high-quality education to get you started and help improve your skills.   • Higher-than-average commissions and per-contract fee. Multi-leg spreads incur an additional base commission charge.
• TD Ameritrade’s total offering allows you to trade a wide variety of assets.   • Very high margin rates.
• Practice your options trading strategies with a simulator before you put your own money on the line.  

• The complexity of the thinkorswim platform makes some features difficult to find.

• Tools for selecting options strategies, assessing their risk, and then rolling spreads to future expiration dates.    
• Nine hours of video webcast every trading day on TDAmeritradeNetwork.com, much of the content devoted to options strategies.    
• Streaming data available on all platforms, even with simultaneous logins on multiple devices.    
     

 

 

See Full E*Trade Review

  • Commission: $6.95 per leg plus $0.75 per contract
  • Account Minimum: $500
  • Best Trading Platform (OptionsHouse)

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Options traders at E*Trade saw their analytical and charting tools expand considerably after the company’s acquisition of the OptionsHouse platform. The platform includes streaming strategy options chains, a fairly unique feature. 

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 OptionsHouse 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.

✓  Pros

 

❌  Cons

• Charting and forecasting tools in the OptionsHouse platform are top-notch.   • Higher-than-average commissions and per-contract fee. Multi-leg spreads incur an additional base commission charge.
• Customizable options chains and trading ladders.   • Very high margin rates.
• Access to a wealth of analysis and research on the classic E*Trade platform.   • With the bulk of the options tools housed in the OptionsHouse platform, customers have to toggle to the E*Trade platform for some research and analysis.   
• Education content that helps you grow from newbie to advanced options trader.    
• Frequent traders qualify for lower base commissions.    

 

 

See Full Charles Schwab Review

  • Commission: $4.95 per leg plus $0.65 per contract
  • Account Minimum: $1,000, portfolio margining available
  • Best Customer Support for Options Traders

Open Account

Schwab’s StreetSmart Central platform has absorbed all of the tools and content created by optionsXpress, which Schwab acquired in 2011. Alternatively, you can download the powerful (and more complex) StreetSmart Edge platform to your desktop, and personalize your trading experience. 

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. You can analyze the idea presented, and then click on Trade to fill an order ticket. You can also close low-priced options for free.

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.

✓  Pros

 

❌  Cons

• All-in-One Trade Ticket guides you through the process of placing an options order.   • Multiple platforms: The proliferation of platforms scatters some of the options selection tools in different places. Consolidation would be an improvement
• The Idea Hub in StreetSmart Central, displays trading ideas in four options-specific categories: big movers, earnings, premium harvesting, and covered calls.   • Higher minimum initial deposit: Schwab requires a minimum initial deposit of $1,000, though you can open an account for $100 if you also commit to an automatic deposit of $100 per month.
• The Trading Education section of the Schwab website has options-oriented lessons that start with basic concepts and get progressively more complex.   • Portfolio analysis peculiarities: customizing the portfolio analysis pages to display options-specific performance is clumsy.   
• Fees are reasonable.    
• In addition to options, Schwab customers can access a wide array of asset classes on any of the available platforms.    

 

 

  • Commission: $1 per leg to open a position, $0 to close, cap of $10 per leg
  • Account Minimum: $0, portfolio margining not available
  • Best in Engagement Features

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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. 

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.

✓  Pros

 

❌  Cons

• A video feed from tastytrade allows you to follow trades of the hosts of the show.   • The brokerage does not offer any mutual funds, nor does it have a robo-advisory.
• The platform appears simple, but it can be customized to your heart’s content.   • There is no portfolio margining available.
• Great charting capability that keys profitability analysis.   • The platform is continually evolving, so you may log in one day and find your favorite tools moved.   
• Trades can be set up with mouse clicks or drags and drops, which helps prevent mobile device users from making errors.    
• Fees are very low, and all services are aimed at self-directed individual traders.    
     

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, risk appetite and, perhaps most importantly, how much money are you comfortable spending in fees?

Options are complex products to understand and trade. Some brokers may 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, while other brokers may allow placing a unified order to create the combined option positions in one shot.

An individual may simply wish to buy and sell the plain-vanilla call or put options. Others may be more inclined to create complex options strategies and combinations. Some intraday traders may want to get discounted brokerage access for high-volume, frequent trading, while others may be good with the buy-and-hold approach till the option expiry date. Identifying these points based on an individual’s trading style and needs will help them select the right brokerage plan at the right cost.

Depending upon what the trader needs, he should confirm with the broker which features and functionality are available and at what associated costs. Certain features may be necessary for an individual’s trading strategy. For example, payoff functions are commonly used by options traders but offered by only a few brokers. Hedgers may like to see a graphical display of option combinations while risk analysts may want readily available information on VaR and similar analytics.

Transaction costs, account minimums, trading interfaces (call-n-trade, online, mobile apps), website response time, customer support and the legalities of registration are general features to consider for any brokerage account. Individuals should be able to verify these details online and select the brokerage firm that offers the best possible fit.

About Our Methodology

At Investopedia, we started from scratch to build a better brokerage recommendation tool and objective reviews of self-directed brokerages. Our mission is to provide an unbiased and accurate analysis – so you can make smarter investing decisions.

We want to help find you the best online stock broker so we examined over 100 variables, from pricing and fees to trading platforms to special features. No single online broker was the best in every category, so you should review the complete list to identify the firm that best matches your priorities.