eOption is very clear on who it wants as a customer and how it intends to meet their needs. This online brokerage wants options traders who already know what they are doing to come over to their platform and enjoy a significant cost savings on options trades. This deep discount approach won’t appeal to long-term investors or beginners, but it does provide active options traders with low commissions and speedy executions. We’ll look at eOption's range of offerings to help you decide whether it is a fit for your trading needs.
- Rated one of our best brokers for low cost options trading.
- The browser-based platform is a customized ETNA white label program with additional options-oriented tools. There are no additional charges for data or streaming news.
- You can use a demo account to test eOption out for up to 60 days without funding an account.
- To address a recent uptick in online account funding fraud, eOption added Plaid to handle funding in a more secure manner.
Who eOption Is For
eOption targets options and equities traders who engage in the markets relatively frequently and who are comfortable with executing their own options strategies. The firm’s relatively low options fees are a draw for high volume options traders. Put simply, eOption doesn’t offer many bells and whistles, but it will help you trade a lot of options at a low price.
Offers great value for frequent options traders
The browser-based eOption Trader platform is easy to use
Newsletter subscribers can auto-trade their alerts
Limited education offerings
News feeds are limited
Any OTCBB (penny stock) trades must be made with a live broker
- Though eOption is one of the few brokers left that charges a per-leg commission for options trades, their per-contract fee is just $0.10. If you trade five or more contracts per order, eOption's fees will end up being lower than almost all other brokers.
- The browser-based platform is a customized version of the ETNA trading platform, and is very easy to use. The customizations are focused solely on options functionality.
- eOption offers an investment system called Auto Trading for executing trade alerts generated by third party newsletters chosen by the investor. Auto Trading executes your newsletter subscription trade alerts and enacts those trades based on parameters you've provided. It is worth noting that commissions are higher for Auto Trades.
- eOption is designed to appeal to sophomore-level options traders, so there isn't much available to help new options traders grow.
- Market news is light; you’ll probably need additional subscriptions to keep up on what’s happening.
- All penny stock/OTCBB transactions must be made with a live broker and there are no international offerings, forex, or cryptocurrency trading capabilities.
eOption has licensed the ETNA trading platform and customized it for their clients. ETNA is a white label software solution, meaning it is developed by a software company and licensed to online brokerages. The brokerages can customize the package and skin it to fit their brand, but the platform is managed by the developer in a software-as-a-service model. In practice, this means eOption Trader has the look and feel of a downloadable direct-access platform, but it runs in a browser.
eOption's tab layout makes the available tools easy to find. Click on the Custom tab and you can drag and drop widgets to set a page up the way you want. You can add an options strategy to a watchlist and OptionsPlay is integrated into the platform, which are good features for the advanced options trader. You also can position an order entry widget wherever you want it on the screen.
Unfortunately, the eOption mobile app isn't quite as friendly as the desktop HTML5 platform, but the look and feel are similar. While watchlists are shared between platforms, they are very hard to find on mobile. Moreover, the data on the mobile app does not stream. Research is quite constrained on the mobile app as well; almost all of the research sources are on the browser platform but not on mobile. That said, you can ask Alexa on your Amazon device for stock quotes if your hands are full, but that probably won’t satisfy traders looking for a fully mobile experience.
eOption's primary platform is the browser-based eOption Trader, but clients can connect to the trading engine (and associated commissions) using the downloadable DAS Trader or Sterling Trader Pro. The latter two platforms incur additional subscription fees.
In eOption trader, you can enter orders from the Trade tab or the Options Chains tab. All the costs of placing a trade, including exchange fees, are shown on the trade verification screen. This is an excellent feature because it gives you full cost transparency—more brokers should do this. You can enter conditional orders (one triggers another, one cancels another) on the browser platform but not on mobile app. Quotes stream on eOption’s browser platform, and there is a customizable ticker that runs across the top of the screen. You cannot stage orders for later entry.
Mobile Trade Experience
The eOption mobile app lets you close or roll an existing position with a couple of taps. You cannot put in a stop and a limit order at the same time on mobile, but you can build an options strategy in the order ticket. The eOption mobile app is sufficient for position maintenance while you're on the go, but you'll want the browser-based app on a computer for your actual trading session.
Range of Offerings
The main reason to become an eOption customer is to trade options strategies in large quantities, but clients of eOption can trade U.S. equities, options, mutual funds and fixed income. There are no futures, futures options, international assets or currencies, or cryptocurrency. Beyond that, investors can trade:
- Stocks long and short (approximately 1,500 on the easy-to-borrow list for short sales—a smaller than average inventory)
- OTCBB (penny stocks) only with broker assistance
- Mutual funds (~500 no-load, no transaction fee. ~8,900 total available)
- Bonds (Corporate, Municipal, Treasury, CDs)
- Simple and multi-leg options
On the eOption browser-based app, you can enter a variety of order types including conditional orders, trailing stops, and trailing stop limits. The order types are more restricted on the mobile app. You cannot select a tax lot when closing a position and the default is first-in-first-out.
eOption’s order router prioritizes price improvement. The router sends equity orders to multiple venues simultaneously and manages to attain $0.01–$0.02 per share in price improvement. eOption does not accept payment for order flow on equity orders. For options, the order router works its way sequentially through the exchanges and attains on average $0.11 per contract in price improvement while making $0.43 per contract in payment for order flow.
You can automate trading signals from a newsletter at eOption but can't backtest strategies on the platform.
eOption joined the race to zero fees for equity trading in Oct. 2019, but still charges a per-leg fee for options trades. That said, the per-contract fee is very low and heavy options traders will pay less overall with eOption than at its competitors. Clearing and exchange fees, typically a fraction of a penny per share, are spelled out on the order confirmation screen and are passed through to customers.
- No commission to trade equities or ETFs.
- OTCBB/penny stock trades must be placed with a live broker for $6.
- Options base commission is $1.99 per leg.
- Options per contract fee is $0.10.
- Fee for 50 or contracts (single leg) is $6.99.
- Fee for a 4-leg order of 10 contracts per leg is $11.96.
- Covered call trade of 500 shares plus 5 contracts is $2.49.
- Mutual fund commission for funds outside the No Transaction Fee program is $5.00.
- Margin interest ranges from 7.75% for $10,000 balance to 5.75% for over $100,000 as of January 2020. This is lower than average.
- Inactivity fee is $50/year. Clients with household balances of $10,000 or more and/or more than 2 trades in a calendar year are not charged the fee.
- Account closure fee is $0.
- Account transfer fee is $60 for a full transfer, $50 for partial.
- Voluntary reorganization is $50. Exercise and assignment fee is $9.
- Fee to send a wire is $30.
- No fee to send a paper check.
- Paper confirmations are $1 each. No fee for paper statements.
- Live broker fee is $6 per transaction.
How This Broker Makes Money From You and for You
The pressure of zero fees has changed the business model for most online brokers. In lieu of fees, the way brokers make money from you is less obvious—as are some of the subtle ways they make money for you.
- Interest on cash: eOption clients can enroll in cash sweep programs that pay a much higher interest rate than the regular interest offered for uninvested cash. The firm makes money from the difference between what you are paid on your idle cash and what they can earn on customer cash balances. The standard interest rate is more than most other brokers pay. The money market fund available pays a higher rate of interest but there are other brokers with fund that have higher returns.
- Stock loan program: eOption does not earn revenue loaning stocks in your account for short sales so there is no revenue to be shared with you.
- Payment for order flow: eOption doesn't engage in payment for order flow (PFOF) for equity trades. This is the practice where a broker accepts payment from a market maker for letting that market maker execute the order.
- Price improvement: eOption's order router prioritizes price improvement and the firm reports $0.01–$0.02 per share for equity trades.
- Portfolio margining: eOption clients cannot apply for portfolio margining, which can lower the amount of margin needed based on the overall risk calculated. Typically, portfolio margining works best for customers who trade derivatives that offset the risk inherent in their equity positions, and since this is an options-focused broker, it's surprising that it's not available.
- eOption does not offer portfolio margining.
- Clients cannot enroll in a stock loan program.
- The standard interest rate paid on cash balances is reasonable, and clients can enroll in a cash sweep program that moves idle cash into money market funds that pay more.
- Dividend reinvestment is not automatic. Clients can call the service desk to enroll in the DRIP program after purchasing a dividend-paying stock.
eOption offers clients several research amenities, free of charge, but here again it really only provides necessities. This spartan approach will work for the options traders, but other investors will not be impressed. There is no ETF-specific screener, but ETFs can show up in the stock screener results. There is no mutual fund or fixed income screener, no additional calculators or trading idea generators outside the screeners.
There is a Screener tab that includes 16 pre-set screens, and lets you set up customizable screens. You can't save custom scans. You can sort the columns that result from any screen and sort them, but you can't yet save the screen to use again.
eOption includes screeners from OptionsPlay, which allow you to look at their ideas or scan on your own idea. One nice touch is the ability to accept an OptionsPlay trading idea and put it directly into an eOption order ticket. At that point, you can hit Preview to edit the order ticket generated.
There are quite a few news feeds on the platform, though some link to premium sources that require an additional subscription. The browser platform scrapes numerous news sites—the list includes ApolloNews, Quote Media, PR Newswire, Canada Newswire, Business Wire, Market wired, GlobeNewswire, UPI, Market News Publishing, and Fly on the Wall. You tag the news sorter by topic, ticker symbol, industry, or person to bring in news about companies that you care about. If you click on an article, a new tab opens in your browser with the complete article.
There are links to Hammerstone research reports, but that is the extent of the third-party research.
eOption charts are powered by ChartIQ, Quote Media, OptionsPlay, and ETNA. You can link chart displays to watchlists so the ticker symbol changes when you click on a particular stock. There are about 30 technical studies available.
Positions and performance are displayed as a heat map, giving you a quick visual of your portfolio. You cannot consolidate holdings held outside eOption for a complete picture of your assets. Margin, buying power, and gains and losses are displayed in real-time; dividends and interest are updated overnight. Any advanced analysis will have to be done by downloading the data to Excel or by using another tool.
The education available from eOption all focuses on options trading. There are webinars hosted by the Options Industry Council and traders from OptionsPlay available. There are articles from Hammerstone Research that discuss the options trading outlook. You won’t find life stage planning tools or other long-term calculators. As mentioned, if you want to check the platform out before opening an account, you can use their Paper Trading tool set for 60 days at no charge. Customers with funded accounts have unlimited use of the paper trading feature.
- Phone line available Monday-Friday, 8 a.m.–8 p.m. Eastern time. Phones are answered very quickly.
- Online chat for current and prospective clients.
- Live broker available while phone lines are open .
- Residents of Austria, Australia, China, Germany, Ireland, Luxembourg, Mexico, Netherlands, New Zealand, Singapore, South Africa, Switzerland and the United Kingdom can open eOption accounts. Accounts can be opened with a minimum of $25,000.00 in any combination of US Dollars and/or US/foreign exchange traded securities. Some foreign securities may be ineligible.
eOption's security is up to industry standards:
- You can opt into two-factor authentication using a soft token for logging into the browser platform.
- The mobile app requires a user ID and password. The app was upgraded recently to allow fingerprint scanning or face recognition.
- Excess Securities Investor Protection Corporation (SIPC) insurance provided by Lloyd's of London. There is an aggregate loss limit of $150,000,000.
- No significant breaches were reported during 2019 by the Identity Theft Research Center.
Unlike many of its larger competitors, eOption is not trying to be everything to every investor in the financial world. eOption offers great value for options traders who are comfortable selecting their own trading strategies and that is the niche it intends to serve. Frequent options traders who trade large numbers of contracts per transaction will find low costs combined with useful strategy scanning tools. If you want to invest passively, trade forex or need hand-holding or a robo-advisor, this isn't the broker for you.
It is actually quite refreshing to see such a focused approach when most other online brokers are going for the widest possible market. Though competitors like Robinhood offer free options transactions, there are more useful tools at eOption to help you succeed and no unnecessary features that get in your way. Active option traders will definitely want to take a long look at eOption, especially if they are trading a lot of contracts. If this doesn't describe you, then there are many other online brokerages actively looking for your business.
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