If you’re new to option trading or looking to make a switch to a new platform, there are many to choose from. Each broker has its own unique set of features, so make sure the one you’re considering supports options before you get started. Your specific needs might be different from someone else’s, so here are some things to consider when selecting options trading platform.
- First, make sure you sign up with a reputable bank; this will be the same for all investors. Do not sign up for Joe Bob’s Trusty Investments or another bank that is not well known. They may charge you less per trade, but trades are cheap anyway. Saving a dollar per trade in exchange for putting all your money at risk with an unknown bank is a bad idea. Many quality well-known banks charging zero transaction fees and $.65 per option contract. There are more affordable options brokers out there, but these smaller discount brokerage companies have been plagued with system crashes and other bugs. As cheap as transaction fees are today, it’s just not worth it to try to save yourself $100 a year and expose yourself to these other risk factors, so go with quality.
- A responsive support team can be an asset to most. When you call your broker, do you go through an automated system for ten minutes before you get to a real person? When you finally get someone, how well do they assist you?
- Does the investment bank support what you want to do? Options trading is more risky, so make sure they allow it and will allow you to trade options. There are five levels of option trading, which are the following:
Level 1: Covered call writing of stock options.
Level 2: Everything that is in level 1, plus purchases of calls and puts, selling of cash covered puts, and buying of straddles or other combinations.
Level 3: Everything that is in levels 1 and 2, plus spreads, covered put selling (writing puts against stock trades that has been shorted), and reverse conversions of stock options.
Level 4: Everything that is in levels 1, 2, and 3, plus uncovered selling of stock options, uncovered selling of straddles or combinations on stocks, and convertible hedging.
Level 5: Everything that is in the previous levels, plus uncovered selling of uncovered writing of straddles or combinations on indexes, index options, covered index options, and collars and conversions of index options.
Make sure you can get approved for your desired level. For most beginners, level 2 should be adequate, but ultimately level 3 is where you want to be. No matter your skill level, make sure you do not do anything uncovered until you feel very conformable with options trading.
Other things to consider when looking for an online broker should be:
- Do they have a quality interface that easily allows you to navigate, get real-time quotes, news, and make trades quickly?
- Do they have talented bankers with good trading ideas? Ultimately this last one is good, but not very important. I worked as an investment banker for a short time before leaving that side of the industry and becoming a market maker. I can tell you first hand there are plenty of people in the investment banking industry who sound and act like they know what good investment ideas are, but they do not.
- Don’t rely on someone else, especially a stranger, to make your decisions for you. If they give you good ideas, sure that is fine, but check those investment ideas out for yourself and make sure you like what you see before putting your money into it.
Here are our reviews of the most popular platforms at this time:
The interface is super easy to use and does everything I want, plus their Thinkorswim desktop platform is also the best options trading software in the industry. If, in the event of a problem or need of help, their support staff is excellent, and when we opened our account, we were approved for level 5 options trading within one day.
TD Ameritrade charges zero dollars per trade plus $.65 per contract trade options. They require a $2000 minimum deposit to trade options.
Beginning to advanced traders flock to TD Ameritrade as their tools and resources are second to none.
Tradier Brokerage is specifically designed with option traders in mind. Their options trading software TradeHawk is an advanced, full-featured stock and options trading platform that gives traders more advanced and conditional order options.
TradeHawk sets itself apart by offering one low monthly subscription price, giving traders the ability to trade unlimited option contracts and stock trades. For traders doing a large number of trades, specifically option contracts, the savings can be substantial.
The software is relatively easy to get the hang of once you get into it. The robust platform is filled with chat rooms, news, charting, and several other features that allow traders the ability to manage multi-leg option trades from open to close.
Charles Schwab has been giving traders an excellent experience for decades. Their options trading software StreetSmart Edge is easy to use and a great experience on all types of devices. They are one of the top brokerages in the world for a reason.
Schwab charges zero dollars per trade plus $.65 per contract trade options. They require a $1000 minimum deposit to trade options.
One of the best benefits of Schwab is that they have an extensive library of educational content to help traders of all skill levels, making them a worthy consideration for any trader looking to get in options.
As the oldest online broker, E*TRADE has a highly built-out system to support both beginner and expert traders alike. Through its OptionsHouse platform, traders are able to access a vast amount of research and tools to push their investing skills to the next level.
E*TRADE charges zero dollars per trade plus $.65 per contract trade options. They require a $5000 minimum deposit to trade options.
E*TRADE is a perfect fit for the casual or modestly active options trader. They have excellent tools in a sleek layout perfect for the new investor who is interested in learning how to trade options.
Fidelity is an excellent choice for beginning and expert traders looking for cutting edge research and trading tools. They are known for their top notch research reports and high-caliber customer support to maximize their customer’s portfolios.
Fidelity charges zero dollars per trade plus $.65 per contract trade options. They require a $2000 minimum deposit to trade options.
The highly responsive company offers the perfect mix by providing Active Trader Pro, their easy-to-use platform, along with a wide range of trading tools and market research.
Ally Invest is an excellent choice for a beginning options trader. The platform is user-friendly and comes with plenty of tools, including charts, data, and analytics, to help new traders understand the art of options trading.
Lightspeed charges zero dollars per trade plus $.50 per contract trade options with no account minimums.
Ally Invest is geared for the beginning option trader, but experienced traders alike will also get massive value from the options trading platform.
Merrill Edge is owned and operated by its parent company Bank of America, which is renowned for its high-quality customer service, delivering both educational insight and market research to help clients achieve next-level trading success.
Merrill Edge charges zero dollars per trade plus $.65 per contract trade options. They require a $2000 minimum deposit to trade options.
Merrill Edge MarketPro is not as well-known of a trading platform as many others on the list, but customer satisfaction remains high, and customers are able to combine their Bank of America account with their Merrill Edge account to earn all sorts of perks through the Bank of America rewards program.
This is a company that has been very popular among professional traders, but in 2019 they launched their new product, IBKR Lite, for average traders.
IBKR Lite charges zero dollars per trade plus $.65 per contract trade options, but they have a $1 minimum per trade. So, if your trading, only one contract will get charged $1. They require a $2000 minimum deposit to trade options.
Interactive Brokers have always been a solid choice for professional traders doing large-volume. Now with IBKR Lite, the beginning investor has a platform with Interactive Brokers. However, beginners might be better off by using a more handholding broker that provides additional resources and support.
Lightspeed is a lesser-known broker with a higher focus on active traders. Even though they are not as mainstream as some of the other brokers on the list, they offer a professional options trading platform called Livevol X, which provides traders with fast execution and detailed analysis.
Lightspeed charges zero dollars per trade plus $.60 per contract trade options. They require a $2000 minimum deposit to trade options.
Lightspeed is not necessarily the best choice for beginning traders, where it lacks in user-friendliness; it makes up for with powerful tools. If you’re looking for a platform that is affordable and powerful, Lightspeed might be a great option, just be prepared for a steeper learning curve.
Trade Station is a top choice for more seasoned traders. They initially launched their platform only to institutional brokers, but later expanded their platform to individuals.
Trade Station charges zero dollars per trade plus $1.00 per contract to trade options with their per contract pricing option. They require a $2000 minimum deposit to trade options. Failure to meet the balance requirements or the five trading year minimum results in a $95 annual fee.
While Trade Station is an excellent choice for advanced traders, it extremely lacks any features that would draw in a beginning trader.
Robinhood took the investing industry by storm by introducing the cheapest platform on the planet, totally free trading. The benefit of free trading is that you can buy and sell options, and you don’t have to pay any transaction fees. This is drawn in a vast number of traders, especially beginning traders, to the stripped-down trading platform.
At first, Robinhood might seem like the way to go. After all, who doesn’t like free? But what you start peeling back the layers, free trading can cost you more than you could possibly believe.
Robinhood doesn’t offer much when it comes to education and tools, but what’s worse is their platform isn’t sophisticated enough to make advance option trades. Mixing options together and how smart traders trade, but Robinhood platform can lock traders out due to its inability to calculate risk appropriately.
In addition, on days with high-volume Robinhood’s system crashed. What good is a brokerage account if you can’t even trade on the days that matter most?
In today’s trading environment, trading is cheap anyway. Don’t try to save yourself a measly hundred dollars a year in transaction fees in exchange for a horrible user experience, which is precisely what you’re likely to get with Robinhood.
Trade with Confidence
If you want to make trades with high probabilities of success, it is recommended to have an experienced trading coach with substantial experience with options. Having a professional options trader in your corner will allow you to see exactly how a seasoned veteran trades, what they look for, and the factors that really matter. Make confident and decisive decisions that will allow you to take your trading game to the next level. Here investors are able to achieve trades that have a huge probability of success, while at the same time, defining an acceptable level of risk. Click here to apply expert research to your own portfolio.