If you already understand options theory and some basics of their inner workings, you’re probably looking to put your knowledge to the test. Well, if you want to learn how to trade options, one of the first steps is to find the right broker. A lot of our new clients ask, “What’s the best options trading platform?” Well, the answer is that there are several options to choose from, and each comes with different benefits. When you’re selecting a broker, it should fit your wants and needs. That said, let’s look at some options brokers so you could get started on your road to learning how to trade options.
Choosing a Broker
Before you even throw on an options trade, you’ll need to select the right options broker. A brokerage platform is the tool that you use to buy and sell securities. However, many online options brokers also offer lots of different add-on tools, from research libraries to information about investment strategies. Now, there are a lot of brokers out there, but you need to find a trusted one with all the necessary tools. Remember, don’t just go out an open an options account and throw on trades for the hell of it. You should trade with a community or mentor so they could guide you along the way when you’re first starting to trade options.
I use TD Ameritrade to trade options. TD Ameritrade has a great reputation and is regarded as one of the best brokers for options by many traders, both the pros and those who trade in their spare time. I love it for options trading because it’s easy to use and I could trade from pretty much anywhere. TD Ameritrade does not charge any platform fees and there aren’t any trade minimums. Moreover, its pricing is straightforward and costs $6.95 per options trade and 75 cents per contract. Keep in mind those are the fees when you trade on the app or platform. If you use a broker or its Interactive Voice Response (IVR) phone system, it would cost $44.99 per trade and 75 cents per contract, and $34.99 and 75 cents per contract, respectively.
With the thinkorswim platform, you can trade multi-leg options, stocks, futures, and forex, anytime, anywhere. The platform offers a customizable options chain, as well as other useful tools. Moreover, if you need to sell or buy options and you’re not by your computer, you could easily trade using their mobile app.
For example, there was one day I was off the desk, but was sitting in some hefty profits. I just hopped on their mobile platform and sold my position.
Now, this is a trusted options broker, but just because a lot of traders and investors use it, it doesn’t necessarily mean you should use it. Before choosing the options broker platform that you’ll use for your trades, make sure it actually has everything you want. Remember, you need to conduct your own due diligence and see if this platform and broker offers the needed tools. Additionally, you should be okay with paying these trading fees.
E*Trade is another widely-used broker for trading options that is considered one of the best brokers for options. There are even some gurus at Raging Bull using this platform. For options, it offers a web platform and OptionsHouse. There are a plethora of tools to help with options trading. For example, you can find potential opportunities easily.
There are fundamental company information and research, as well as charting tools.
Similar to TD Ameritrade, it offers a stock screener, charts, options chain and a tool to view different options strategies.
Here’s a look at E*Trade’s fee schedule.
Again, be sure to do your own due diligence if you’re looking to pick E*Trade as your broker.
Interactive Brokers has some of the lowest trade commissions and margin rates of all the options brokers. Moreover, it’s got a professional-like platform. That makes it one of the best options trading platforms for experienced traders.
Here’s a look at the broker’s fee schedule.
Now, Interactive Brokers offers various products. Here’s why some traders opt for this options broker platform.
- Client Portal – This tool is suitable for new clients, traders and investors who want an easy way to trade with 24/7 access. You’re able to check quotes, place trades, view account balances, P&L and performance metrics.
- Desktop TWS – This platform is designed for active traders and investors who are trading multiple securities, such as stocks, options and ETFs. Its got advanced order algorithms and trading tools.
- IBKR Mobile – You could easily trade and monitor your options on the go from your iOS or Android device.
Here’s a look at Interactive Brokers’ desktop platform.
Source: Interactive Brokers
This options broker platform provides research, news, market data, real-time monitoring, algos and trading tools, and risk management just to name a few.
When you’re learning how to trade options, one of the first steps to actually putting on a real trade is to choose a broker that fits your needs. There’s no one-size-fits-all options broker; rather, the best options trading platform for you will depend on your level of experience, as well as your needs and personal preferences. Now, these three options brokers are among some of the most popular, because they cater to a wide variety of needs and they’re easy to use, both for amateur options traders and for the experts. But keep in mind, if these don’t suit your needs, you have to do your own due diligence until you find a good fit.
Jeff Bishop is lead trader at WeeklyMoneyMultiplier.com and widely recognized as the Mensa Trader. He runs short-term trading strategies, using stocks, options and leveraged ETFs.