Trading Options gained significant traction over the past five years, particularly with retail investors. In response to the increased demand, the best trading options brokers now offer features once only available to the pros, combining amazing trading tools with low commissions and high-quality research tools.
Beginner investors and advanced active traders can now trade with options confidently thanks to risk management analysis tools that many brokers offer. We’ve looked into the best brokerages for options traders and found the following platforms offer the most value to investors. With options trading, brokers earn a much higher profit margin than on a stock trade, but competition is intense, which offers more opportunities for investors.
The
best trading options brokers offer low options contract fees, quality trading tools, an
abundance of high-quality research and the customer service necessary to
support everyone from beginner investors to advanced traders.
While
most of the brokers on our list of best brokers for stock trading would be a
good pick for options as well, this list highlights brokers that excel in areas
that matter most to options traders. Many of the below brokers also appear on
our list of best online trading platforms for day trading.
Best Trading Options Brokers
and Platforms in 2023
Charles Schwab
Charles
Schwab does so many things well, all while keeping a keen focus on what’s good
for the investor, making it a great selection for options. In addition to fair
pricing for options, Schwab also gives you fundamental research that should
prove valuable in selecting the options you want to trade. Add on fantastic
customer support and the highly regarded StreetSmart Edge trading platform, and
it’s hard to go wrong here.
Options commission: $0.65 per contract
Fidelity Investments
Fidelity
is neck and neck with Schwab on so many features, and it’s another solid pick
if you’re looking for an options broker. Besides options commissions that are
right in line with Schwab’s, Fidelity offers a solid customer experience, and
its Active Trader Pro platform is one of the tops among brokers. Investors also
like the fact that Fidelity doesn’t ding you for every little thing, unlike
many brokers, which helps improve the overall experience significantly.
Options commission: $0.65 per contract
Interactive Brokers
Interactive
Brokers has long been regarded as a place for professionals, and with good
reason. The broker to the pros offers three capable trading platforms, and it’s
well known for its ability to access virtually any security. Options
commissions start at $0.65 per contract with no base commission, and the fee
falls from there for truly high-volume traders (think 10,000 contracts or
more.)
Options
commission: $0.65 per contract, with volume discounts available
TradeStation
TradeStation
is another broker that caters to higher-volume traders, and its pricing
reflects this focus. You don’t have to trade thousands of contracts to achieve
a more attractive price than Interactive Brokers, and TradeStation offers
options trading at $0.50 to $0.60 per contract, depending on which account type
you select. That fee won’t get you fundamental research, but it does allow you
to access the broker’s Options Station Pro, a tool that evaluates and places
your trades.
Options commission: $0.50-$0.60 per contract, depending on account type
Ally Invest
Ally
Invest is a solid choice for those looking to reduce their trading costs. Like
much of the industry, Ally has reduced its commissions, slashing its options
pricing from a $4.95 base commission and $0.65 per contract to a simple $0.50
per contract, and you won’t need to be a volume player to get this
better-than-average price. Ally offers basic research and works well for those
traders who are existing customers of Ally Bank and prefer a consolidated
account.
Options commission: $0.50 per contract
Robinhood
If
low pricing is your biggest objective, then you’re likely to find Robinhood an
attractive broker. The trading app is well-known for its $0 stock commissions,
but it also offers the same for options. Traders will get an easy-to-use
interface on a mobile app that allows you to place trades intuitively, though
you can also use a desktop platform if that’s your style. What you won’t get,
however, is the same level of research and tools that many other brokers offer,
though you can upgrade your account to Robinhood Gold for additional reports.
Options commission: $0
Firstrade
Firstrade’s
low costs will appeal to options traders, with the broker charging no
commissions or contract fees. You can also trade stocks and ETFs
commission-free in one of the many accounts offered, including retirement
accounts and education savings accounts. Traders that are new to options may
benefit from Firstrade’s educational content, which includes articles and
videos that explain topics such as how to place a trade and how to generate
income using options.
Options commission: $0
TD Ameritrade
TD
Ameritrade offers a healthy array of features for options traders, including
its highly regarded thinkorswim trading platform and research from Morningstar
and Credit Suisse among others. If you prefer to perform your options trading
on mobile devices, the broker has you covered there, too, with its Mobile
Trader app that allows you to input complex multi-leg trades. TD Ameritrade
charges $0.65 per contract and doesn’t charge for option exercises or
assignments.
(Charles
Schwab has purchased TD Ameritrade, and will eventually integrate the two
companies.)
Options commission: $0.65 per contract
E-Trade brings research and solid trading platforms to the table, and has discounted pricing, too. The broker’s Power E-Trade platform offers technical studies and a snapshot analysis that lets you see the risk and reward on a trade. You’ll get almost the same functionality on the Power E-Trade mobile app, including the ability to trade multi-leg orders. The broker chops its per-contract commissions, too, if you make more than 30 trades in a quarter, not a particularly high hurdle.
Options commission: $0.65 per contract, or $0.50 for more than 30 trades per quarter
Before Getting Into
Options Trading
If you’re new to the options market, avoid jumping into it without fully understanding how these derivative products work and what the risks are by using them. Educate yourself about options trading by reading expertly-written books and articles — your prep can help to avoid pitfalls.
Plotting and reviewing payoff profiles for any options strategies you’re considering entering into also generally makes sense. This allows you to assess the upside and downside potential of an options trade and lets you know when you might need to anticipate or take evasive action after a market shift.
Frequently Asked Question (FAQ)
Q: How Much Money Do You
Need to Trade Options?
A: That depends on your broker and the type of options strategies you employ. In general, the minimum required deposit is less than $1,000 for level 1 (entry-level) options trading or as much as $10,000 for level 2 or level 3 options trading. Even if the required minimum is low, it's always a good idea to have at least $5,000 to $10,000 to start trading options.
Q: Can you trade options
with $100?
A: Yes, you can trade with a start capital of only $100 if your broker allows.
Q: Can you get rich off
options?
A: Options traders can profit by being an option buyer or an option writer. Options allow for potential profit during both volatile times, and when the market is quiet or less volatile.
Q: What is safest option
strategy?
A: Covered calls are the safest options strategy. These allow you to sell a call and buy the underlying stock to reduce risks.
Q: How can I trade
online without a broker?
A: All you need to do is contact a Depository Participant (DP). All Demat Accounts are backed by Central Depository Services India Ltd (CDSL) and National Securities Depository Ltd. (NSDL) and regulated by the Securities and Exchange Board of India (SEBI). So, they are entirely secure.
Q: Do you need 100
shares to sell options?
A:Since a single option contract usually represents100 shares, to run this strategy, you must own at least 100 shares for every call contract you plan to sell. As a result of selling (writing) the call, you'll pocket the premium right off the bat.
Q: Which broker has free
options trading?
A:Free options trading is like free
stock trading. It has some associated costs, like payment for order flow, or
PFOF. While many brokers no longer charge commissions on options trades, almost
all charge per-contract fees (including some brokers who claim to have
"free" options trading). The exceptions are Robinhood, SoFi Invest,
Firstrade and Webull, which charge no commissions or fees for options.
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