Trading options can be a wildly profitable career! There are plenty of different options trading strategies, all with their own risk to reward ratio. If you’re curious what options trading is, and what the best options trading platform is – read on. We’ll address commonly asked questions, and review our top 5 best platforms for options trading.
Quicklook: Best Options Trading Platforms
- TD Ameritrade: Best All Around Brokerage
- E*Trade: Best for Active Traders
- InteractiveBrokers: Best for Low Fees/Commissions
- TradeStation: Best for Desktop Users
- Merrill Edge: Best for Beginners
Table of Contents:
- 5 Best Options Trading Platforms
- What Is Options Trading?
- How Does Options Trading Work?
- What to Consider With Options Trading Platforms
- The More Help, the Better
5 Best Options Trading Platforms
Let’s dive into the 5 best options trading platforms on the market today!
TD Ameritrade is by far the best all around brokerage. Not only has TD Ameritrade been in business a long time (so you know you’re working with a well established and reputable firm), TD Ameritrade also comes with a massive toolbox of tools and educational classes/information that can help take your trading and investing to the next level! Additionally, they have low fees and a beautiful app and desktop software.
Minimum Deposit: There is no minimum deposit to open an account with TD Ameritrade. However, you’ll need to deposit $2,000 to be considered for a margin account, and obtain certain options privileges.
Options Contract Fee: There is a $0.65 fee per options contract.
Standout Features: The standout feature of TD Ameritrade must be how powerful and informative their platform is! From novice trader to expert, TD Ameritrade has it all!
- TD Ameritrade offers a wide range of educational material
- There are no trading commissions
- The $0.65 options trading fee is aligned with other competitors
- Their desktop and mobile platform is powerful, fast, organized, and capable of doing advanced trading and analysis
- TD Ameritrade offers customer service in a variety of forms, including live chat and phone support
- Considering how advanced TD Ameritrade platform is, it will require some time to adjust to
- You cannot trade or invest in any cryptocurrency with TD Ameritrade
- TD Ameritrade does not allow you to directly invest in international markets
E*Trade is one of the best options trading platforms for active traders. E*Trade is owned by Morgan Stanley, which is an iconic name in the world of investing and trading. This platform is well respected for their low fees and outstanding customer service. Additionally, E*Trade offers a wide range of account types.
Minimum Deposit: There is no minimum deposit requirment to open an account, but you must fund the account within 30 days to keep it active.
Options Contract Fee: E*Trade offers some of the lowest option contract fees in the industry. You can trade equity and index options for $0.50 per contract and futures options will cost you $1.50 per contract.
Standout Features: As an options trader, the feature that standouts the most is simply how low their fees are per contract. A few cents can make a large difference depending on how many contracts you’re trading, and E*Trade is $0.15 – $0.25 cheaper than their major competitors.
- Their mobile app is fast, organized, and powerful
- E*Trade has great customer service
- There are also a wide range of tools that you could use to help you make trading decisions
- Their website can be complex and difficult to navigate at first
- Robo advisor can be expensive and can erode your profits
Interactive Brokers is a well known and respected trading and investing platform. Interactive Brokers has a global reach, and still maintains low fees and commissions. If you want to trade internationally at a low cost, look no further. Interactive Brokers may have all that you are looking for.
Minimum Deposit: The minimum deposit depends on what type of account you open. A broker account will require a $10,000 minimum deposit. Whereas a standard account, or joint account, will not have a minimum deposit requirement.
Options Contract Fee: Interactive Brokers has some of the lowest fees in the industry. You can trade option contracts for as little as $0.15 per contract!
Standout Features: The standout feature of Interactive Brokers must be their worldwide exposure. You can invest in 135+ international markets spread across 33 countries. In addition to the international exposure, their fees are incredibly low!
- There is tremendous international exposure with Interactive Brokers
- Their fees are some of the lowest, if not the lowest, in the industry
- Interactive Brokers has advanced tools and analysis software
- Their software is complex. You will certainly need a training session, or two, before you are comfortable diving into their platform.
- Although their fees are amongst the lowest in the industry, the fees are also contingent on a sliding scale. The more you trade, the less expensive the fees become. But if you’re trading infrequently, the fees are on par with other platforms.
TradeStation was founded in 1982. Today, TradeStation has become a common option for traders. Not only can you trade stocks, bonds, mutual funds, and options, you can also trade cryptocurrencies, which is becoming increasingly more popular.
Minimum Deposit: TradeStation offers two different account types. The standard account does not require a minimum deposit, however, their TS GO account requires a $2,000 minimum deposit.
Options Contract Fee: TradeStation is transparent with their fees. You will pay less fees or commission if you have a TS GO account. You can trade an options contract for as little as $0.50.
Standout Features: TradeStations desktop platform is second to none. Everything is beautifully organized, and there are an endless amount of tools available to you if you want them. The investor resources TradeStation provides makes it one of the best option trading platforms on the market today!
- If you have $2,000 for an opening deposit, you will receive discounted commissions and fees
- TradeStation provides a wide range of investor resources
- All of their fees are transparent, nothing will catch you by surprise
- Foreign exchange markets are not available
- Their customer service is not highly ranked or respected as alternative options
Merrill Edge is a Bank of America company. With Merrill Edge, you can invest in a variety of markets, and receive advice from their investment team. Not only that, you can keep all of your banking under the Bank of America roof, which helps organize all of your finances.
Minimum Deposit: There is no minimum account deposit.
Options Contract Fee: You can trade options with a $0.65 fee per contract.
Standout Features: Merrill Edge is a great option for beginners. Their software isn’t overly complex, yet, you can still execute trades and investments. A Merrill Edge financial advisor would be happy to work with you to help you develop a financial plan if you ever needed professional advice.
- Merrill Edge is backed by Bank of America, a well known and respected bank
- You can combine all of your finances under one roof – from mortgages, car payments, credit cards, checking accounts and investing accounts
- You can work with a financial advisor at Merrill Edge to help make sense of the investing world and develop a personal financial plan
- Merrill Edge is not for advance traders
- Their platform is limiting, and leveraging technical analysis or other investing/trading tools is few and far between
What Is Options Trading?
Without question, options trading can be intimidating. Options are their own asset class, and trading options is not the same as trading stocks, bonds, currencies, or mutual funds.
An option is a contract provides the buyer with the right to buy or sell the asset at a specific price, either on or before a specific agreed upon date. Note, the buyer has the right to execute the trade, but they are not obligated to. An option trade could be a year in the making, or it could be executed intraday.
How Does Options Trading Work?
Options trading can best be understood when you break it into three different steps.
First and foremost, the options trader must decide whether they are buying a call option or a put. If the trader believes the price of the asset class is going to increase, they purchase a call option. If they believe the price is going to decrease, they’ll go with a put option.
Secondly, the trader needs to predict where they believe the price of the asset is going. For example, if the trader is trading options in an underlying stock, they need to predict the future price of the stock. For example, if the stock is currently trading for $50/share, the trader needs to do analysis to determine where they believe the price per share will land at a future date.
Speaking of a future date, that’s the third step to trading options. Unlike stocks, options are time bound. In order to make money with an option, your prediction must come through by the expiration date of your option.
What to Consider With Options Trading Platforms
If you’re interested in trading options, you’ll need to use an options trading software that matches your needs, goals, and preferences. Keep the following characteristics in mind when selecting the best options trading platforms.
Ease of Use
First and foremost, the options trading platform should be easy to use. By no means does easy to use suggest you can’t do advanced analysis, but the software itself shouldn’t be complicated or disorganized.
A learning curve is given when beginning to use any new type of software, however the platform you choose to trade on should be compatible with the level of trader you are.
Fees and Commissions
You will also want to be very mindful of the fees and commissions associated with using the platform, or executing trades on the platform. Trading fees and commission can quickly erode your profitability, so keep that in mind when picking a platform. Some options trading platforms come with high fees, whereas others pack a strong punch with minimal fees.
Having the right tools to do the job correctly is applicable in any trade. The same applies for options trading. The software or platform you go with should come packed with investor tools that can help you complete analysis’, set up watchlists, and execute your trades.
Desktop and Mobile Options
Technology continues to advance and make trading/investing more accessible to the public. Gone are the days where you need to sit in front of a computer screen all day long to monitor your investments. The best options trading platforms will support both desktop and mobile trading.
Last but not least, you’ll want to make sure the options trading platform has a strong customer support team. You never know when you’ll need to contact the team, or need support troubleshooting something. Waiting on hold for a long period of time, or not being able to reach a human can be incredibly frustrating.
The More Help, the Better
Managing your personal finances and investments can be extremely difficult to do. Not only does this require a great deal of time, you also need to know what you’re doing so you do not over invest, or take on too much risk.
Trading options can be incredibly complex, even if you are using the best options trading platform. The best way to hit your financial goals is to work with a financial advisor. Financial advisors will help manage your risk, develop a plan to reach your goals, and ensure you are adhering to a financial budget. The more help you have, the better, and the quicker you’ll reach your financial destination.
Frequently Asked Questions
Options are just a different asset class than stocks. Investing or trading in one or the other is not necessarily better, it is entirely dependent on your goals and risk tolerance.
Before you start trading options, be sure to educate yourself on various strategies. Develop a plan, learn how to navigate your options trading platform, and execute your first trade.
All investing has an associated risk with it. With that said, options trading is considered a higher risk than other investing strategies.