You already know that options trading is becoming more and more popular. That’s because you can earn with options during both a bull and a bear market.
Now that you’ve decided to expand your portfolio by including options, it’s time for you to take a look at options trading brokers and choose an options platform.
Luckily for you, our Wall Street veterans have already found the best choices and shared them with you in this article. Without further ado, let’s begin!
Best Options Trading Brokers
- TD Ameritrade
- E*TRADE
- Webull
- Fidelity
- Interactive Brokers
- Tastyworks
Overviews
TD Ameritrade - Best mobile options trading
We believe, and many options trading review platforms agree that TD Ameritrade offers some of the best options trading brokers on the market. Plus, this is a platform that can suit beginners and advanced options traders.
It’s good for beginners because it has easy-to-understand pricing. The platform provides various types of educational content and tools. The material is available in various formats and covers, including tutorials, podcasts, videos, webinars, and much more.
Advanced investors can benefit too. The platform’s tools are sophisticated, fast, and follow the latest trends. The trader can access TD Ameritrade through a browser and download a mobile app for on-the-go trading.
Regarding the user interface, TD Ameritrade offers possibly the best mobile app. Everything you’ll need is a few taps away.
TD Ameritrade includes an income estimator, portfolio planner, RMD calculator, IRA selection tool, retirement calculator, portfolio analysis, etc. Besides many tools, the options screener and the options strategy builder are great for options traders.
Price
- No minimum deposit
- $0.65 per contract
E*TRADE - Best educational catalog
E*TRADE is yet another fantastic options trading platform. The best part of this broker is that it’s suitable for beginners and includes various advanced tools for advanced traders.
E*TRADE offers both a web-based platform and a mobile app. The Power E*TRADE is a fantastic choice for options traders, as the platform provides impressive charting capabilities and features.
With this platform, you can access graphics on the maximum profit or loss and the breakeven of a particular multi-leg position. However, the Power E*TRADE isn’t the only perk you can get from this broker.
The reason why it’s suitable for beginners is that it offers a vast educational catalog. The web-based platform and mobile app have an excellent user interface, analysis tools, and screeners.
For instance, the Live Action tool on the Power E*TRADE platform specializes in identifying any unusual activity of the options and volatility in the market.
Another tool, the StrategySEEK Tool, helps identify the trader’s criteria, such as the strike price, timeframe, investment amount, etc.
Price
- $0.65 options contract fee; $0.50 for 30+ trades per quarter
- No minimum deposit
Webull - Cheapest broker
Webull is considered one of the best, if not the best, low-cost options trading brokers on the market. However, it’s important to mention that this is not the most beginner-friendly broker.
The reason why Webull is more suitable for experienced options traders isn’t that the platform is complicated for beginner traders. The platform’s learning center doesn’t offer educational content on portfolio management and trading.
Nonetheless, you can still access instructional material, such as text and screenshots, to help you learn how to use the platform. Additionally, the mobile app comes with numerous charting tools, alert settings, and reporting features you can use for free.
As mentioned above, the broker's cost is the biggest advantage of using Webull. You won’t have to pay fees per options contract, and there are no exercise or assignment fees.
Plus, like with most of the options trading brokers, there isn’t a minimum deposit requirement you have to meet.
Price
- No fees per contract
- No minimum deposit
Fidelity
We have a broker that works for experienced and new options investors. Fidelity provides its clients with three platforms and a mobile app through which the broker offers a comprehensive number of tools.
Fidelity operates through Fidelity.com, Active Trader Pro, and Fidelity Mobile for options trading. The Active Trader Pro includes numerous tools and features that provide a seamless trading experience.
You can use the real-time analytics tool for tracking trading opportunities or the Trade Armor tool to define strategies and check the trade’s potential risk.
The platform also includes an all-in-one daily dashboard with real-time news and announcements so that you stay informed.
When it comes to supporting beginners, Fidelity is a good choice to consider because it provides extensive educational content. The broker shares materials in various formats, such as articles, webinars, infographics, videos, etc.
Price
- $0.65 per options contract
- No minimum deposit
Interactive Brokers
Interactive Brokers is a part of our list since it’s one of the most comprehensive platforms for investors. The broker offers two web-based platforms and three mobile applications. Each of them has a different role.
The Trader Workstation is designed for traders who need flexibility and access to various products. The platform offers portfolio management and charting tools.
The mobile app is nearly the same as the platform. It’s a good choice for trading while on the go because it has an easy-to-use interface.
One of the advantages of using Interactive Brokers is the ability to research and stay in touch with market events. The platform offers various research features, but not all of them are free.
For instance, the news feature is free and provides reports 24/7 from Wall Street, Dow Jones, etc. This feature also includes information about whether the investors are bearish or bullish about a specific stock.
Another beneficial feature is the market scanner which can help you find investments based on your specific parameters.
Price
- $0.65 per options contract
- No minimum deposit
Tastyworks
We have one of the most widely-known options trading brokers for experienced traders. Tastyworks' set of tools matches the needs of investors who are interested in trading derivatives.
Even though all brokers in this list have comprehensive tools for options brokers, Tastyworks offers some of the most advanced tools for this trading type. That’s because the platform was created with the options trader in mind. The tools are crafted to help you analyze and monitor the options market so that you don’t miss anything important.
For some beginners, Tastyworks is an overwhelming platform. Still, it offers a free learning center with vast content. You can find valuable information and educational content for free and educational events.
Traders can benefit from many tools and features inside Tastyworks, such as the charting tool that’s available on the web-based and the mobile app.
Also, traders can use calculators specifically designed for options and the options screener for analyzing trades.
Price
- $1 for opening options trades ($0 to close)
- No minimum amount
What to Consider When Choosing an Options Platform
As a trader looking to expand their portfolio to include options, you’re probably wondering what to consider when choosing an options platform.
You should remember that looking for an options platform differs from searching for a stock platform. However, the truth is many brokers offer diverse platforms so that traders can trade various assets at the same place.
When choosing an options broker and platform, you should first consider the cost you’ll have to pay to use the services. Besides the service costs, you may also be required to show a certain amount of money to be able to trade.
For beginners, it’s crucial to find a platform with educational resources. This is something you should carefully research if you want to improve your trading skills and knowledge.
Choose a platform that offers various articles, videos, webinars, infographics, etc., or has a trader community where you can meet other traders and discuss options topics.
The platform’s functionality is also very important. You want to choose one with various tools and features, such as scanners, market monitors, market analysis tools, calculators, etc. Therefore, you’ll have a user-friendly trading experience.
Do You Need an Options Trading Broker to Trade Options?
Yes! You must have an account with a brokerage company to trade options. First, check if the broker platform you’re using for other financial instruments supports options, as many platforms work with various assets.
However, to find a new platform, you should consider several factors to make the platform suitable for your options trading strategies.
You should remember that choosing an options platform is a two-way process. You’re not the only one that will research the service to make a choice. Once you select a platform, you have to apply for trading options and wait for the approval.
This means that the broker has to review your application before permitting you. The platforms have several eligibility criteria determining whether they’ll allow a new options trader to enter.
What Criteria Should You Meet to Trade Options?
As we mentioned, all investors looking to expand their portfolios to include options have to apply for an account at a brokerage firm of their choice. The brokers have various eligibility criteria you have to meet to create an account.
In your application, you’ll have to provide personal and financial information. The broker reviewing your application needs to know whether you have trading experience. You may have to share how often you trade and which strategies you use.
The trading experience is one of the most important factors brokers consider when granting new options traders permission.
Other details you’ll have to provide are income information, growth, employment information, and the types of options you want to trade. You can also include the trade level you prefer.
After reviewing your application, the broker may allow you to trade options. Based on your information, the broker will assign you a trading level that may be the one you requested or lower. If the broker doesn’t approve your requested trade level, you’ll be able to trade using a restricted account. Then, you can reapply.
How Much Money Do You Need to Trade Options?
While options trading may be more complicated than buying and selling stocks, the advantage of this asset is that you don’t need much money to start.
Look at it this way: The option's underlying asset is a stock currently trading at $100. You need $100 to buy one share of that particular stock or $10,000 for 100 shares.
Let’s say that the price of an option on the same underlying asset costs $1.2 (the price of the option premium). You’ll have to buy a $120 options premium for 100 shares of the underlying.
Now, a call option will give you the right to buy those 100 shares. But you’re not obligated to buy the stock if you don’t want to. Do you see the difference?
So, to answer your question - you can start trading options with just a few hundred dollars. Of course, this is the technical view of the process. You should always remember that you’ll have to pay commissions or trade fees per share or contract.
Generally speaking, $1,000 is the minimum amount, and that’s for entry-level trading. However, this varies from level to level, and you may need much more money for higher-level trading.
What Is the Best Options Strategy for Beginners?
Long calls and long puts are considered the best strategies for beginners. That’s because you don’t have to plan multiple actions, and you don’t have to buy and sell options contracts simultaneously.
Going long on calls and puts means you buy a call or put option when you think a particular asset will move up or down. The best part of buying these contracts is that you can buy or sell 100 shares of the underlying, but you’re not obligated to exercise the contract.
Is Options Trading Better Than Stocks?
There are pros and cons on each side. The good part is that you can use both as a part of your portfolio and take advantage of their strong sides.
The main difference between stocks and options is that with stocks, you own an equity stake in a business, while options don’t represent ownership but give you the right to buy it.
Another difference is the price. For stocks, you need an amount equal to the stock’s price, while options require a lower initial capital.
Options trading is better than trading stocks if we consider the costs. Even though you buy the right to buy the underlying with options, you’re not obligated to buy it. So, you won’t need the same amount of money you’ll need to buy shares.
However, the value-time relation is much more important for options than stocks. You need trading experience to buy options because you have to determine the asset’s direction, the strike price, and the timeframe during which the asset will hit the strike.
Conversely, the loss is smaller with options because you can lose only the amount you paid for the premium. The stocks may lose their value, bringing way bigger losses.
How to Trade Options Effectively
As we discussed, you must apply and get approval for an account to start trading options. If the broker approves your request, you can start trading.
Now, at this point, you have to research the market carefully and look for stocks or other assets that have a bigger public interest. If the stocks have a limited public interest, they can’t support an options market.
That said, you have to choose options that can be bought or sold easily, or in short, are liquid. This is an important step. Therefore, many options traders use option-alert services, like FoolProof Options, to receive notifications on the market’s movements and news.
If you want to stay alert, you should definitely check Foolproof Options offers because the platform is affordable and sends comprehensive alerts on the trades that can be beneficial for you.