In this article, we share the Best Brokers for options trading in 2021. Starting in options trading can be an overwhelming experience. Our guide should make your start much easier. We’ve listed the best and easy-to-use trading platforms. We assessed the platforms based on the tools, order types, commissions, safety, regulation, and more.
For beginners, we would recommend Interactive Brokers and TD Ameritrade ‘thinkorswim’ trading platform. If you want to get a feel for trading at a more relaxed pace, we’d recommend Robinhood for its simple style.
Best Options Brokers in 2021
This list of brokers for options trading is based on numerous factors. Fees & commissions, account security, customer support, ease-of-use, regulation and more is considered in our analysis.
This is a recap of our selections…
- TD Ameritrade
- Interactive Brokers
- Plus500 – Great For Non US Traders
- IQ Option – Best For International Traders
- Tradier Brokerage
- Merrill Edge
- Charles Schwab
- You Invest by J.P. Morgan
- Ally Invest
TD Ameritrade “Thinkorswim”
TD Ameritrade ‘thinkorswim’ trading platform is ideal for beginners. It has a $0 account minimum which makes it accessible to all. The platform is easy to use and navigate which makes trading easy.
TD offers 24/7 over-the-phone customer service and email support. They also have virtual trading which is ideal for beginners who want to experience the platform without putting their money at risk.
The thinkorswim platform also has features for experienced traders such as research. They also have risk management tools available.
This platform can also be used to study option strategies, do asset risk, and set up rolling spreads for expiration dates.
For beginners, thinkorswim offers educational tools so that you can learn on the go.
We would recommend this platform for both beginners and expert traders.
|Charges $0.65 per contract||High margin interest rates|
|Webcasts available at their website||A few features in Thinkorswim are a challenge without help|
|Tools for strategies, risk assessment, and rolling spreads||TD has two different trading platforms which can be confusing|
|Educational tools for learning on the go|
|A trading simulator for beginners to practice|
IQ Option – Best For International Traders (Not Available in the US)
While not ideal for beginners, IQ Option is a good trading platform. They are a regulated online broker. For the most part, their profile of financial products is good.
If you are starting out or just want to check IQ Option out, they do offer a demo account.
There is a low minimum deposit of $10 and a minimum trade of $1.
IQ Option has platforms on both mobile and desktop which is handy if you’re constantly on the go.
We would recommend this platform to more experienced users.
|Available on both mobile and desktop||Not available in the US|
|Offer a demo account||Requires a minimum deposit to open an account|
|Withdrawals are processed within one business day|
Plus500 is a seasoned CFD broker from Israel. They have been listed on the FTSE 250 and have earned the respect and prestige that comes along with it.
Their platform is easy to use. It is available in multiple languages which is always a plus.
A downside of this platform is that Plus500 does not offer educational content. We would not recommend this platform for beginners.
|User-friendly platform||No educational content offered|
|Demo account available||Not Available in the US|
|Regulated by the FCA in the UK||No swap account|
|Available in multiple languages|
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Interactive Brokers is known for its smart and easy-to-use tools. It offers global investing tools.
With Interactive Brokers you can access any electronic exchange internationally.
It is suited to active traders. Interactive Brokers are best suited to experienced traders but they have expanded their tools to suit beginners.
Interactive Brokers offer a mobile app that is perfect for traders on the go. They also have a customizable Trader Workstation. This includes OptionTrader.
This platform includes market data displays. What makes this platform stand out is its voice command feature. This allows you to use voice commands to use the app which is always a win!
We recommend this platform to both expert traders and newbies.
|Low margin rates||Customer Service|
|Easy to use||Cannot view quotes on more than one screen at the same time|
|Zero Account minimum|
|Large selection of options-based lessons|
TradeStation is a standout in trading platforms because it does not charge commissions. It offers various features such as custom watch lists, and view charts. You are also able to review trends in real-time.
Most of the features are suited toward experienced traders. TradeStation offers over 150 indicators for test strategies and over 90 years of stock trading data.
It also features vast research tools.
A drawback is that this platform was designed with expert traders in mind. It is not the easiest platform to use and does require some tutorials.
We would recommend this platform for experienced traders.
|No fees per trade (not including ETFs)||Requires a minimum balance|
|$1 per option contract||Not easy to use|
|An active trader community||Lacks phone support|
|Vast research and charting tools|
Tradier Brokerage is high-tech. It is unique in that it uses Application Programming Interface (API) with its trading software. This lets Tradier offer a vast range of platforms from a third party for traders.
Tradier is suited to active traders. What is great about Tradier is that they offer low commissions and fees.
|Affordable margin rates||Does not offer online mutual funds|
|Real-time market data available||Not suitable for newer traders|
|A vast range of platforms available|
Lightspeed is a direct-access online broker. Their focus is on active traders.
They offer fair, competitive pricing. Along with the third-party trading platforms they offer, Lightspeed also has their trading platform called Lightspeed Trader. When comparing their platform to competitors it is lacking.
A downside to Lightspeed is that if you are a casual or beginner trader, this platform is not for you. Casual trading can mean paying high monthly fees.
|Low trading fees||High commission|
|Offer Futures trading||High minimum investment needed|
On the opposite end of the coin, Merrill Edge is perfect for casual traders. They offer rich research content and have competitive prices. They have unlimited free trades on stocks.
What makes Merrill Edge great is that it is linked to Bank of America branches all over the US. You can easily go to your nearest branch and get in-person customer service.
|Rich third-party research content||Not suited to advanced traders|
|Linked to Bank of America||Limited securities offered|
Fidelity is a well-rounded trading brokerage. They do not charge commissions on stock, options, and ETF.
Their investor-friendly trading can save you tons of money!
Fidelity is known for its mutual funds. They also have rich research and an easy-to-use customizable platform.
|Customizable news feed||Not available Worldwide|
|Amazing research and asset screeners||Do not offer commodities or options on futures|
|Good trade executions||Users will have to use multiple platforms to use the tools|
Robinhood changed the game with their zero commissions approach to options trade, stocks, and ETFs.
This saves you so much more money when trading than with other platforms.
They offer a minimalistic mobile app that is sleek and streamlined to make accessing trade easy.
A downside to the simplicity is that the mobile app lacks spread intelligence tools and portfolio testing tools. The app can only be used to make trades and check your portfolio.
Expert traders may find this platform limiting. It is better suited to beginners looking for trade practice and hobbyists.
We would recommend this platform to beginners and hobbyists who would like to play around with trading.
|Zero commissions||Lacks spread intelligence and portfolio testing tools|
|Simple, easy-to-use mobile app||No phone support|
|Low-cost margins for trade||Lacks retirement accounts|
|Limited educational content|
Tastyworks was launched in 2017 and is run by Tastytrade. This platform is perfect if you’re looking to specialize in options.
It is suited to active traders.
The platform is available online via their website, as a mobile app, and on desktop. This is ideal for traders on the go.
But, the educational content offered is limited and this is suited to experienced traders. The educational content that is offered is focused on volatility.
This platform can be overwhelming to beginners but, if you have some know-how you might find the challenge exciting.
We would recommend this platform to experienced traders and daring newbies.
|Zero commissions||Lacks spread intelligence and portfolio testing tools|
|Simple, easy-to-use mobile app||No phone support|
|Low-cost margins for trade||Lacks retirement accounts|
|Limited educational content|
E*Trade started as an online broker. It has a reputation for supporting newbie investors. They offer an array of educational tools and courses which is perfect for anyone starting.
It has cool features like allowing for complex spreads and customization. It has a performance risk tool. This shows the risk of individual holdings that offer security, especially if you’re just starting.
If you’re an experienced trader that wants to give E*Trade a shot, you can check out their OptionsHouse platform. This offers more data and research.
We would recommend this platform for eager beginners.
|Offers charting and forecasting tools||High margin rates|
|Customization available for charts and trading ladders||There are additional charges for multi-leg spreads|
|An extensive amount of educational content|
|Low fees ($0.50 to $0.65)|
WeBull is a US-based trading platform. They are a fintech startup. What makes them so great is that they offer zero-fee and discount services.
They are a safe and regulated broker and offer a maximum of $500,000 investor protection.
WeBull offers commission-free stock, options, and ETF. They do not charge inactivity fees. This makes it perfect for casual or beginner traders.
A downside to this platform is that it has a limited product portfolio and only covers US stocks, options, and ETFs.
|Free ETFs, stocks, and options||Limited product portfolio|
|Easy to open accounts||Only bank transfers for withdrawals and deposits|
|Amazing trading platform||Do not offer live chat and have bad phone support|
Charles Schwab is a professional trading platform. Their platform is based on optionsXpress.
Charles Schwab offers various tools like StreetSmart Edge, which is on desktop and online. They also offer the All-in-One Trade Ticket. This allows you to access spread tools and access different kinds of trades from a drop-down menu.
They also have an Idea Hub. This lets you view contracts. What makes this feature so great is that it sorts contracts by market activities or profit projections.
We would recommend this platform to beginners and expert traders.
|Different platforms like StreetSmart Edge and Idea hub lets you see new trading ideas||Tools are spread across numerous apps which can make trading confusing for beginners|
|Educational content available for trading||Higher margin rates|
|A large variety of asset classes||Unattractive dashboards and user interface|
|Commission-free options available in the US|
You Invest by J.P. Morgan
You Invest is a DIY trading platform that is linked to Chase’s mobile banking app. They do not charge commissions. They also have an amazing trading app.
You Invest is a good choice for beginners who want to dip their toes into buying and selling investments.
They also offer good research and educational tools. For users to want their portfolios managed for them, You Invest offers an automated advisor called You Invest Portfolios.
|User-friendly platform||Limited tools and research|
|Does not charge commissions||The Portfolio Builder tool needs a balance of $2,500|
|No account minimum needed|
|Easily connected to all Chase accounts|
Gatsby is a mobile-based trading platform. They offer commission-free options which is great for traders.
A downside is that the app has a limited trading portfolio. Their customer support also leaves something to be desired. Customer support is only available via email and they do not have a mailing address, phone number, or live chat.
|Commission-free options||Only available on mobile|
|Easy options spread||Limited trading portfolio|
|Offers a social trading feature|
eOption specializes in options. They also offer investments in ETFs and stocks. They do not have commission fees on stocks and ETFs which is a major bonus.
They offer some of the lowest commissions and margins on the market which is always a bonus.
A downside is that you do need an account minimum of $500 which is pricey.
For beginners, they offer educational content. They have platforms on both mobile and desktop.
We would recommend this platform to both beginners in options trade and experts.
|Low fees||High account minimum|
Ally Invest is known for its low-cost and low fees. This platform is suited to beginners because Ally Invest because of its easy-to-use tools.
The low costs include everything! There are no account minimums! This made us so excited. Times are tough and saving money, and making money, is always a win.
This is great if you’re on a budget.
Ally Invest has clear fees. If you are interested you can check out Ally’s Straight Talk Fees Guide.
We would recommend this platform for beginners and expert traders.
|$0 for options, ETFs, and stock trades||Only available online|
|$0 account minimum||Transaction fees on mutual funds|
|Professional research and tools|
What Is Options Trading?
An option is a contract that gives the owner the right to buy or sell an asset at a specific price (strike price) by a specific date (expiration).
This is based on the kind traded.
They can be bought, or gained as a form of compensation. Options are assets and have value. The value is determined by the relationship between the underlying asset value, expiration date, and market volatility.
They can be traded between private parties or in exchange trade via markets in the form of standardized contracts.
To make this easier to digest, we have broken up trading into four key points:
These are agreements between buyer and seller. It gives the buyer the right to buy or sell the asset at a specific date (expiration date) and an agreed-upon price (strike price).
Contracts are used as commodities, securities, and in real estate transactions.
This is the market price of an contract. It is the income the seller receives for the contract.
There are two factors for in-the-money premiums, namely; intrinsic and extrinsic value. For out-of-the-money premiums, only extrinsic value is given.
The premium is generally valued at a dollar amount per share. Contracts generally account for 100 shares.
The premium has more value the further away it is from expiration.
The strike price is also known as an exercise price. It is the price that the owner of an option can buy or sell a commodity or underlying security. The strike price could be decided about the market price of the option or commodity.
The strike price can also be set at a discount or a premium.
When an option needs delivery of the underlying instrument, the trade takes place at the strike price. This occurs regardless of the market price at the time.
The expiration date is the last day that contracts are valid. Before the contract expires, investors can decide to ‘realize’ the option and make a profit or loss. Or they can decide to let the it expire and become worthless.
How Much Money Do You Need to Start Trading?
There is not a set amount of money you need to start trading. But, this does not mean that there aren’t any costs involved. The amount that you could end up spending depends on the trading platform you use.
To make your life a bit easier, we have listed some of our favorite trading platforms. We drew up this list keeping beginners in mind.
How to Pick an Options Broker?
Choosing a trading platform can be a stressful task, especially if you’re starting. Before jumping in, it is good to think about what you want.
Think about your needs, wants, and goals. And, of course, your bank account.
Do you want to be an active trader? Do you want to dabble? How much money are you willing to invest?
Once you have that figured out, you can begin sorting through the thousands of online reviews to find a platform that suits your needs.
Once you’ve narrowed this down the real fun begins. Here are a few things to consider:
Now it’s time to compare all of the fees to see which platform offers you the best deal. Online reviews and videos can help with this. Here are a few fees you should look at before making your decision.
- Exercise fees: Exercise fees are charged when you decide to exercise an option instead of closing it
- Assignment fees: Assignment fees are charged if you have stock from an option automatically sold or bought because the stock was exercised.
- Per contract fees: Stockbrokers can charge a base option fee as well as a commission for each contract. The fee system can have multiple tiers for trading. This offers you some flexibility.
- Commission fees on trades: When trading online, brokers can charge a commission fee for every trade you make.
- Transaction fees: This fee is charged when buying or selling a good or service.
If you’re a beginner, a platform’s educational content should be high on your checklist.
An important thing you should look at is customer service. Trading platforms usually offer live chats, phone call services, or email.
You should make sure that the platform you’ve chosen is regulated. Trading platforms are regulated by the country they are based in or by third-party companies.
When trading, make sure that the platform ensures that your personal information is secure. Investing is a risky game and being secured against hackers can give you peace of mind.
Most trading companies offer platforms online and as a desktop application. There are also mobile apps. If you’re a trader on the go, ensuring that the broker offers numerous platforms is something you should consider.
In our experience, it might take a few tries before you find the perfect fit. Our advice is to do your research so that you can make an informed decision.
Buying and Selling Options
Options trading is not as straightforward as most stock trades. There are four basic order types.
Options order types
Buy to Open
This is a common type of options order. This works when an contract could increase in price. This method is used when you want to make a long or short position on an underlying security.
Sell to Open
This is used if you want to open a trade and sell an option using ‘naked calls’. You can also use this to make a profit if you think the price of the security is at risk.
Buy to Close
This is used if you want to close a trade. Buy to close ends your short position.
Sell to Close
A sell to close is used when you want to end your long position option. You can use this when you want to make a profit on an option after it goes up in value.
Advanced Options Orders
Advanced option orders are option trading strategies. Here we have listed the common strategies that you can use.
This strategy involves combining put and call options when entering a trade. This strategy is also known as an ‘iron butterfly’.
This lets a broker know that you want to buy or sell an option at market price. There is a risk using this method because a broker can make you wait before you buy or sell. If the market price drops you will have an order filled at a bad price. This doesn’t happen too often but there is a risk.
This lets you set the price point of a buy or sell. It can help you avoid market drops and helps you know the stock trends. You can then use this information to your advantage.
Which Vertical Option Spreads Should You Use?
There are four types of vertical spreads. These are the bull call, bear call, bull put, and the bear put. Using a vertical spread, you can buy one and sell options at a higher strike at the same time. You can do this by using both puts or calls.
What is a put option?
A put is used by investors who want to place a bet on a stock. This is usually if they think the stock price will drop. Buying a put gives you the freedom to sell shares of a stock at the strike price before the expiration date.
This can be profitable because the value of the contract will increase as the stock drops. But, if the stock value increases, the contract value will drop.
What is a call option?
A call is used by investors who want to bet that the stock value will go up. Buying a call will give you the freedom to sell the shares of a stock at the strike price before the expiration date.
This means that the contract value is based on the value of the stock. If the stock value rises, so will the value of the option contract. But, if the stock drops, so will the contract.
Is options trading risky?
Yes. Options trading is a leveraged investment and like most investments, it is risky. When entering any investment you are at risk of a loss.
This is why having education content and research are so important when choosing a trading platform.
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