What are the Best Brokers for Options Trading?
In two simple trades, a man recently turned $766 into $107,758. Those kinds of trades spark interest from all kinds of investors, big and small.
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Options trading gained significant traction over the past five years, particularly with retail investors. In response to the increased demand, the best 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 brokers 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.
This guide reviews each of the best brokers for options trading based on commissions, tools, order types, and incentives. While each of the apps offers unique features and benefits, all of them provide more than adequate tools to help you figure out how set up and execute anything from simple puts and calls to complicated, multi-leg bull and bear spread combinations.
As the famous investing champion of 1984 Martin Schwartz said, “A lot of people get so enmeshed in the markets that they lose their perspective. Working longer does not necessarily equate with working smarter. In fact, sometimes is the other way around.”
Let’s see how much smarter your trades will be when working with our top options brokerage firms.
Best Brokers for Options Trading
The commission fees for options trades have a different structure than stock trading. They may be higher and a bit more complicated. While some brokers have removed the base fee, there is typically a commission for each contract being traded.
There are several base charges for each trade and because options strategies often include 2 to 4 legs or more, the costs of placing a trade are more expensive than stock trading. Options also require a margin account rather than a cash account.
However, investors with bigger portfolios may be able to use portfolio margin minimize the risk of a margin call by offsetting netting gains in one option trade with losses in another.
1. Interactive Brokers – Overall Best for Options Traders
Interactive Brokers ranks high in most reviews because of its variety of smart, and easy-use-tool tools for investors interested in global investing trends. Although the firm once catered specifically to active and advanced trading, they have expanded and evolved their offerings to suit less active and less experience traders.
Here’s a quick list of what we love and don’t love so much about the broker when it comes to options trading:
- $0 account minimum and zero per-leg fee
- Lowest margin rates in the industry
- Comprehensive selection of options-based lessons
- Unable to view quotes on more than one screen at a time
- Customer service is not on par with competitor brokers
Impressively, Interactive Brokers clients can access any electronic exchange around the globe to trade options, equities, and futures.
We have ranked them as best overall broker for options trading because of its interactive mobile app, customizable Trader Workstation platform that includes OptionTrader, and cool spread set-up.
Clients can download Interactive Brokers Trader Workstation (TWS) app, or access it on the website. The platform has become increasingly more user-friendly and customizable, helping traders of all levels strategize and implement a winning plan.
The TWS OptionTrader feature displays market data, and allows you to easily create and implement more complex strategies such as combination orders. A favorite feature of the app is that it’s designed to be used through voice command, with minimum typing – sign us up!
A slightly inconvenient downside, however, is that traders can only see option chains on one screen at a time, so if you have the app open on your phone and then try to get a better picture on your laptop, one platform will become restricted.
Another downside is that anyone with less than $100,000 in assets in their account will pay a fee of $10 per month and may be charged other fees to receive data in real-time.
Finally, you will have slightly less features in the app compared to others. However, we don’t think any of the missing features will materially decrease your performance. Your watchlists and alerts will all remain synced.
Now for more of the good stuff.
Newer traders will especially love Interactive Brokers’ IBot feature. This feature has been designed to understand and reply to questions asked in simple, plain English. This means that you can ask questions in your own words, whichever way suits you best, and IBot will understand.
For example, you can ask, “Give me a 1 hour line chart of AAPL”, or “Close all my positions” without any need to know specific financial terms.
Last but not least, we’ve chosen Interactive Brokers’ as the best broker for options trading because it gives clients the ability to set up a spread in no time and then move it to a future expiry with just a few quick clicks. For traders who use options as a way to supplement their monthly income, being able to easily roll their positions really helps to keep things simple!
To help you make the best decision, the brokers’ Probability Lab lets you see the probability distribution for any market and try out the trade virtually before betting any real money.
Overall, if you’re looking for a broker with a bank of smart tools, a great app, and maybe even want to learn more about options trading, then Interactive Brokers might be the perfect match for you.
2. Ally Invest – Best Budget Option
Ally Invest comes in second place, and is our top pick for the best low cost options broker because of their low fees and beginner friendly yet robust tools. The broker offers no account minimum, an excellent web based platform, and commission-free trades on options, stocks and ETFs. Here’s what Ally Invest does best, and where it falls short:
- $0 options, stock and ETF trades
- $0 account minimum
- Excellent web platform
- Advanced research and tools
- Mutual funds incur a transaction fee
- Fully online service with no branches
“An informed trader is a smart trader” – Ally Invest
Think you might benefit with more education on options? Ally Invests educational material on options are top quality. Learn everything from the basics of what is options trading to an introduction of understanding option greeks and dividends. Have a browse through their well-laid out options articles to see if they might help improve your trading.
But fees is where Ally really stands out. If you’re on a budget and/or want to minimize the impact that high expenses can have on your returns as much as possible, then hop on the Ally Invest offers wagon.
The broker offers affordable, transparent, competitive fees, that won’t slow down your financial targets. Take a look at Ally’s Straight Talk Fees Guide for an upfront and straight-forward run through of fees including; regulatory fees, credit interest, individual retirement, and service fees.
In a comparative list of fees against some of the biggest names in the business, Ally Invest comes out on top. You can see how they compare in the table below:
|Brokers||10 Contracts Standard Pricing No Account Minimum|
|Ally Invest||$0 commission fee + 50c per contract|
|Schwab||$0 commission fee + 65c per contract|
|TD Ameritrade||$0 commission fee + 65c per contract|
|Merrill Edge||$6.95 commission fee + $.075 per contract|
|Fidelity||$0 commissions + $.065 per contract|
This can all seriously add up to expensive costs and if you’re looking to stick to a budget then these can really throw you off, making it an important factor in your decision making; especially if you have, or plan on creating, a larger portfolio. This table shows that while almost all competitors have moved to $0 commission fees, Ally Invest have the lowest per contract fee at $0.50 per contract in comparison to Schwab’s, TD Ameritrade’s, and Fidelity’s $0.65 per contract.
Not only this, but Ally Invests options tools are pretty on point. Some of them include:
This tool helps you “crunch the numbers” to get a better understanding of a trades potential value before making any decisions.
Options traders can use Ally Invest’s probability calculator to help you determine how close (or far) you are from reaching your goals by using implied volatility.
Easily view what readily available to you and place trades with Ally’s intuitive display.
Research and Market Data
The importance of quality and up-to-date research can’t be underestimated, and Ally Invest know that. The broker offers customized market stats, news and comprehensive metrics on the companies you have your eye on. This feature will show you company quotes, charts, high/low prices, news, peer performance comparisons, among other things, to help you get a better picture of a company’s current climate.
As you can see, Ally’s low fees, beginner-friendly education options, and suite of tools make them the best budget friendly option. But, before you make your decision, check out Ally Invest’s options playbook where you’ll see examples of strategies get your creative juices flowing, while also taking into consideration your experience, risk tolerance, and goals.
3. TD Ameritrade’s ‘thinkorswim’ Platform: Best for Options Tools
Are you new to options trading? You can easily get started on TD Ameritrade’s app or website by using its intuitive thinkorswim platform. With amazing tools and educational content, traders also have access to live coaching for options as well.
- Free per-leg options trading with no commissions in the US
- Charges $0.65 per options contract
- Incredible webcasts available for options on TDAmeritradeNetwork.com
- Use trading simulator to practice trades
- Educational tools for learning complex spreads
- Thinkorswim offers tools for options strategies, rolling spreads, and assessing risk
- Pretty high margin interest rates
- Some features difficult to use on thinkorswim without coaching
- Two different platforms for options trading makes it a bit confusing
If you are an advanced trader, the thinkorswim platform offers a lot of new tools and research options for options traders. You can select from hundreds of different options and look at risk management tools.
You can also build your own studies with over 500 signals on the downloadable platform or the mobile app. However, the two platforms offer different experiences so learning one doesn’t necessarily mean you’ll intuitively understand the other.
Options traders use the thinkorswim platform to study options strategies, set up rolling spreads to future expiration dates, and assess risk. For inexperienced traders, you can use the site to access education tools for understanding more complex spreads. If you check what you want to learn, TD Ameritrade will customize an education menu for you.
4. E*Trade: Best Learning Platform for Options Trading
E*Trade started off as the only online broker, and it has a long history of supporting beginner investors with educational tools and courses. However, expert-level traders can use its OptionsHouse platform to find more data and research on the latest spreads.
- Options are $0.50 to $0.65 per contract, depending on how much you trade
- Charting and forecasting tools available on Power E*Trade platform
- Customizable trading ladders and options chains
- Multi-leg spreads have an additional base commission charge
- Very high margin rates
If you are an options trader, E*Trade offers some of the best research tools and spread options. Recently, the company bought OptionsHouse and then relaunched as Power E*Trade.
Now, this platform offers access to streaming strategy options chains, which is pretty different from many other platforms. The abundant amount of education content that helps you grow into more advanced spreads and strategies.
E*Trade lets you work on complex spreads and customized options. For example, you can set up an iron condor strategy and define the strike width of your option spread. Only the data relevant to your options spread will stream for you.
There’s also a performance risk tool on the side that shows you the risk on any individual holding, but you can also see what it says about your entire portfolio. You can use six different risk ranges to stress test your portfolio.
Technical Insights is another analysis feature that gives you access to spectral analysis charts and shows you how your spread might perform in the future. With other tools like LiveAction scanners, you’ll see all of the potential trades based on the criteria you set in real-time.
5. Charles Schwab: Best for New Options Traders
For an all-around professional options trading platform, Charles Schwab offers great tools with full-service options. You can open a new account and get commission-free options trading in the US. However, they do charge a base fee of $0.65 per options contract.
- Use the Idea Hub with StreetSmart Edge platforms to see new trading ideas
- Access options trading lessons that allow you to grow your skills
- Check out a wide array of asset classes that can be traded on a variety of platforms
- Excellent research tools for all options spreads
- Unique trade orders
- Options trading tools spread between too many apps
- Clumsy dashboards make it difficult for portfolio analysis on just one platform, web or mobile
- Typically higher margin rates than average
Charles Schwab offers tools like StreetSmart Edge, which you can access via your browser or download to your computer. This platform is based on optionsXpress, which Schwab took over in 2011.
In addition, the All-in-One Trade Ticket gives you access to spread tools that let you select the type of trades you want from a drop-down menu. From there, you can select the legs through the options chain display. If you are familiar with options, this makes it very easy to set up your trades.
The Idea Hub also lets you look at all of the options contracts available sorted by their market activities or projections for profit in four categories specific to options. These include covered calls, premium harvesting, big movers, and earnings. You can analyze any of the ideas presented by Idea Hub and then click on “Trade” to simply fill the order.
If you like emerging options or need more education on options, you can use Charles Schwab’s intuitive tools to get more familiar with options spreads. The fees are pretty low, but for more savvy options traders, the tool helps you spot transactions that will negatively affect your margin balance.
6. Tastyworks: For Specialized Options Trading
This DIY discount brokerage started from the founders of TD Ameritrade’s thinkorswim platform. Launched in 2017, Tastyworks is a run by Tastytrade and offers an online financial network. It’s a niche trading platform that caters specifically to options experts.
- Conveniently trade all kinds of options and spreads through different platforms
- Offers expert tools and options for active traders
- $1.00 open options trades and $0.00 to close
- Fast, accurate executions
- Very stable and fluid tools on the web browser platform
- Focused on derivatives in particular
- May be challenging for newcomers to understand
- Not all asset classes are available
- Does not include a strong portfolio analysis
Tastyworks is suited for active options traders who want more advanced options for specialized trades. While the platform has some educational content, it’s mainly used by experienced traders. There are three ways to access and use Tastyworks including the website, mobile apps, and a downloadable application.
The downloadable version has the most bells and whistles for active options traders. All of the tools help traders with probability, volatility, and liquidity. Much of the education revolves around understanding volatility as founder Tom Sosnoff believes that it’s the best way to understanding profitable trades.
Executions are typically fast on this platform, and the costs are lower than average with equity option trade commissions set at $10 per leg. Though beginners might be uncomfortable at first, those who enjoy options and understand the basics can use the niche features and content to their advantage.
7. Robinhood: The Best No Commission Platform for Options
Robinhood is a newer platform that changed the game when it came out with a no-commission approach to stocks, ETFs, and options trades. You also don’t need to have an account minimum to sign up for Robinhood, and it’s completely mobile-first.
- No commissions ever on options
- Streamlined mobile app
- Great for new investors who only want specific options
- Easy and low cost margin trading
- No retirement accounts
- Only individual taxable accounts
- Very limited in education resources and online tools
- Does not support mutual funds and bonds
- No phone support
Investor Warning: Carefully consider the investment objectives, risks, charges and expenses of any investment company before investing. All securities trading, whether in stocks, exchange-traded funds (“ETFs”), options, or other investment vehicles, is speculative in nature and involves substantial risk of loss. Robinhood Financial encourages its customers to invest carefully and to use the information available at the websites of the SEC at http://www.sec.gov and FINRA at http://FINRA.org.
This minimalist stock trading app gained notoriety for being the first stock trading platform to offer commission-free trading. In fact, it could be the reason that many stock trading apps removed fees in October 2019.
Robinhood is the bare-bones options trader for mobile. It doesn’t have many of the bells and whistles of larger brokerage apps like TD Ameritrade or E*Trade, but it doesn’t have to.
Being successful on Robinhood simply means knowing how you want to trade options and doing it in a very minimal style. Without any fees whatsoever and low margin rates, you can save a lot of money when it comes to trading options.
However, you won’t get any spread intelligence tools or portfolio testing tools. You simply use the mobile app to make your trades and check on your portfolio.
While professional traders may find it limiting, hobbyist investors looking to make some extra money with options can benefit from Robinhood’s no-fee structure and minimalist platform.
8. TradeStation: The Best Options Trading Platform for Experts
TradeStation started as an advanced software just for traders. Now it has more options and a mobile app to help those expert traders who love stocks, options, and futures.
- Fast, highly successful trade executions
- No fees per trade (but not on ETFs)
- $0 base on TradeStation Go app with $0.50 per contract
- $1 per option contract
- Comprehensive research and charting tools
- Very active trader community
- Minimum balance required
- Highly customizable but also overwhelming for new traders
- No phone support if you are not a full-service client
TradeStation really shines for options traders because it does not charge any commissions. Options traders also can use the OptionStation Pro platform, which has a preview mode on the mobile app. You can also create custom watch lists, view charts, and review trends in real-time.
For research, TradeStation also earns high marks with more than 150 indicators to include in your test strategies. The platform includes over 90 years of stock trading data and also has over 40 years of intraday data.
While you will love access to a plethora of options research tools, there are some drawbacks to this platform. It’s made for advanced users, so when it comes to trading, you’ll need to go through some tutorials first. There are also additional fees and a subscription to access some of the “pro” features.
TSgo is the company’s commission-free offering. However, if you want a regular trading account which includes access to TradeStation’s downloadable platform on your computer, you’ll be charged a $5 flat fee for commission schedules.
If you plan on using TradeStation’s TSgo plan with their mobile app, then you won’t have to worry about fees. You may need to get involved with their community to get some tips on how to use their options tools, but otherwise, it’s pretty straightforward and experienced traders love it.
What Type of Options Trader Are You?
Have you thought about what type of trader you want to be? If you already trade-in options, you probably have a strategy to mitigate risk and reap the awards. However, some platforms have different tools and offer more complex spreads.
Options can be complex, and while all of the brokers above offer different options tools, some are built for more complicated positions. You may be able to take only one position per order, which means that you will need to place several individual orders at one time to create your position.
If you are a beginner to options, you may have studied how options control a fixed amount of a security. Typically this means you can buy one option that controls 100 shares of stock.
Options are also broken down into calls and puts. “Calls” state that you have the right to purchase the underlying security, and a “put” means that you have the right to sell it. Options decrease in value as their expiration dates draw closer. When you buy a call or put option, you restrict your risk to the option’s original buy price and any fees charged by your broker.
While most stock trades are straightforward, there is a learning curve with options trading. There are generally four main types of options orders.
Buy to Open
Do you want to buy a call or put option? You’ll use buy to open. This is probably the most common type of options trading. Traders use the buy to open order when they want to establish a short or long position on an underlying security.
If you anticipate that a particular options contract will surge in price, then buy to open orders are perfect. You can buy call options to open a long position and put options to open a short position. When buying options, your downside is limited to the price of the contract. When you want to exit your position in the future, you would place a sell to close order.
Sell to Open
In this options trade, the trader wants to open a trade and sell off the option by making “naked calls” or “naked puts.” If you think an option is likely to fall in value and you want to take advantage, then you can set up a sell to open order to sell call options that would create short position in that option.
You can use a sell to open option to profit when you believe the price of the underlying security is going to rise by selling a put. This means that you’ll be going long on the option’s underlying security by allowing you to buy that appreciated security at a lower price in the future. When selling options, your downside is unlimited and you can lose more than the amount you have invested.
Buy to Close
If you want to close out an existing option trade, you would use the buy to close option. In this case, you opened a trade that was originally a sell to open transaction. You sold a call or put through this option, which placed you in a short position on an underlying security.
Once you establish that you’re ready to exit the trade, the buy to close option concludes your short position. For a put trade to profit in a buy to close option, you need the underlying security price to fall enough that it drives the put option price below your break-even point. If you had a call trade to profit, then the underlying security price must remain under the sell to open price of the option.
In most cases, as you establish a short position with an option, you are given a credit called an option premium. The short position opens you up to some risk as you could incur a large loss if the trade moves swiftly against your position.
If an underlying security’s price continues to trend upwards, then your losses will be much greater. In this case, it would cost you a lot more to buy an option that is trending upwards quickly.
Sell to Close
If you want to close an existing long option, then you would use the sell to close trade. This occurs when a trader who bought an open order to go into a longer straddle decides to close out the position.
Traders use these types of orders to gather profits after the option you own goes up in price. You can also use the same type of order to get rid of options contracts that are dropping in value to cut your losses.
Combination Orders, Market Orders, and Limit Orders
In options, there are a lot of strategies. You can use education tools on most trading platforms to understand them, but it can be difficult at first for beginners.
Combination orders happen when you combine put and call options to enter into a trade. For example, one strategy is called an iron butterfly and allows the trader to combine a sell to open and buy to open.
The thing to remember is that whenever you are setting up a trade, you are using a buy to open or sell to open. When ending a trade or closing out, you use a buy to close or sell to close option.
Market orders tells the broker that you want to buy or sell the option at the current market price. However, your broker will make the purchase some time after you instruct to purchase or sell, so you could have the order filled at a bad price if the market suddenly drops.
In most cases, your market order is filled instantly, and you won’t have any issues. However, you may pay more to the broker if the order is quite large but the trading volume is thin.
Limit orders allows you to specify a buy or sell at a certain price point. This helps you avoid issues with the market dropping at the time of a broker’s purchase or sell off, but it also helps if you know current stock trends and want to take advantage of a stock you think will fall or go up in price in the near future.
Which Vertical Option Spreads Should You Use?
These are advanced options strategies, but there are typically four types of a vertical spread including bull call, bear call, bull put, and bear put. Options spreads are commonly used on trading platforms to minimize risk and place bets on different market outcomes with two or more options.
With a vertical spread, a trader can purchase one option and sell another at a higher strike point at the same time just by using both calls or both puts available.
Bull vertical spreads only get profits when the underlying security price rises. A bear vertical spread earns more money when the price falls.
Wrapping Up: Are Options Trading Platforms for You?
Options are pretty advanced for most traders, but they can be quite lucrative if you know how to bet and spread the market.
As you learn more about options, you should pay attention to platforms that don’t charge too many fees and have several education tools to help you learn more about options trading, bull call spreads, and so forth.
As you become more familiar with options combinations, you can use testing strategies and simulators on certain trading platforms like TD Ameritrade and E*Trade to see how your trades could possibly earn you more money.