If you are comfortable with stock trading and are looking to branch out into a new kind of trading, options trading is commonly the next step. While a riskier venture than other investments, options also provide the opportunity for higher payouts. Options contracts – which are equivalent to 100 stocks – allow you to speculate on how a stock will do and buy or sell calls or puts based on your trading style and strategy.
Online options trading brokers provide a platform where you can not only trade options, but also research and monitor stocks, create watch lists, learn trading strategies, and use tools to estimate how a stock will perform based on the market outlook and the stock's history, among other factors. The best discount brokers – including OptionsHouse, TradeKing and TD Ameritrade – offer these features within their platform and trade at low fees. For more information about trading investments, take a look at our articles on options trading.
With online options trading, you can choose a platform that suits your experience level as well as a broker whose commission fees fit your budget. While most services offer nearly the same basic features, some offer additional features, lower fees or stronger platforms that make them a better value.
Fees & Commissions
All services charge a per-contract fee for options trading, which is the most important fee, especially if you'll be trading a large number of contracts because it can add up. The best options brokers charge as little as $0.50 per contract while some charge as much as $1.25. Another important fee is the trade fee, which not every service charges; however, if a broker does not charge a trade fee, there is a minimum order amount required. For services we reviewed, trade fees range from $3.00 to just below $10.00.
The fee for an exercise or assignment varies greatly from service to service, with some charging as little as $5.00 while others charge as much as $30.00. Broker-assisted fees also vary, but $20.00 to $25.00 is typical.
If you wish to have a margin account, you must maintain a minimum balance, generally, of $2,000 or $2,500. The interest rate on margin accounts starts higher for smaller balances and decreases as the balance increases. Lower is better, but we did not see an interest rate above 10% when reviewing options brokers. Nearly all services have their own way of determining the interest rate: some have a set rate, others calculate a base rate based on the market and other factors, and some use the federal base interest rate. These rates do not change often but are subject to change at any time.
Trading Platform & Research Tools
Choosing a trading platform is important because some are geared toward experienced traders interested in complex trades. Others are simplistic and are better for those new to options trading. Some platforms are online, which tend to be simpler and laid out like a website, while others are desktop applications and tend to be more advanced, with options to customize gadgets and windows.
The best options trading platforms allow you to create watch lists, set alerts and use options screens and scanners to view current stock and options prices. All of the services we reviewed include preprogrammed strategies to help you choose trades based on your trading style and the market outlook. Other features most services include are calculators for options, probability and profit versus loss, which all help estimate how stocks will perform.
All services we reviewed offer mobile trading. Most have mobile apps for cell phones and tablets, while others optimized their websites for use in mobile browsers; the best services have both, in case you don't own a compatible mobile device. Standard functions include trading, monitoring positions, and creating watch lists and real-time quotes. Additional convenient features that some apps provide include mobile check depositing, and one service includes barcode scanners to receive instant stock information about a product.
Help & Support
Certain services put great weight into education and provide resources online, including video tutorials, education centers, webinars and teaching courses to help you understand how to trade options. Some brokers that have local branches have live seminars and events. All of the services on our lineup offer support by telephone, email and live chat. A few offer these support options 24/7.
When trading stock options, you have many choices in platforms and brokers, and we have identified the best options brokers. Depending on your expertise and the amount you wish to spend on trades, some services are better than others, but the best include tools and resources to help you choose and trade stocks without breaking your wallet.