Online Broker Review 2013

Yearly Review of Stock Brokers

Fellow investors,

Another year has gone by, and the challenges facing us as investors are ever present. The start of 2012 was great, followed by a roller coaster year that included a dramatic Facebook (FB) IPO. In the end, while the market did wrap up the year in the green, it is clear to see that retail investors, on the whole, have become overwhelmed and slowed their participation in the stock market.

Daily average revenue trades, also known as DARTs, were down upwards of 20% or more for many online brokers in 2012. Serving as the primary revenue source, this slump strained margins; however, the industry pressed forth. Capital One completed its acquisition of ING Bank (including ShareBuilder) in February, TradeKing and Zecco tied the knot in May (forming TradeKing Group), and a slew of platform updates and new tools were released across the board.

Not all is rosy, though, as we found there was a distinct lack of innovation in 2012. Research is still the same outsourced data mining experience it has been for years, and many brokers now understand the importance of a web- based platform. Furthermore, every broker knows mobile is a frontier worth investing in, with many now offering easy- to- use, basic experiences. The most logical spaces for true innovation in 2013 are mobile trading and education; then again, other areas should not be ruled out.

Our goal here at StockBrokers.com is to push the industry forward. Less the brokers themselves, we are the toughest critics, not to mention advocates and cheerleaders for innovation alongside a quality client experience. As the brokerage industry adapts, invests capital in new offerings, and overall matures, investors have more tools available to them to succeed. It is this mission that has brought us to where we are today.

Our 2012 Broker Review was read more than 65,000 times in 2012, receiving over 100 social media shares and proving itself as the most respected broker review on the web. When StockBrokers.com launched in February of 2011, the brand was nothing more than 12 characters and a “.com”. Today, investors from more than 150 different countries visit StockBrokers.com each month, of which more than 16%+ type “stockbrokers.com” into their web browser and visit us directly.

While we find this humbling, we know we can push ourselves harder. For our 2013 Broker Review, we took our depth of research to a whole new level. We consulted with a private equity analyst to update our grading rubric, allowing for more data and separate rankings for each category. This year, participating brokers were each assessed on a staggering 283 different variables, requiring us to hire two additional part- time staff members and dedicating, once again, many hundreds of hours.

The fact of the matter is, we are honest, unbiased, and do not shun away from sharing the truth. While last year we had 24 brokers included and did not require participation on the part of the brokers, this year, to be included, brokers had to opt in. When it came down to making a decision, only 17 online brokers were brave enough to volunteer themselves and be assessed by our strict criteria.

I couldn’t be happier with this, because it means we are doing our job right. Take a look at the average broker website today, and you will quickly notice the littering of Barron’s awards and other print media accolades. Getting critiqued by professional journalists is one thing, but being reviewed by actual investors is another. Our battle cry is simple: for traders, by traders. No matter how you slice it, our review is the toughest around.

All in all, I am thrilled with the results of this year’s stock broker review. Between our new full length individual reviews and the research below, there are now more than 20,000 words of wisdom available for investors to digest. Furthermore, we have podcast interviews, dubbed the “2013 Broker Hot Seat,”, with CEOs and executives from every participating broker. Over five months of hard work has gone into what is, without a doubt, our best review yet. Thank you in advance for reading; we appreciate your support.

Here’s to us as investors and our success in 2013,

Blain Reinkensmeyer
Co-Founder & CEO
StockBrokers.com

Trade costs are no doubt on many investors’ minds. Just like paying $4 for a Starbucks (SBUX) latte every morning adds up, so does paying $7, $8, $9 or $10 per trade. For the drinkers who have to have their morning brew, cost can be brought down dramatically at the expense of quality and taste. This exact philosophy holds true for online trading, which we will now explore.

To find the best broker for low-cost trading, we took into consideration all the possible scenarios. Whether trading 100 shares or 5,000 shares, one contract or 100 contracts, as well as having $5,000 in equity versus $1 million in equity, we assessed it all. We also analyzed the actual net costs per month for casual investors who might make 10 stock trades each month or the hyperactive traders who might place 100 stock trades and 50 options trades in one month. Monthly minimums, platform fees, data fees, mutual funds, ETFs, exercising and assignment fees were addressed; the list goes on and on.

When all data and possible scenarios are considered, the best pick in the category of Commissions & Fees is Interactive Brokers. While the broker is very picky with its clients — the broker requires a $10,000 minimum deposit and encourages keeping accounts active by charging up to $20 per month between two minimum fees — it ultimately gives investors the best all-around deal for trading online. Flat-rate equity trades are $.005 per share ($1 minimum), options trades run $.70 per contract, mutual funds are $14.95 per, the broker charges no fees for exercising and assignments, and its margin rates are far lower than its nearest competitor.

However, while Interactive Brokers is the best all-around deal, there are numerous scenarios where other brokers shine. If trading straight equities in several hundred share increments, Lightspeed is the cheapest option. Alternatively, if trading, on average, 20 options contracts or more, OptionsHouse is your clear choice, as each trade will only set you back $8.95 + $.15 per contract. Like ETFs? Then go for TD Ameritrade, which currently has the largest selection (101 total) of commission-free ETFs. Lastly, if automated investing for your retirement account is your gig, then ShareBuilder is your best choice, as its two commission plans center around just that.

The take-away here is this: When contemplating any broker switch or new account based on commissions alone, it’s critical to understand what type of trader you are first, then research from there. How many trades do you place per month, on average? What is your typical order size? Do you buy and sell options? Do you frequently trade on margin? Do you trade ETFs or mutual funds? These are all great questions to ask yourself.

Because, just like the brokers that shine for niche reasons, the opposite is also very true. Interactive Brokers offers the lowest margin rates, but if you trade with only cash then this is negligible. If only trading a few contracts per options trade, tradeMONSTER’s $.50 per contract rate looks great but the broker’s $12.50 minimum is hardly ideal. Like mutual funds? Well, OptionsHouse’s $9.95 rate appears attractive until you realize that all orders must be phoned in. There’s an indefinite amount of examples.

To find out the true cost of trading, don’t just trust our rankings, run the numbers yourself. Utilize the trade calculator here on the site, read our detailed commissions notes for each broker, and then compare your top picks using the compare tool to make a final decision. $4 lattes may be too expensive; however, $.99 brews from the local gas station are anything but delicious. In the end, it is about finding that happy medium where quality and price come together to form the right taste for you.

To trade online successfully, some investors rely purely on their trade platform. Today’s trading platforms are not only web-based but also desktop-based, and are increasingly becoming mobile-based as well. Advanced charting, options tools, screeners, hot keys, virtual trading, watch lists, ladders, Level II quotes and back-testing are just a sampling of the functionality brokers make available to their clients.

To differentiate themselves, many brokers offer unique platform and tool offerings. One of the most popular third-party service integrations we’ve seen in the last year has been the use of technical analysis data provider Recognia. Markit On Demand is another popular data provider that has been around for years, powering tools such as Scottrade’s SmartText. CNBC TV can be streamed through ETRADE Pro, TD Ameritrade’s thinkorswim, alongside StreetSmart Edge, and some brokers have begun offering Bloomberg videos as well.

Over the years, we’ve learned that it is not just the tools that separate the brokers, but the design, depth, speed and overall execution of delivering the ultimate trading experience. This is where brokers such as TD Ameritrade’s thinkorswim and TradeStation really differentiate themselves. After spending dozens of hours on both desktop platforms, we prefer thinkorswim; however, both platforms execute so well that it truly comes down to personal preference. Die-hard fans exist for both and either one is a great choice for the seasoned active trader.

Behind thinkorswim and TradeStation, ETRADE Pro and Schwab’s StreetSmart Edge are two other desktop platforms worth a close look. ETRADE Pro and StreetSmart Edge have one distinct advantage over thinkorswim and TradeStation, and that is ease-of-use. While these platforms do not offer the same depth of tools, historical data, chart studies, etc., both platforms are very well designed and are easy to adapt to. In some respects, their balance of power and design makes them a better fit for certain traders.

Unfortunately, not all active trader platforms are free to use or available to all clients. For example, to gain complete access to Fidelity’s Active Trader Pro offering, 120 trades or more must be placed in a rolling 12-month period. Scottrade limits its active trader ScottradeELITE platform to clients that have at least $25,000 in assets. Lastly, TradeStation charges $99 per month for access to its flagship platform, which can be waived if 5,000 equity shares are traded, or other certain criteria is met. Platform fees and minimums are set in place to keep costs under control, and while these serve as simply examples, it is something investors should be aware of, should they consider an online broker based solely on its platform.

For investors who prefer a web-focused experience, there are many great browser-based platforms to consider. Our top pick this year, tradeMONSTER, combines the best of both worlds: ease-of-use with fantastic tools. The platform is great for options trading (see section “Options Trading” below), alongside our No. 1 recommendation for new investors looking to trade virtually and hone their skills.

Ultimately, TD Ameritrade takes the overall No. 1 spot for Platforms and Tools because it offers investors fantastic experiences on not only desktop, but also browser as well. Trade Architect (browser) appeals to newer and intermediate investors while thinkorswim (desktop) is built solely for seasoned active traders. The icing on the cake? Both platforms require no minimums or fees to use. All clients have access. If there is one request we have for TD Ameritrade, it is to add virtual trading to Trade Architect; thinkorswim is best kept to the pros to test advanced strategies.

When selecting a broker based on its platforms and tools, if possible, try it out first before committing. If you are really serious about your trading platform, then take the time to read our full length broker reviews, narrow your search to two or three brokers, try them each out, then compare both brokers and make a decision. Start with questions like: Do I prefer a browser-based platform or a desktop platform? Will I reach the minimums to maintain fee-less, consistent access throughout the year? How important is ease-of-use?

It is no surprise that the largest, most publicly well-known online brokers excel and all vie for the top spot for research. With larger client bases and higher commission costs, high-quality research is expected.

In fact, our top five picks this year yielded scores painstakingly close to one another. Out of the 48 total variables we assessed on for research, our No. 1 pick, Charles Schwab, had 97% of them. Fidelity and TD Ameritrade both had 96%, ETRADE 94% and Scottrade had 90%.

Comparing apples to apples, all five brokers are nearly identical. They all utilize Morningstar as their primary provider for ETF and mutual fund research, all of them offer a slew of data and graphs for researching stocks, all offer fixed-income research, etc. Slight differences only begin to show when assessing specifics such as total third-party research reports available for equities, for example Apple (AAPL). In that category, the title goes to Fidelity with 13 total reports offered, followed by TD Ameritrade with eight and Charles Schwab with seven.

While any of these brokers will more than satisfy the appetite of most investors, deciding a winner and overall Top 10 based on checklists alone is not enough. Quality and design matters just as much as quantity, not to mention many brokers will go “above and beyond” to differentiate themselves.

Charles Schwab, which earned our No. 1 spot again this year, offers clients its own proprietary A – F ratings, called Schwab Equity Ratings, for some 3,000 U.S. stocks. In fact, in May 2012, Schwab celebrated its 10-year anniversary for providing the service. Even more impressive, Schwab boasts a full lineup of 26 in-house experts that provide numerous articles, on a variety of market topics, throughout each week. Some experts, such as Chief Investment Strategist Liz Ann Sonders, can often be seen on TV discussing the market.

Fidelity Investments, on the other hand, stands out for its 13 total equity research reports offered (so many that they offer research report filters). Fidelity also offers fantastic stock comparisons, allowing clients to compare up to five stocks at once with 21 different metrics.

Not to be outdone, TD Ameritrade allows clients to create custom PDF research reports using 24 different modules. The reports can be saved for later use and even downloaded. TD Ameritrade also analyzes data from its six million retail clients to create what it calls the Investor Movement Index (IMX). Launched in 2012, the index displays and analyzes the sentiment of its retail investors’ portfolios. Only roughly three years of data is available as of now, which is limited; however, the index is an example of positive innovation and has potential.

Speaking of innovation, ETRADE is the only broker to include visual research provider TREFIS’s eye candy graphics right into its research area. TREFIS helps investors understand how a company’s products translate into and impact the current stock price. TREFIS is not new to the scene, but the service is another example of a fresh way to look at data and perform research, all while educating the client.

All in all, when it comes to researching stocks, ETFs, mutual funds and fixed income, any top five broker is going to provide an excellent experience for investors. With such similar offerings, it’s the unique features and functionality that differentiates the brokers. Furthermore, the space remains way overdue for innovation, and our goal is to see brokers continue to push themselves to reimagine how investors conduct research.

When assessing customer service, one phone call or live chat conversation is not enough. To really gauge the quality of support, multiple tests across every channel must be completed. That is why this year we conducted 158 customer service tests using phone, email and live chat. We had eight individual custom-made templates, covering everything from being a prospective client, a current client or even unique scenarios such as someone with more than $1 million in assets looking for a new broker. Each template consisted of three individual questions of varying difficulty.

Phone support was weighed heaviest, comprising more than 50% of the overall score, with email and live chat following thereafter. If a broker did not offer live chat, then providing quality phone and email support became that much more important.

TD Ameritrade, despite its size with more than six million clients, took the No. 1 spot. The consistency and ability of support reps to, time and time again, deliver an A or A+ experience was impressive. While TD Ameritrade did not finish in our top 10 for Email, the broker placed first for both the Phone and Live Chat sub-categories. Cobra Trading, an online broker that specializes in active trading and boasts a small team, finished second, showing, once again, this year it understands what it takes to keep clients happy.

Focusing first on phone support, most brokers were on top of their game, as 71% of all phone tests were connected to a rep within one minute. The broker with the longest hold times, on average, was OptionsHouse, however, once connected with a rep we found their support to be positive. The longest single hold time was with Interactive Brokers: 20 minutes. Once the discussions started, it was apparent which brokers had gone the extra mile with training and which had not. ETRADE, which is usually a contender for top phone support, failed our 24/7 support weekend testing, as what appeared to be overseas reps didn’t deliver nearly as strong.

One surprise came with TradeKing, normally a top finisher, which did not place in our Top 10 for phone support. While our testing did not take place during the month of December when TradeKing’s merger with Zecco was in full force, it is worth noting that the merger may have had an impact. TradeKing finished 9th Overall in Customer Service.

Next, focusing on email, TD Ameritrade and Interactive Brokers tied for the quickest overall time (on average) to reply, averaging just more than an hour each. Out of all the email tests, 34% of the brokers delivered replies within an hour, and only one broker failed to respond to a test, tradeMONSTER. Back on the positive side, only 7% of email tests took longer than two days to receive a response. Five brokers – Charles Schwab, Cobra Trading, ETRADE, Firstrade and optionsXpress – received one perfect test score. In the end, ETRADE’s email support came out on top, with Scottrade and optionsXpress finishing second and third, respectively.

As far as live chat goes, experiences were mostly positive. 70% of all tests saw a connection with a live rep within one minute. Both TD Ameritrade and Scottrade, who finished No. 1 and No. 2, respectively, received one perfect test score. It is important for brokers that offer live chat support to train their staff and offer a similar experience through phone and email. Lightspeed closed its live chat support toward the end of 2012 to focus purely on email and phone. On the other hand, TradeStation was the hardest broker to reach for live chat. Over half the time, despite the time of day, we found TradeStation’s live chat services to be unavailable.

When it comes to the personalized service, no one does it better than Scottrade. Scottrade leverages its network of 505 retail locations, redirecting all customer phone calls during week-day office hours directly to its local branch offices. There is something special about the experience of knowing you are one of several million clients, yet calling and feeling like your broker lives right next door. Scottrade is the only online broker to do this, earning it the award again this year of Best Overall Client Experience.

With our most rigorous support testing completed, the big positive is that the online broker space as a whole has made noticeable improvements. Looking at the overall Top 10 for customer service, we would be happy clients with any of them.

Over the last few years, especially in 2012, the educational offerings provided by online brokers have grown by leaps and bounds. Brokers have realized that providing robust education on options trading basics and strategy, for example, yields more active and confident clients. While truly interactive education, provided by new companies such as InvestingTeacher.com, has not yet made its way into the scene, investors can be confident knowing the space is progressing at a great pace.

To keep up the explosive growth, this year we went deep to break down and rank the educational offerings offered by online brokers. While in previous years just having investor videos or archived webinars was enough to impress, this year we weighted the quality and quantity of each education type. We spent endless hours reading articles, watching videos and webinars, and even reading client magazines to find a true champion.

The top three finishers this year wowed us. First place TD Ameritrade has finally begun to really leverage Investools, making 18 full courses available for free organized by skill level. Brilliantly constructed guides to order types and the quarterly thinkmoney client magazine are also some of the highlight offerings (Charles Schwab is the only other broker that mails out a client magazine throughout the year).

Like TD Ameritrade, ETRADE also shines. The broker offers a well-organized collection of both short, custom video clips, called “3 minute videos,” as well as archived webinars. The broker also includes Morningstar Investing Classroom courses. Furthermore, we enjoyed the supplemental educational content tied in throughout the website. For example, pull up an option chain of Apple (AAPL) and you’ll find a breakdown of different option strategies at the bottom. There is room for improvement, however, as ETRADE has made little effort to expand its 3 minute videos to include intermediate and advanced content.

The biggest year-over-year change we saw came from Scottrade, which really ramped up its internal efforts, beefing up its client Knowledge Center. Articles, videos, definitions, calculators, archived webinars, live seminars, and even quizzes and assessments are available. Alongside its own in-house webinars, Scottrade also offers daily market webinars, several strategy seminars per week, and trader podcasts through its partner Learning Markets. We also enjoyed being able to toggle “on” and “off” education help, which when on, converts key terms into hoverable definitions. For such a diverse offering, our only request is more comprehensive navigation and sorting to find what we want faster.

Competition for the best offering of investor education has really heated up over the last year, which is fantastic for investors. While quality education shouldn’t be the only reason to choose a broker, it certainly is a nice compliment to the primary offering.

Trading and accessing client information via mobile devices continues to rise, and brokers are betting big on the future. Today, nearly every online broker has resources devoted to mobile development, which is no surprise given mobile usage continues to skyrocket. In Facebook’s (FB) most recent quarterly earnings call on January 30, Mark Zuckerberg noted that out of the 1 billion-plus users on the site, 680 million use mobile. In fact, more users now access Facebook each day via mobile device than they do with a PC.

Despite the majority of brokers having mobile apps for several years, the user experience is still ripe for innovation. Many of the online brokers are wagering that mobile investing isn’t just about viewing a portfolio, maintaining a basic watch list and placing trades. Instead, they are working to bring the full web experience to mobile, which includes trade tools, streaming quotes, advanced order types, charting, options, cloud preferences and much more.

No single broker has “cracked the code” to the ultimate mobile investor experience yet, but some are getting closer. Our criteria were extremely tough this year as we assessed more than 40 different variables for mobile trading. In fact, only five brokers managed to break the 50% mark in the variable portion of our mobile trading assessment. All testing was done on iOS devices, focusing primarily on the iPhone.

ETRADE, the first broker to really push mobile, continues its dominance, finishing first overall in our rankings. ETRADE is one of a handful of brokers that has begun moving user preferences to the cloud. For example, your ETRADE Pro watch list is magically available on your iPhone as well. ETRADE was the only one to include investor education in its app, a nice touch, and had a slew of advanced features offered by few brokers: CNBC TV, Level II quotes, barcode scanning, and third-party research reports, among others. The only area ETRADE falls behind is in charting, where only two indicators are supported.

Speaking of available charting indicators/studies, several brokers are clearly ahead of the pack. Scottrade, optionsXpress, MB Trading and TD Ameritrade all support more than 40 each, while 11 brokers support three or less. Want to customize your indicators? Only four brokers support that: ETRADE, MB Trading, optionsXpress and TD Ameritrade.

There were several other fascinating finds as well. TD Ameritrade and ETRADE were the only brokers to support barcode scanning, which allows investors to scan a product to quickly identify the parent company. On the other hand, Fidelity and ETRADE are the only brokers to allow users to customize their initial log-in screen with different home screen cards/widgets, which was something we found very useful for quickly pulling up the information we desired.

While the majority of our testing was with the iPhone, we did spend time with the iPad as well. Ten out of the 17 brokers included in this year’s review offered native iPad apps. ShareBuilder’s new iPad app released in January supports a completely customizable user dashboard. MB Trading’s iPad app feels similar to its MBT Web platform, which was great, however, the app was buggy. Lastly, Fidelity was our favorite iPad app this year. Highlights include the broker’s research area which provides both Recognia and Trefis research alongside a great overview of the world markets.

All in all, the world of mobile trading is still under construction. While online brokers have come a long way from where they were even a year ago, there remains ample room for innovation.

It is not a surprise that active traders are highly coveted clients desired by every online broker. These seasoned traders require far less hand-holding than a new investor, and generate much more revenue for the broker each year. The question is, though: How many trades (buy or sells) must be made to be considered an “active trader”?

After speaking with numerous brokerage executives, traders and industry experts over the last year, there really is no defined answer. This is because every broker has a different number based on their offering and costs of doing business. In fact, “active trader” has become so loosely used in marketing and branding that niche brokers such as Lightspeed have begun using a new term, “hyperactive trader” to distinguish between the two.

Here at StockBrokers.com, we have no problem setting industry standards, and thus will define both from our perspective. An “active trader” is best defined as someone who places at least 10 trades or more per month, or 120-plus trades per year. Alternatively, a “hyperactive trader” is someone who places at least 10 times that much, 100-plus trades per month or 1200-plus trades per year.

Understanding where you fall as a trader is critical to selecting a broker. As an active trader, you are likely comfortable paying $4, $5, $6 or even $7 per trade. You desire low-cost trades, but having a feature-rich platform or research is likely important too, thus, you are willing to pay more. However, speak to a hyperactive trader, and you’ll find that the platform design, research and trade tools don’t matter; cost and execution talks while everything else walks.

Because of this, our top 10 ranking in this category weighs both trader types, with the most significant factors being price, speed and execution as these are aspects both have in common.

Our No. 1 pick, Lightspeed, wins this category because the broker has only one item on their mind, and that is active trading. You won’t find the broker’s platform at a beauty pageant anytime soon, and you can forget research. What you will find though are programmable hotkeys for every possible order under the sun, low margin rates, direct market feeds and a secret to controlling cost so powerful that only a select few brokers offer it, and few traders actually understand it.

This secret is that Lightspeed passes 100% of all market rebates for adding liquidity back to its clients. The combination of limit orders and direct market routing can dramatically lower net trade costs. Confused yet? I’ll explain. Many market exchanges will pay your broker for routing your order to them. These rebates are usually no more than a tenth of a penny or two per share, but they add up. Using a broker like Lightspeed, routing a 1,000 share buy limit order to the NASDAQ will currently net you $0.0021 per share. Lightspeed charges $.0045 per share, so the original $4.50 trade now becomes only $2.40, thanks to a $2.10 rebate from the NASDAQ, nearly a 50% savings.

While Lightspeed gives this rebate to the client like the example above, most online brokers do not. The practice, known as receiving payment for order flow, is very common in the brokerage industry. In fact, only three brokers included in our review this year do not receive payment for order flow, and instead offer market rebate kickbacks: Lightspeed, Interactive Brokers and Cobra Trading. Only one broker, TradeStation, does not accept payment for order flow, nor does it pass on rebates.

Ironically enough, according to Wikipedia, payment for order flow was a practice pioneered by Ponzi scheme king Bernie Madoff. But let’s get something straight: Your average online broker is no crook. The SEC requires by law that new clients be notified upon opening their accounts. Furthermore, these rebates help pay for the slew of tools, research reports, mobile apps and customer service clients enjoy.

Order routing aside, our other top finishers in this category shine for different reasons. Interactive Brokers offers the lowest margin rates in the industry. TradeStation provides competitive rates with quality executions and an insanely powerful desktop platform rivaled only by TD Ameritrade’s thinkorswim. OptionsHouse has an easy to use platform, low pricing and ample experience from its parent PEAK6 that’ll make any options trader get excited. We recommend reading our full online broker reviews for a complete breakdown of each broker.

All in all, finding the right broker as an active trader first requires defining “active.” Next, ask yourself, “How really important is low cost?” Assume that the lower your trade costs are, the lower the overall quality of everything else you will have (platforms, tools, research, etc.) In the isolated world of a hyperactive trader, there is certainly no free lunch.

Behind active traders, there is arguably no client more valuable to an online broker than an options trader. Options trades offer much higher profit margins for brokers than stock trades, and as a result, competition is fierce in attracting these clients. This type of market atmosphere is great for investors because with healthy competition comes innovation and competitive pricing.

Our winner this year, OptionsHouse, understands what it takes to succeed in the niche. Backed by PEAK6 Investments, which is even based out of the Chicago Board of Trade in Chicago, IL, the broker offers two commission plans. The first is designed for less frequent traders, with single-leg options costing $5 for up to five contracts, and any additional contracts costing $1 each. Active options traders will prefer the second plan, which is $8.50, plus $.15 per contract for single-leg orders. Exercising and assignments are only $5 each.

To complete its offering, OptionsHouse also offers a variety of beginner and advanced options tools, which are all available through the broker’s web-based platform. However, when it comes to the ultimate platform for trading options, OptionsHouse is not king, tradeMONSTER is. tradeMONSTER’s web-based platform offers all the tools an options trader could want and displays them in magnificent form. Attention to detail, like being able to translate option Greeks to English and easy-to-understand risk/reward data, makes tradeMONSTER truly a one of a kind experience. While trading options on tradeMONSTER’s platform is an industry best, the broker misses the No. 1 spot because its $12.50 minimum for options trades is well on the pricey side.

Keeping the spotlight on high-octane platforms and tools for options traders, TD Ameritrade’s thinkorswim and TradeStation cannot be left out. Strategy Roller from thinkorswim allows clients to create custom rules and roll their existing option positions automatically. The number of settings and depth of customization available is impressive to say the least, and something we’ve grown to expect from thinkorswim. Not to be outdone, TradeStation’s OptionsStation tool makes analyzing potential trades a breeze, even going as far as including 3D P&L charts. Investors note, however: Popcorn and 3D glasses are not required, and while visually appealing, we did not see any distinct advantage over the traditional 2D P&L chart.

If innovation matters to you, optionsXpress is also worth a close consideration. While optionsXpress is the most expensive broker out of our top 10, the broker offers several unique features. In 2012, the broker launched its new “Walk Limit” order type, which will "walk" your order to try to get the most favorable price within the National Best Bid or Offer (NBBO). The broker also launched Idea Hub in 2012, which uses poplar scans to break down new possible options trades. Both of these tools have yet to be proven winners in the eyes of options traders; however, the foundation for success is in place.

In the world of options trading, there are a lot of great brokers to choose from. We found that nearly all the top option brokers offer P&L, risk analysis, and easy-to-read option chains. Ultimately, it comes down to personal preference and weighing priorities such as cost, ease-of-use and tools.

There are three important assets a broker can offer any new investor. The first and most important is an easy-to-use website and platform. After all, what good is trading online if you can’t figure out how to perform research or place an order? Second, naturally, a robust offering of educational content (see the “Education” section for a full breakdown) is always beneficial. Third is having access to virtual trading for practice and hone the art. “X” factors include customer service, community functionality and research.

Based on the above criteria, our No. 1 pick for new investors is TD Ameritrade. New investors have access to an easy-to-use platform and website through Trade Architect, more than 100 branch offices for live seminars, top-notch research and much more. Investools, a premium investing education provider brought to the broker through its acquisition of thinkorswim, is also a great asset. While we have not yet taken any of the $x,xxx premium classes offered, we can say that the free ones provided are interactive, thorough and a great resource. Our one gripe with TD Ameritrade is that its virtual trading capabilities are offered only through the thinkorswim platform, which is not built with new investors in mind. This caveat aside, TD Ameritrade is the best environment for new investors.

Earning our second recommendation based on its platform alone is tradeMONSTER. tradeMONSTER’s web-based platform requires no minimum deposit for access and is the perfect atmosphere for any new investor. Whether stock or options trading in a virtual or real environment, the platform defines ease of use. Personal notes can be added to stock charts as well as any new trades being made (trade tagging also allows for speedy post trade analysis). The one major caveat with tradeMONSTER is its on-site education, which we found to be mediocre in depth. Also, tradeMONSTER’s research capabilities are just okay. Despite the drawbacks, however, tradeMONSTER is still a winner for beginners.

Other top brokers in this category include Scottrade, TradeKing and ETRADE. Scottrade shines with its massive network of 505 local branch offices for live seminars, ever growing variety of on-site educational content, and easy-to-use Scottrader Streaming Quotes platform. Alternatively, TradeKing gives investors great education and boasts the No. 1 trader community, which includes user blogs, forums, verified trade history and the like. Lastly, ETRADE offers clients access to in-depth research, an easy-to-use website and excellent on-site education.

Navigating the challenges of being a new investor is no easy task. That is why having a good broker to gain confidence with, while learning the rules of the game, can and will pay big dividends down the road.

Each year there are online brokers that stand out for going above and beyond. Our broker Industry Awards recognize these brokers for their hard work and dedication in the past year.

For our 2013 Broker Review we interviewed executives from every participating broker. Known as the "Broker Hot Seat", these podcasts are roughly 10 - 15 minutes in length each and included four industry specific questions alongside a few fun questions.