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 again 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.
Published by Blain Reinkensmeyer on Tuesday, April 15th, 2014 .
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 for trading options 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 visually break down new possible options trades. In 2013, optionsXpress expanded its Walk Limit order type to include single leg option orders and customizations to the order itself.
In the world of options trading, there are a lot of great brokers to choose from. In 2014, investors should expect their broker to include scanning, P&L analysis, risk analysis, and easy order management. Position management functionality and tying the experience all together is where brokers like tradeMONSTER really stand out and separate themselves. Ultimately, it comes down to personal preference and weighing priorities such as cost per trade versus ease-of-use and tool selection.