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Next to active traders, there is arguably no customer more valuable to an online broker than an options trader. Options trades offer brokers much higher profit margins 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 product innovation and competitive pricing.
The Best Brokers for Options Trading in 2019
Here are the top five brokerages for options trading, based on over 100 variables.
- E*TRADE - Best for options overall
- Interactive Brokers - Lowest commissions
- TD Ameritrade - Best options tools
- TradeStation - Well-rounded offering
- Charles Schwab - Unique order types
Best Options Trading Tools
Platform wise, web-based Power E*TRADE offers all the tools an options trader could want, and displays them in magnificent form. Attention to detail, such as automatic spread groupings, effortless scanning through strategySEEK, and easy-to-understand risk/reward data through tradeLAB, make Power E*TRADE a truly unique experience.
Keeping the spotlight on excellent 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 options positions automatically. The number of settings and depth of customization available is impressive, and something we have come to expect from thinkorswim.
Not to be outdone, TradeStation's OptionsStation tool makes analyzing potential trades a breeze, and even goes 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 unique features and functionality matter to you, Charles Schwab offers the “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 offers Idea Hub, which uses targeted scans to break down options trade ideas visually.
Looking at cost alone, Interactive Brokers takes the crown. At Interactive Brokers, there is no base charge, and the per-contract rate is just $.70. Additional savings are also realized through more frequent trading. That said, the broker is built primarily for professional traders and requires a $100,000 minimum deposit for margin accounts. Lastly, its trading platform, Trader Workstation, is the most challenging platform to learn out of all the brokers we tested for our 2019 review.
There’s a healthy variety of reputable brokers to choose from in the world of options trading. In 2019, investors should expect their broker to include scanning, P&L analysis, risk analysis, and easy-order management. Position management functionality and tying the experience together is where platforms such as Power E*TRADE and thinkorswim by TD Ameritrade distinguish themselves.
Options Trading Features
Ultimately, choosing an options brokers comes down to personal preference and weighing priorities, such as cost versus ease of use and tool selection.
On a feature by feature basis, all of our top five finishers this year offer the following features to their options trading customers.
|Has Education - Options||Provides a minimum of 10 educational pieces (articles, videos, archived webinars, or similar) with the primary subject being options. All content must be easily found within the website's Learning Center. Platform tutorials, FAQs, etc do NOT count.|
|Option Chains - Streaming Real-time||Option chains with streaming real-time data.|
|Option Chains - Greeks Viewable||When viewing an option chain, the total number of greeks that are available to be viewed as optional columns. Greeks = delta, gamma, theta, vega, rho.|
|Option Chains - Quick Analysis||The ability to jump straight from the option chain to a P&L chart or probability chart for deeper analysis. Viewing a summary P&L within the chain itself also qualifies.|
|Option Analysis - P&L Charts||When analyzing a theoretical option trade, a P&L chart is available.|
|Option Analysis - Probability Analysis||A basic probability calculator.|
|Option Analysis - Probability Analysis Adv||A tool to analyze a hypothetical option position. Displays a probability histogram / chart with optional customizations.|
|Option Positions - Greeks Viewable||View at least two different greeks for a currently open option position.|
|Option Positions - Greeks Viewable Streaming||View at least two different greeks for a currently open option position and have their values stream with real-time data.|
|Option Positions - Advanced Analysis||Ability to analyze an active option position and change at least two of the three following conditions - date, stock price, volatility - and assess what happens to the value of the position.|
|Option Positions - Rolling||Ability to pre-populate a trade ticket and seamlessly roll an option position to the next relative expiration.|
|Option Positions - Strategy Grouping||Ability to group current option positions by the underlying strategy: covered call, vertical, etc. Can be done manually by user or automatically by the platform.|
|Level 2 Quotes - Options||Level II options quotes available.|
|Screener - Options||Offers a options screener. Commonly referred to as a spread creation tool or similar.|
Options Trading Brokers at a glance (overall)
Best Brokers for Options Trading (Summary)
|Online Broker||Best For||Minimum Deposit||Base Fee||Per Contract Fee||Options Rating|
|E*TRADE||Options overall||$0||$6.95||$0.75||5 Stars|
|Interactive Brokers||Options rates||$0||$0||$0.70||5 Stars|
|TD Ameritrade||Options tools||$0||$6.95||$0.75||4.5 Stars|
|TradeStation||OptionStation Pro||$5,000||$5.00||$0.50||4.5 Stars|
|Charles Schwab||Walk-Limit orders||$1,000||$4.95||$0.65||4.5 Stars|