Back To Basics Friday: Picking an Options Broker

If you ask any diehard options trader what the best broker is for options trading, you’ll likely get a variety of answers. This is because many traders rate brokers based on different factors.

Having said that, one of the most important factors when selecting an options trading broker is cost.

When you bag a winning trade (or close out a losing trade), every dollar that you spend on commissions and fees is a dollar you could have had in your pocket.



When you make 100+ trades a quarter, trading commissions add up – seriously.

If you can reduce your transaction costs, you will, by definition, instantly become a more successful trader.

Here are our Favorite Options Brokers

Broker Highlights Commissions Account Minimum Current Offers Start Investing


More Info +
24/7 customer service and impressive trading platform $3.95 +
$0.50/contract
per trade
Get a $200 cash bonus or $500 in commission-free trades with Ally Invest!


More Info +
Downloadable trading platform w/ algorithmic trading capabilities $1.00 per option contract All new pricing & no maintenance fees for new accounts!


More Info +
Phunemonomal mobile trading application $6.95 + $0.75 None

 

Is the Cheapest Options Broker Automatically the Best Options Broker?

Definitely not, because you get what you pay for. But at the end of the day, online options brokers are kind of similar, because 99% of online brokers offer the exact same functionality, yet some still charge vastly higher fees. A great example of this is Charles Schwab.

Until they recently slashed their fees, Charles Schwab charged some of the highest fees in the entire industry. The ticket charge for a single options trade used to start at $9.99! For reference, deep-discount brokerages like Interactive Brokers charge $1.00 per contract.

Ally Invest is one of the newest stock and options trading brokers for 2017, and they have some of the best pricing in the entire industry. As an exclusive deal for active traders that make 10 trades or more per fiscal quarter, Ally charges a base charge of only $3.95 and $0.50 per contract!

It also depends on your typical trading volume. If you frequently trade small lots of contracts, brokers that offer options trading for $1.00/contract will be a better choice.

 

Web-Based Trading Platform vs. Downloadable

There are only a handful of retail brokers in the industry that offer downloadable trading platforms. For the most part, it’s cheaper and just as reliable to for a brokerage to offer a trading platform that is web-based.

One of the benefits of downloadable platforms, like TD Ameritrade’s flagship platform, thinkorswim, is more customization and advanced options analytics/trading features.

Other platforms like Interactive Brokers’ Trader Work Station (TWS) offer a lot of customization options, but after a certain point, changing the uptick and downtick colors for bids and asks in an option chain simply do not matter to your profitability.

The bottom line is, as long as there is no lag or delay in order entry/exit and quotes, there really is no problem with an active options trader using a web-based trading platform.



Therefore, for 99% of traders, web-based platforms are just as good, if not better than clunky downloadable trading platforms. Moreover, more and more traders are managing their portfolios from their smartphones via mobile applications, so the days of desktop trading might be a thing of the past.

So What’s the Best Options Broker?

The short answer is that it’s tough to say.

The Options Bro conducted a thorough review of some of the best options brokers, but ultimately the options broker that will suit you best largely depends on cost, personal preference, and your trading activity. Besides concrete factors like transaction costs, some traders are going to like one platform more than another platform.

— The Option Specialist

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About the Author: The Option Specialist