Best Options Trading Platform
Not all options trading platforms are created equal. But which one is best for you? Read on to find out.
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Here are the top 7 best options trading platforms:
- Merrill Edge for beginners
- TastyTrade for active options traders
- Thinkorswim for mobile trading
- SoFi Invest for low-cost trading
- E*Trade for options screeners
- Interactive Brokers for options analytics tools
- TradeStation for options strategy building
Trading options could be complex and risky. To make the most out of it, you need the right trading platform. With it, you'll have all the right tools you need to trade with confidence.
But how do you know which platform to choose?
In this guide, you'll discover the best platforms for options trading, everything they have to offer, and who each is best for. You'll also learn about their pros, cons, and costs.
7 Best Options Trading Platforms
The best options trading platform largely depends on your level of experience and the tools you need.
| Options Trading | Minimum Deposit | Virtual Trading | |
|---|---|---|---|
| Merrill Edge | $0 + $0.65 per contract | $0 | No |
| tastytrade | $1 per contract ($10 max per leg) | $0 | No |
| Charles Schwab | $0 + $0.65 per contract | $0 | Yes (thinkorswim platforms) |
| SoFi Invest | $0 ($5 exercise/assignment fee) | $0 | No |
| E*TRADE |
| $0 for self-directed brokerage accounts; Managed portfolios start at $500 minimum | Yes |
| Interactive Brokers | $0.15-$0.65 per contract ($1 minimum per order) | $0 | Yes |
| TradeStation | $0 Commission + $0.60 per contract | $0 | Yes |
Most people fail at options trading because of a lack of knowledge and a failure to backtest trading strategies. If you don't have a plan or the discipline for trading, it's likely that you won't be successful.
Merrill Edge: Best for Beginners
Merrill Edge is considered the best options trading platform for beginners because of its easy-to-navigate platform and comprehensive educational resources.
Merrill Edge offers webinars, articles, and videos that will teach you what options trading is about and how you can succeed in this kind of trading. The education it gives is specifically designed for beginners so they can have a solid grasp of options trading.
It offers an Options Screener that helps you quickly see option opportunities. It allows you to screen assets based on a specified criteria.
It also has an Options Play that enables you to see a trend, specify your view, and execute option strategies after simply entering a symbol.
Commission and Fees:[1]
- Zero-commission for all option trades
- $0.65 per contract fee
- $0 exercise/assignment fee
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TastyTrade: Best for Active Options Traders
TastyTrade is best for active options traders because of its highly competitive trading commissions. The trading fees add up if you're an active trader, so it's good that TastyTrade has zero to low commissions.
This platform also has excellent options trading tools, options-focused education, and live video materials. Its customer support also answers promptly.
It also offers a Follow Feed feature that allows you to follow the trades of experts on the platform. This is beneficial when you want to learn a new trading strategy.
TastyTrade has strong options analytics that includes:
- Greeks for multi-leg strategies
- Profitability graphs for options positions
- Easy order entry that automatically sets up the trade structure: makes it easy to change the expiration dates and strike prices
- Probabilities for the potential profitability of various options strategies
Commission and Fees:[2]
- $1 to open options trades
- $0 to close trades
- $10 per leg maximum
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Thinkorswim: Best for Mobile Trading
Thinkorswim is an investment platform offered by Charles Schwab. Its mobile app has a simple and easy-to-use platform with a broad range of asset classes and excellent educational resources.
This is best for mobile traders because its app has all you need to be able to trade seamlessly on the go.
The Thinkorswim mobile app offers watch lists and real-time data. It also supports charting and allows trading multi-leg options.
Additionally, you can backtest strategies and set automatic triggers when specific criteria are met.
Commission and Fees:[3]
- Zero-commission options trades
- $0.65 per contract fee
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Yes, it's possible to get rich with options trading. However, it can take time. Trading profits usually come once you establish a profitable strategy and your trading decisions are no longer affected by your emotions. Additionally, you'll need discipline and perseverance to continue through losses and failures.
SoFi Invest: Best for Low-Cost Trading
SoFi Invest is best for beginner traders who are looking for low-cost trading. It offers zero-commission options trades, no contract fees, and its asset offering focuses on low-cost ETFs.
SoFi also offers lots of educational materials that are beneficial to beginner traders. Its options trading materials teach you the basics of trading options, including some common strategies.
It also provides essential trading metrics such as data on your maximum profits, losses, and breakeven point.
Commission and Fees:[4]
- Zero-commission trades
- $5 exercise/assignment fee
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E*Trade: Best for Options Screeners
E*Trade offers options screeners that are highly customizable according to your needs. It also offers screeners for stocks, ETFs, and mutual funds.
This allows you to choose options strategies depending on your risk tolerance or market factors. This is particularly beneficial if you're just starting out and don't have a profitable strategy yet.
In addition, this platform offers a Live Action tool that helps you identify unusual options and market volatility. This is a useful tool to know when to stay out of the market.
E*Trade also offers a wide range of educational materials and an easy-to-use platform that any beginner can pick up.
Commission and Fees:[5]
- $0.5-$0.65 options per contract fee
- $1.50 futures options per contract fee
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Interactive Brokers: Best for Options Analytics
Interactive Brokers (IBKR) offers the best options analytics tools that are more for advanced traders. This platform also provides ongoing improvements to its already excellent trading and analytics tools.
IBKR offers options spread templates so you can quickly compare strategies to find one that has the best risk/return profile. It also has indicators that can tell you if an options exercise would prove to be a good trade.
Its Options Portfolio scans market data to help you identify low-cost options strategies that are in line with your trading goals.
In addition, it has tools that graph potential payouts on options strategies, tools to estimate the probability that an option would be profitable, and a write option tool that scans your stock positions.
Commission and Fees:[6]
- $0.15 to $0.65 per option contract ($1 minimum per order)
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TradeStation: Best for Options Strategy Building
TradeStation offers OptionStation Pro, a trading tool that helps options traders build profitable options trading strategies and identify option opportunities.
It also provides a visual representation of the strategy's risk/reward probability.
This platform also allows you to backtest strategies against historical market data so you can see its effectiveness before trading with real money.
Its Strategy Optimizer also allows you to identify the parameters that produce the best results for each strategy.
Commission and Fees:
- Zero-commission options trades
- $0.60 options per contract fee
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Options trading isn't a gamble if you know what you're doing. If you know how to trade options, then you're using trade analysis methods to give you an idea of the market's potential movement. You act based on data and tested methodologies, not on gut feeling.
What is Options Trading?
Options trading refers to the buying or selling of options at a chosen price and at a specified time in the future.
Options are a derivative contract that's based on an underlying security or asset. For example, stock options are derivatives whose value is based on stocks (the underlying asset).
These contracts give the buyer the right (not the obligation) to buy or sell the asset at a specific price and at a specific point in time.
Buyers are then charged with a certain amount called a premium. They exercise their right to buy or sell the asset if the market prices move in a favorable direction. Otherwise, they just let the option expire.
How to Choose the Best Options Trading Platforms
Choosing the best options trading platform largely depends on your level of trading experience or expertise. Here are some considerations:
- Commissions and fees
If you're an active trader, the best platform for you is one that offers zero-commission trades and zero-to-low options per contract fees. These fees can pile up if you trade frequently. Make sure you check the platform's commissions and fees before using it. - Comprehensive educational materials
If you're a beginner, choose a platform that offers comprehensive educational materials so you can have a solid understanding of options trading before risking real money.Choose a platform that offers a trading simulator or paper trading so you can practice and build your confidence before risking real money.
- Options trading tools
If you're an experienced trader, pick a platform that has the trading tools you need. If you want to test out a new strategy, choose one that offers strategy building or strategy optimizing features.
Methodology
The list above was chosen based on the platform's fees, trading tools, and educational materials. Trustworthy platforms with zero-commission and competitive options contract fees were selected.
Most of the platforms are also good for beginners. We picked those that offer comprehensive educational materials so you can have the guidance you need before you start testing trading strategies.
Finally, we chose platforms that offer strategy building or optimizing features so you can backtest and finetune the strategy that works for you.
Bottom Line
Options trading is more complex than trading stocks. It also carries more risk. This is why you need a good options trading platform. Pick one with all the tools and educational materials to help you build confidence when trading.
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If you're just starting out, make sure to focus on the educational materials and simulated trading. Taking the time to really learn the ropes could help you out in the future.
References
- ^ Merrill. Self-Directed trading fees & commissions, Retrieved 01/14/2024
- ^ Tastytrade. Pricing, Retrieved 01/14/2024
- ^ Charles Schwab. Charles Schwab Pricing Guide for Individual Investors, Retrieved 01/14/2024
- ^ SoFi. What are the fees associated with options?, Retrieved 01/14/2024
- ^ E*TRADE. Pricing and Rates, Retrieved 01/14/2024
- ^ Interactive Brokers. IBKR Options Pricing, Retrieved 01/14/2024
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