Best Binary Options Broker 2020!
Good Choice for Beginners!
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2nd in our ranking!
Best Options Trading Platforms for 2020
The StockBrokers.com best online brokers 2020 review (10th annual) took six months to complete and produced over 30,000 words of research. Here’s how we tested.
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.
Best Options Trading Platforms
Here are the best options trading platforms, based on over 100 variables.
Best for options overall – Open Account
Promo Offer: Get $100 when you deposit just $5,000 into a new E*TRADE account!
Built as a web-based platform, Power E*TRADE innovates and delivers speed, ease of use, and the tools needed for traders to succeed. Once again, in our 2020 Review, Power E*TRADE won our award, “Best Web-Based Platform.” E*TRADE also took our top spot for options trading. Read full review
Low costs, great platform – Open Account
Promo Offer: Commission-Free Trades on Stocks, ETFs & Options Trades
As a trading technology leader, TradeStation shines. Options trading is a breeze using OptionStation Pro, a built-in tool within the TradeStation desktop platform designed for streamlined trading and robust analysis. Options tool capabilities include custom grouping for current positions, streaming real-time greeks, and advanced position analysis, to name a few. Read full review
Best options tools – Open Account
Exclusive Offer: Get up to $600 and trade commission-free with TD Ameritrade.
Once again, for the ninth consecutive year, TD Ameritrade is number one for trading platforms and tools, thanks to desktop-based thinkorswim. Whether day trading, options trading, futures trading, or you are just a casual investor, thinkorswim is a winner. Read full review
Best for professionals – Open Account
Exclusive Offer: New clients that open an account today receive a special margin rate.
Best Binary Options Broker 2020!
Good Choice for Beginners!
Free Trading Education, Free Demo Account!
Get a Sign-Up Bonus Now!
2nd in our ranking!
Trading tools within the Trader Workstation (TWS) platform are designed for professional options traders. From algo trading to Options Strategy Lab, Volatility Lab, Risk Navigator, Market Scanner, Strategy Builder, and Portfolio Builder, Interactive Brokers is built for professionals. Options commissions start at $.65 per contract with a $1.00 minimum and no maximum. Read full review
Unique order types – Open Account
Current Offer: $0 online stock, ETF, and options commissions at Schwab.
Schwab’s flagship downloadable trading platform, StreetSmart Edge, provides most of the bells and whistles options traders and day traders need to succeed. For options traders, Schwab’s All-in-one trade ticket, alongside the proprietary Walk Limit order type, are both excellent. Read full review
Options Trading Tools Comparison
|Option Chains – Streaming||Yes||Yes||Yes||Yes|
|Option Chains – Total Columns||30||37||33||32|
|Option Chains – Greeks||5||4||5||5|
|Option Chains – Quick Analysis||Yes||Yes||Yes||Yes|
|Option Analysis – P&L Charts||Yes||Yes||Yes||Yes|
|Option Probability Analysis||Yes||Yes||Yes||Yes|
|Option Probability Analysis Adv||Yes||Yes||Yes||Yes|
|Option Positions – Greeks||Yes||Yes||Yes||Yes|
|Option Positions – Adv Analysis||Yes||Yes||Yes||Yes|
|Option Positions – Rolling||Yes||Yes||Yes||Yes|
|Option Positions – Grouping||Yes||Yes||Yes||Yes|
|Platforms & Tools||4.5||4.5||5||5|
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 enables 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.
For professionals, 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 2020 review.
There’s a healthy variety of reputable brokers to choose from in the world of options trading. At a minimum, 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.
What is the best platform for trading options?
The best trading platform for options trading offers low costs, feature-rich trading tools, and robust research. Our all-around top pick in 2020 for options trading is Power E*TRADE. The web-based Power E*TRADE platform includes all the tools an options trader could want and displays them in magnificent form. My two favorites are strateySEEK and Snapshot Analysis.
What is a call option?
In its most basic form, a call option is used by investors who seek to place a bet that a stock will go UP in price. Buying a call option contract gives the owner the right (but not the obligation) to buy shares of stock at a pre-specified price for a pre-determined length of time. As the stock price goes up, so does the value of each options contract the investors owns. Each contract represents 100 shares of stock.
What is a put option?
In its most basic form, a put option is used by investors who seek to place a bet that a stock (or other security such as an ETF, index, commodity, or index) will go DOWN in price. Buying a put option gives the owner the right (but not the obligation) to sell shares of stock at a pre-specified price (strike price) before a preset date (expiration). The further the stock falls below the strike price, the more valuable each contract becomes.
What is the minimum amount required to trade options?
Each online broker requires a different minimum deposit to trade options. For most brokerages, the minimum deposit required is less than $1,000. To apply for options trading approval, investors fill out a short questionnaire within their brokerage account. Access to begin trading options can be granted immediately thereafter.
Is options trading risky?
Yes. Options trading is a form of leveraged investing. Any time an investor is using leverage to trade, they are taking on additional risk. Many times, this risk is unforeseen. With options, investors who buy a call or put risk the money they invested in the contract. However, when selling a call or put, if the trade isn’t protected (also known as going naked), then the investor is taking on significant risk. To protect investors, new investors are limited to basic, cash-secured options strategies only.
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.|
Explore our other online trading guides:
For the StockBrokers.com tenth annual best online brokers review published in January 2020, a total of 3,540 data points were collected over six months and used to score brokers. This makes StockBrokers.com home to the largest independent database on the web covering the online broker industry.
Participation is required to be included. Each broker completed an in-depth data profile and provided executive time (live in person or over the web) for an annual update meeting. Our rigorous data validation process yields an error rate of less than .001% each year, providing site visitors quality data they can trust. Learn more about how we test.
Still aren’t sure which online broker to choose? Email us a question! Whether you are a beginner investor learning the ropes or a professional trader, we are here to help. Email us your online broker specific question and we will respond within one business day.
The 8 Best Options Trading Platforms of 2020
From beginner solutions to expert portfolios
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Options trading is a somewhat high-risk area of the investment world where you can pay for the option to buy or sell a specific security at a set price on a future date. Based on fluctuations in market prices for those securities, the value of options rises and falls until their maturity date.
If you want to trade options, you’ll need an account with a brokerage that supports options. Each platform is unique and has its own pros and cons, so it is best to understand what you want in an options account and platform before you get started. Follow along to learn more about the best options trading platforms and which may be best suited for your options trading needs.
Best Overall: TD Ameritrade
TD Ameritrade takes the top spot in this ranking thanks to a combination of reasonable pricing, excellent beginner resources, and a top-of-the-line trading platform that works well for experts and professional traders. No matter where you are in your options trading journey, TD Ameritrade has something for everyone.
Trades at TD Ameritrade cost $6.95 per trade plus $0.75 cents per contract. There is no account minimum. The site offers a current promotion where you get 60 days of commission-free equity, ETF, and options trades with a deposit of $3,000 or more. You get additional bonuses with larger opening deposits.
Beginners have a wide range of resources that are great for options and other investing and trading strategies. For expert traders, the Think or Swim platform gives you Wall Street quality at a Main Street price.
Best for No Commission: Robinhood
You can’t get cheaper than free. While some professional traders are not happy with how trades are handled and processed at Robinhood, it is an excellent platform for beginners to get started with less risk. With no trading fee, you can buy and sell options without risking anything more than your initial investment.
Robinhood is a web-first platform and it doesn’t offer much when it comes to education and research tools. But if you read a book on options and want to try your hand as a hobbyist, Robinhood can certainly handle your needs.
Robinhood also offers commission-free stock trades, ETFs, a limited number of cryptocurrencies, and a limited number of ADRs (American Depository Receipts — a type of stock listing in the US for a foreign company). Because it is mobile first, it offers great real-time notifications for investments and trades on the platform.
Best for Experts: TradeStation
TradeStation started as a software company for traders, and even though it has grown over time, it has held true to its initial trading principles. If you want professional data and high-speed trade execution on an expert-level platform, TradeStation is a great choice.
TradeStation charges $5 per trade plus $0.50 cents per contract. However, it also offers unbundled and per-contract pricing. Professional and high-volume traders may do better with the flat rate cost of $1 per contract instead of the base + per contract fee most brokerages charge.
While it doesn’t offer as much for beginner traders and new traders, you could host a family office or business portfolio on TradeStation with no problems. In fact, its tools are so good it sells many of them for a fee to professional investors with accounts at other brokers. With an active account at TradeStation, you get those tools for free. Just beware the minimum $2,000 balance or five trades per year to avoid a $95 annual account fee.
Best for New Traders: Charles Schwab
Charles Schwab delivers an all around great experience with excellent customer service. Once you open a new account, trades are $.95 each plus $0.65 cents per contract. First-time clients get 500 commission-free trades for two years when you deposit $100,000 or more in a new account.
Schwab offers above-average research and education offerings. It also gives you a very good platform for trading on desktop, web, and mobile. Even outside of options, it is one of the best overall brokerages for a wide range of investing and trading needs.
With the large library of educational and research content, you can enter the high-speed options trading world with your eyes wide open to the risks and opportunities. That said, the competitive costs and quality trading platforms make it a worthy consideration for even the most experienced traders. Accounts require a $1,000 minimum to access options trading.
Best for Low Costs and No Minimums: Ally Invest
Ally Invest is another low-cost brokerage best known for its cousin Ally Bank. Like the bank, Ally Invest offers an easy-to-understand and low-fee brokerage lineup. Trades are $4.95 each plus $0.65 cents per contract. There is no account minimum. With a current promotion, you can get up to $3,500 bonus cash depending on the size of your deposit.
You can start with a low investment to learn more about Ally without worrying about big minimum balances or fees. But even some more experienced traders will be happy with the low costs and a wide range of services geared toward option traders.
Highlights include a powerful trading platform and valuable charts, data, and analytics to help you build your options trading strategy. In the world of discount brokerages, you can’t always take the value of a broker from its trading fees. At Ally, that’s certainly the case.
Best Per-Trade Fees: Interactive Brokers
If you are an active trader who prefers making frequent, small trades, Interactive Brokers may be the best fit. There is no pre-trade fee and options commissions are $0.70 cents per contract. High volume traders can qualify for lower pricing down to $0.15 cents per contract with 100,000+ contracts per month. This brokerage also offers pricing that is attractive to active stock and ETF traders. Different pricing applies to non-US options.
This brokerage is not good for passive investors with few trades per year or a large balance. The account requires a hefty $100,000 minimum balance or $10 in commissions per month to avoid an activity fee. The activity fee is the difference between your trading commissions and $10 per month to total a $10 minimum monthly charge. The account charges a higher $20 minimum if you don’t keep at least $2,000 in equities in the account.
If you do have the appetite for at least $10 in trades per month and/or can satisfy that $100,000 minimum, Interactive Brokers has excellent trading platforms. These tools include a natural language bot that will place orders based on your instructions and a professional-grade desktop platform.
Best Tiered Pricing: Lightspeed
Lightspeed is a brokerage with a focus on active and experienced traders. Lightspeed charges $0 per trade and $0.60 cents per contract with a $1 minimum per trade. Tiered pricing starts at 500+ contracts per month. Depending on your volume, discounted rates range from $0.20 cents at 100,000+ contracts per month to $0.50 cents at 500 to 2,000 contracts per month.
Lightspeed offers professional-grade trading platforms. The options platform is known as Livevol X and offers integrated order execution, analysis, customized layouts, historical data analytics, and other useful features. Like competing platforms, you can manage most common account needs right in the desktop, web, or mobile-based platform.
This brokerage is not as beginner friendly as others on our list, so you should look elsewhere if you are brand-new to options trading. But if you are experienced and want expert tools, you can find everything to whet your appetite at Lightspeed. With low pricing for high-volume options traders, you might find it the right home for your options brokerage needs.
E*TRADE ranks in the top 5 overall with terrific mobile apps
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- AccountMinimum: $0
- Fees: No commission for stock/ETF trades. Options are $0.50-$0.65 per contract, depending on trading volume.
E*TRADE, an online brokerage pioneer, has been held back by higher than average commissions for the last decade. This changed in Oct. 2020, when E*TRADE joined a majority of brokers in cutting equity and per-leg options commissions to $0. E*TRADE offers three computer-based platforms and two full-featured mobile apps that will appeal to a range of investing styles and interests. Its flagship web platform at etrade.com has been remodeled to be easier to navigate. Options tools they acquired and integrated into the Power E*TRADE platform, after purchasing former rival OptionsHouse, have given them some top-notch options tools. E*TRADE Pro, a downloadable platform for frequent traders, offers streaming real-time data and excellent charting tools. Aside from this E*TRADE broker review, we’ve also reviewed the E*TRADE Core Portfolios robo-advisor service.
- Rated our best broker for ease of trading and best broker for beginning options traders.
- Highly advanced mobile app with a powerful, yet intuitive, workflow.
- Options trading tools integrated into Power E*TRADE give E*TRADE a top end options platform that will help you find and develop trading strategies.
- Morgan Stanley announced its intent to acquire E*TRADE in Feb. 2020.
We’ll look at how E*TRADE ranks now that fees have come down and dig into its features and resources to help you decide whether it is the right fit for your investing needs.
Who E*TRADE Is For
For about a decade, E*TRADE has targeted engaged, active investors, and high-net-worth investors with over $100,000 to invest. E*TRADE was a top 5 broker in many categories last year, particularly in options and trading, and the fee elimination has bolstered its position for more active investors. The Power E*TRADE platforms, both desktop and mobile, bring clients robust options analysis and strategy development tools. That said, E*TRADE has continued to rank highly among the best online brokerages for beginners thanks to its excellent resources and usability. Like other large online brokers, E*TRADE has something to offer for all levels of investors.
Two excellent mobile apps aimed at different trading styles
Paper trading replicates the entire Power E*Trade platform
Get invested quickly by choosing a Prebuilt Portfolio
Per-contract options commissions are tiered with higher fees for less frequent traders
No direct international trading or data
No consolidation of outside accounts for a complete financial analysis
- E*TRADE’s mobile apps are extremely well laid-out, easy to use, and are among the most comprehensive and extensive apps we tested. There are two mobile apps available: regular E*TRADE and the Power E*TRADE app. The latter is focused on derivatives—options and futures. E*TRADE did extensive work this year to make the user experience consistent across platforms with multiple paths to the most frequently used features.
- Paper trading capabilities are becoming harder to find, but E*TRADE Pro’s desktop platform is being used extensively to test strategies and capabilities. The paper trading site uses delayed data so you won’t think you’re placing real trades. E*TRADE executives report that the trading simulator is being used extensively, with approximately 500,000 fake trades being placed per year.
- For those with a chunk of change that they want to invest quickly, E*TRADE’s Prebuilt Portfolios offer a fast track to the markets. You can choose from three different risk levels (conservative, moderate, aggressive) made up of ETFs ($2,500 minimum) or mutual funds ($500 minimum). There are no fees beyond the fund management costs.
- E*TRADE is hanging on to their tiered commission schedule for options trades, charging $0.65 per contract for less frequent traders and $0.50 for those who place more than 30 options trades per quarter.
- Investors who would like direct access to international markets or to trade foreign currencies will be better served elsewhere.
- Though you can see all of your E*TRADE accounts when you log in, you cannot consolidate your external accounts to form a complete picture of your net worth. Syncing of external accounts is a feature that many of E*TRADE’s direct competitors offer.
E*TRADE has a long history as an online broker, and this experience has paid off in terms of very intuitive and easy-to-navigate platforms. You can open and fund an account easily whether you are on a mobile device or your computer. There are two main web-based platforms that each have dedicated mobile apps mirroring the functionality of the respective web platform.
The Power E*TRADE app, for example, allows you to do almost everything you can through the Power E*TRADE web platform. The standard E*TRADE website and app, aimed at investors who are just getting started, have two-level menus with access to numerous screening tools, portfolio analysis, and education offerings. Placing an order with E*TRADE is straightforward with a Trade Ticket that you can save for later. Your portfolio positions are easy to monitor and E*TRADE provides analysis tools where you can measure your asset allocation against three model portfolios.
For active investors and traders looking for charting tools, price alerts and more, the Power E*TRADE site and app provides a wider set of trading focused features. Power E*TRADE can be set up to put the functions you use most often front and center so you don’t have to dig around for them. Power E*TRADE is the place for derivatives analysis and trading as it has all the features inherited from the firm’s acquisition of the OptionsHouse technology.
There is a downloadable platform, E*TRADE Pro, for advanced traders that can be customized extensively and is intended to be used on a desktop computer.
Watchlists are integrated across all of E*TRADE’s platforms, and the full range of tradable assets is accessible on the mobile apps. The workflow is smoother on the mobile apps than on the etrade.com website, though the website has been updated a bit over the last year. Using Power E*TRADE on a tablet, for example, is quite pleasant.
The standard E*TRADE website can be clumsy to navigate with its two-level menus. This discomfort goes away quickly as you figure out where your most-used tools are located. Compiling your watchlist is centered around the symbol lookup and your watchlists have a trade button inline with each stock if you decide you like what you see. New investors without a particular list can see stocks organized by common strategies and styles, including fundamental strategies like low price-to-earnings and Dogs of the Dow, and technical strategies like a long term RSI.
Power E*TRADE’s workflow is designed to let you access all your favorite tools in a single layout that you can tweak to your preferences. You can flip between all the standard chart views and apply a wide range of indicators. The trade ticket for Power E*TRADE is more detailed than the standard one and provides snapshot analysis that projects max profit and loss, events to look out for, and more. On all platforms, you’ll find a ubiquitous trade ticket with streaming real-time data. You can place orders from a chart and track it visually. You can also stage orders and send a batch simultaneously.
Range of Offerings
E*TRADE offers a solid range of assets that are tradable on all its platforms, including:
- Stocks long and short (6,000 on easy-to-borrow list)
- OTCBB (penny stocks)
- Mutual funds (over 4,600 no-load, no transaction fee)
- Bonds: Corporate, municipal, treasury, CDs, international
- Single leg and multi-leg options
- Robo-advisor, E*TRADE Core Portfolios, is integrated into website and mobile app
It is worth noting that E*TRADE does not enable cryptocurrency trading but you can trade CME Bitcoin futures. There is no international trading (outside of those available in ETFs and mutual funds) or currency trading. Other assets that can be traded online include U.S. Agency Bonds, initial public offerings, new issue program notes, secondary or follow-on offerings, and new issue preferred stocks.
E*TRADE clients can enter a wide variety of orders on the websites and E*TRADE Pro, including conditional orders such as one-cancels-another and one-triggers-another. Mobile users can enter a limited number of conditional orders. The most powerful order entry setup is on E*TRADE Pro, which allows trailing stop limit orders and several other advanced order types. Clients can stage orders for later entry on all platforms.
If you’ve been buying into a particular stock over time, you can select the tax lot when closing part of the position, or set an account-wide default for the tax lot choice (such as average cost, last-in-first-out, etc.). You can also set an account-wide default for dividend reinvestment.
The way a broker routes your order determines whether you are likely to receive the best possible price at the time your trade is placed. This is called price improvement, which is, in essence, a sale above the bid price or a buy below the offer.
E*TRADE’s order routing technology utilizes both spray and sequential routing, and most orders are sent to market makers. Approximately 95% of orders for stocks on the S&P 500 receive price improvement. The router looks for a combination of execution speed and quality, and the firm states that it has a team dedicated to monitoring its advanced order routing technology to seek the best execution available in the market. E*TRADE publishes its order routing report on its website and updates it quarterly.
E*TRADE’s fees are now competitive since it joined the race to zero fees by major online brokers in Oct. 2020. Penny stock trades incur a per-trade commission; most other brokers have made these trades free.
- E*TRADE charges no commissions for online equity, or ETF trades.
- OTCBB trades incur a commission of $6.95/transaction for clients placing fewer than 30 trades per quarter, or $4.95 with 30+ trades/quarter.
- There is no per-leg commission on options trades. Per-contract commissions are $0.65 for most clients; $0.50 for those who place more than 30 trades per quarter. Fees are waived for contracts priced at $0.10 or less.
- An order for 50 options contracts is $32.50 ($25 for frequent traders).
- Covered call trade of 500 shares plus 5 contracts would cost $3.25 ($2.50 for frequent traders).
- Mutual fund commission for funds outside the No Transaction Fee program is $19.99.
- Fixed income is $1 per bond with a minimum of $10 and a maximum of $250.
- Margin interest ranges from 10% for $10,000 balance to 8.75% for over $100,000 as of Jan. 2020.
- Futures transaction fees are $1.50; per contract per side plus exchange fees. Bitcoin futures fees are $2.50 per contract per side plus exchange fees.
- No fees for inactivity, account closure or transfer, exercise/assignment.
- Sending a wire is $25. Sending a paper check is $10.
- Voluntary reorganization fee for corporate actions is $38.
- Paper statements incur a $2 handling fee for accounts with low balances. Trade confirmations are free.
- Live broker fee is $25 per trade across asset classes. This fee is waived for Extended Hours overnight session trades placed via broker between 4 a.m. and 7 a.m. ET.
- Most orders incur exchange fees, which are typically fractions of a penny per share or contract, which E*TRADE passes through to its customers.
- E*TRADE’s margin interest rate is about 1% higher than its peers. Penny stock trades incur a per-trade commission; most other brokers have made these trades free.
How This Broker Makes Money From You and for You
The pressure of zero fees has changed the business model for most online brokers. In lieu of fees, the way brokers make money from you is less obvious—as are some of the subtle ways they make money for you.
- Interest on cash: Like most brokers, E*TRADE generates interest income from the difference between what you are paid on your idle cash and what they can earn on customer cash balances. E*TRADE clients can earn a small amount of interest on their uninvested cash if they take no action. If you move cash into a money market fund or an E*TRADE high-interest bank account, you could earn more, but you must take action yourself.
- Payment for order flow: Quite a few brokers generate income by accepting payment from market makers for directing their customer’s equity and options orders to those trading venues. This is called payment for order flow. E*TRADE accepts payment for order flow but its order execution practices generated significantly more price improvement than they received in payment for order flow.
- Stock loan programs: These programs generate revenue for brokers when the stock held in your account is loaned to another trader or hedge fund, usually for the purposes of selling that stock short. It is not obvious how much you will pay to borrow stock for the purpose of selling short. E*TRADE says that it shares approximately 50% of the revenue they generate from its stock loan program with the owner of the loaned stock. You can choose to enroll in its Fully Paid Lending Program but cannot control which stocks can be loaned.
- Price Improvement: E*TRADE clients enjoy a healthy rate of price improvement on their equity and options orders. On average, equity orders receive $0.0045 per share in price improvement and options orders receive $1.81 per contract.
- Portfolio Margining: E*TRADE clients who qualify can apply for portfolio margining, which can lower the amount of margin needed based on the overall risk calculated. Typically, portfolio margining works best for customers who trade derivatives that offset the risk inherent in their equity positions.
- E*TRADE clients who qualify can apply for portfolio margining.
- E*TRADE has a fully-paid stock loan program, in which it shares revenue generated by loaning stock to short-sellers with the clients who own the loaned stock.
- E*TRADE clients can earn a modest rate of interest on their idle cash if they take no action.
- Clients can manually move cash into a money market fund or an E*TRADE high-interest bank account, potentially earning a higher rate of interest. Since this isn’t a sweep program, customers must keep an eye on potential asset purchases to make sure there is cash available.
- E*TRADE clients can enroll dividend-paying stocks in a DRIP program.
E*TRADE’s research offerings on the website include flexible screeners for stocks, ETFs, mutual funds and fixed income, plus a variety of tools and calculators. Power E*TRADE features options-specific research and a great charting package.
The standard E*TRADE stock screener is customizable using 45 different criteria, across six categories. On Power E*TRADE, the Live Action scanner has over 100 pre-defined screens that scan the market in real-time on live prices and live analytical metrics based on unusual activity, volatility metrics, the Greeks, fundamentals, price movement or any option or stock activity. LiveAction provides numerous screens on technical, fundamental, earnings, sentiment and news events. Many of these built-in screens are unique to the Power E*TRADE platform. The Recognia scanner enables you to scan stocks based on technical events or patterns, and set alerts when new criteria are met.
The mobile stock screener has 15 criteria across six categories. Users can compare a stock to industry peers, other stocks, indexes, and sectors.
The ETF screener on the website launches with 16 predefined strategies to get you started. Scan and narrow ETFs using 74 different criteria including category, performance, cost, risk, Morningstar rating, and others. You can save custom searches and export results to a spreadsheet. Use the Comparison Tool to compare performance, fees and portfolio information of up to five ETFs and/or Mutual Funds. The Category Analysis Tool helps you compare and contrast the performance and risk of ETF categories. You can search to find all ETFs that are optionable too.
Options Strategy Tools
This is an area where E*TRADE shines. Power E*TRADE’s Live Action tool to let you scan for unusual options activity or equities with outsized volatility, then dig deeper or place a trade. Spectral Analysis is a visually stunning tool that helps you visualize maximum profit and loss for an options strategy, and understand your risk metrics by translating the Greeks into plain English. It’s a great way to learn how certain strategies work. The Risk Slide tool helps you quantify the potential impact of market events on your portfolio, and see how your investments could react to changes in volatility.
Mutual Fund Screeners
On the web, the All-Star Mutual Funds are a list of funds selected by E*TRADE Capital Management to get clients started. The list is selected from the universe of no-load mutual funds offered through E*TRADE Securities. E*TRADE Capital Management monitors the All-Star Funds and typically updates the list with fund additions and/or removals quarterly. There are typically 150–170 funds on the list. There is a fairly basic screener with a link to a more advanced screener.
Fixed Income Screeners
The Bond Screener allows clients to search for fixed income products by entering criteria that meet their needs. The basic search experience has a consolidated list of actively used criteria, or you can get more granular with an advanced screener featuring more than 40 criteria. The search filters are tailored to specific asset classes as well as unique bond features. Users have the ability to name and save custom searches.
Tools and Calculators
Power E*TRADE features numerous options-related tools including probability charts. The website includes a number of calculators including a taxable equivalent yield calculator, a marginal tax rate calculator, a retirement planning calculator, a Roth IRA conversion calculator, a required minimum IRA distribution calculator, and a loan repayment calculator, among others.
Trading Idea Generator
Power E*TRADE has the Live Action tool that includes technical pattern recognition. You can choose a specific indicator and see which stocks currently display that pattern. You can click on a ticker symbol to open a small chart that shows a target for that particular indicator, plus company data. At this point, you can add the stock to a watchlist, do more research, or place a trade. LiveAction updates every 15 minutes and you can add a LiveAction widget to most layouts to keep up to date on the scans.
The Strategy Seek tool is a rehash of an OptionsHouse feature that is intended as education as well as an illustration of how options work. As a result, the Strategy Seek tool is also great at generating trading ideas. All you have to do is enter a ticker, choose a market outlook (bullish, bearish, or neutral), decide how much you want to trade, and set when you expect it to pay off. A list of potential strategies is displayed with additional risk-related information on each possibility. Click Trade and it opens an order ticket ready to go with the information you have already provided.
Power E*TRADE features free Bloomberg TV plus real-time streaming news, Dow Jones, MarketWatch, PR Newswire, BusinessWire, GlobeNewswire and Briefing.com. The news sources are also available free on the website. Both mobile apps stream Bloomberg TV as well.
E*TRADE gives clients access to research and ratings from Moody’s, Thomson Reuters, Morningstar, MarketEdge, Trefis, Research Team, TipRanks, and New Constructs free of charge. TipRanks offers aggregated opinions from more than 4,000 sell-side analysts and 4,500 financial bloggers. Clients with over $100,000 in assets can check out Credit Suisse research; new account holders are given a 30-day trial.
On Power E*TRADE, charting enthusiasts have access to a wide array of technical indicators as well as Recognia’s ability to recognize technical events. Charting maintains the light or dark theme from your settings. Quotes stream on Power E*TRADE, while on the website, you can access snapshot quotes that are refreshed on demand.
On Power E*TRADE, you can look at your overall portfolio risk as well as your asset allocation. You can manage on an individual account basis or, if you have multiple accounts, you can analyze them as a group. The risk slide feature looks at risk across various ranges in price and volatility to show you where you are most vulnerable to market changes. You can’t consolidate assets held at other financial institutions to get a picture of your overall assets, though. Traders can also add notes to trades or watchlists on the Power E*TRADE platform.
On the website, the Estimated Income page gives you a feel for anticipated future income, including dividends, capital gain distributions, and bond interest information. Buying power and margin requirements are updated in real-time. E*TRADE has integrated capital gains management into its standard transaction reporting for taxable accounts and there is guidance in the Tax Center.
E*TRADE’s website offers a Learning Center that contains investing-related articles, help using the technology, and trading-related content. Beginners to trading can check out the Getting Started section and move on from there as they get more comfortable with investing concepts. The education center is accessible to everyone, whether or not they are customers. It offers investor education in a variety of formats and covers topics spanning investing, retirement, and trading. Disclaimer: there is some Investopedia content included in E*TRADE’s education center, along with content provided by E*TRADE Securities, Morningstar, and Forefield. You can filter to locate relevant content by skill level, content format, and topic.
E*TRADE offers a daily product webinar to help its traders and investors become proficient in the web, mobile and Power E*TRADE platforms. There are three to four virtual learning environment events (VLEs) each year, which are webinar-based all-day events with a structured, sequential learning format, which the firm plans to continue in 2020. The most recent event was the Options Forum which provided three tracks—Beginner, Intermediate, and Advanced—for a total of 12 education sessions directed toward options competency. The 2020 VLEs will be complemented by a complete on-demand library of all the content which will be delivered live, intended to allow customers to learn at their own pace and on their own schedule.
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