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Market research of trading platforms that offer options trading
Analyzing the structure of the global financial market, one can see that some of its tools stand out against the background of other elements that are an integral part of online trading. Among these assets, options (binary, classic or digital) are the most talked about and popular among online trading fans. Some users, including professional financiers, believe that options have a great future and very soon their market will function according to general rules, while others call the considered instruments the next fraudulent project. There are also economists who argue that options should not be taken seriously at all. It is best to take them as an additional opportunity to lose your money (sometimes and win) in a casino or a playground, working in online mode.
General analysis of the market specializing in options trading
Many traders (especially it concerns fans of online trading without an economic education) believe that options trading practically does not differ from casino gambling. Studying open sources on the Internet, you can find a large number of web resources, the creators of which fully agree with this statement. But such an attitude to the question under consideration makes one wonder, why do we need such reviews, market analysis, ranking of brokers who deal with options, etc.? All of these options will be absolutely powerless, if the result depends on the case and good luck.
Of course, determining the direction of changes in the price of an asset is very difficult in the short term. But this does not mean that transactions with options are of interest only as a new gamble for money. Experienced traders recommend anyone who plans to work on the trading floor, hoping solely for their luck, to abandon the idea of registering a profile on the resources of financial brokers. Clients of such companies to prepare accurate forecasts for changes in the value of assets apply the methods of technical or fundamental analysis.
The first method is based on studying the history of changes in the value of assets. In this case, traders are confident that the “ups” and “downs” of stock prices, gold, oil or cryptocurrency, periodically repeated. That is, a detailed analysis of the chart, which shows all changes in the value of the asset, will help the trader to predict his “behavior”, both in the near future and in the long term.
Fundamental analysis involves finding and studying information about all parameters that may affect the value of an asset. These include:
• Interest rates of financial institutions.
• Balance of payments of the country.
• Public confidence in the national currency and banking system.
• Functions and capabilities of central banks.
Another important indicator that is an integral part of the options market is the volatility of securities, currency, commodities and other assets. It shows the range of changes in the value of financial market instruments over a period of time. For professional traders, this indicator is one of the most important. On its basis, the compilation of almost all investment forecasts is carried out. High volatility shows that this asset allows you to get a high income, but such operations are associated with greater risk.
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Analyzing the market of brokers who are engaged in options trading, it is impossible to ignore the negative phenomena of this direction of online trading. We are talking about fraudsters who pretend to be decent brokers, which helps them to deceive gullible traders. And if the criminals who apply the standard scheme (to collect the maximum amount promising “fabulous” conditions to their clients), in principle, can be calculated, the more inventive adventurers can work for years without fearing that someone will be able to prove fraud. Such “brokers” often use fake charts and signals, use the money of traders for their own purposes (for example, issuing short-term loans), create financial pyramids, paying well for the work of users who invite active traders, etc.
If you plan to make money on binary options, before registering an account on the platform that interests you, be sure to check this broker. For these purposes, you can use “black lists”, reviews and comments of experienced traders or recommendations of more experienced colleagues.
Leading Options Brokers
To date, the list of reliable brokerage companies that deal with binary, classical or Digital options, includes more than a dozen trading platforms. Consider what offer their customers the most famous representatives of this category.
The above companies are the leaders of the options market according to several well-known services that are respected by many representatives of the global financial market. It is also necessary to take into account the fact that the presented trading platforms are engaged not only in operations with binary or classical options. They provide their clients with the opportunity to earn decent money with the help of CFD contracts, concluding transactions for raw materials, precious metals, securities, etc.
Summing up, we can say that options trading is a highly profitable activity, operations are carried out very quickly, the trader knows how much he will earn on each transaction, and in order to access his account it is enough to have a modern mobile device. The main disadvantage of this area of financial activity is a high probability of losing your money.
“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”
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.
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:
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Best Options Trading Platforms
The best options brokers have a wealth of tools that help you manage risk
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Options trading has become extremely popular with retail investors since the turn of the 21st century. Our best options brokers have a wealth of tools that help you measure and manage risk as you determine which trades to place. They also include valuable education that helps you grow in sophistication as an options trader.
Best Online Brokers for Options Trading in April 2020:
- tastyworks: Best Options Trading Platform
- tastyworks: Best Broker for Advanced Options Traders
- tastyworks: Best Broker for Mobile Options Traders
- E*TRADE: Best Broker for Beginning Options Traders
- eOption: Best Broker for Low-Cost Options Trading
Best Options Trading Platform, Best for Advanced Options Trades, and Best for Mobile Options Traders: tastyworks
- AccountMinimum: $0
- Fees: $0.00 stock trades, $1.00 to open options trades $0.00 to close
Tastyworks says that more than 90% of the trades placed by its customers are derivatives, so they naturally spend their time designing a lot of tools specifically for options and futures traders. Everything is designed to help traders evaluate volatility and the probability of profit. Tastyworks’ entire platform is geared towards making decisions and taking action. Tastyworks opened its virtual doors in 2020, so it isn’t saddled with legacy systems that bog down many of the older online brokers. This has helped it tremendously in keeping the options trading experience to the essentials. Tastyworks’ executions are fast and the costs are low, with commissions capped for opening orders for options on equities and futures at $10 per leg.
Watchlists are a key component of the tastyworks platform, and they are the same on mobile, web, and download. The look and feel of the mobile platform is very similar to the desktop versions, though you’ll find price wheels and ways to define trades that minimize the possibility of making a mistake. As you build a position from a chart or from a volatility screener, a trade ticket is built for you. There’s also a video viewer embedded so you can keep an eye on the tastytrade network. Though a newcomer to options trading might be initially uncomfortable, those who understand the basic concepts will appreciate the content, features, and focus apparent throughout tastyworks’ platforms.
All of the tools you’ll need for analyzing and trading derivatives are built into the platforms.
The charting capabilities are uniquely tuned for the options trader. If you have multiple positions on a particular underlying, you can analyze the risk profiles of the combined position.
There are hours of original video from tastytrade every weekday, offering up-to-the-minute trading ideas, plus a huge library of pre-recorded videos and shows.
Newcomers to trading and investing may be overwhelmed by tastyworks at first.
There is no fixed income trading (outside of ETFs that contain bonds) for those who want to allocate some of their assets to a more conservative asset class.
Any additional portfolio analysis beyond profit and loss requires setting up a login on a separate site, The Quiet Foundation, which is also part of the tastytrade empire.
Best for Beginning Options Traders: E*TRADE
- AccountMinimum: $0
- Fees: No commission for stock/ETF trades. Options are $0.50-$0.65 per contract, depending on trading volume.
New options traders need some help in understanding how trading derivatives can help improve portfolio returns. E*TRADE’s more advanced platforms are elegantly designed and guide you along the way. When you graduate to options and derivatives, the Power E*TRADE website and mobile app can help you learn. The Power E*TRADE site and app 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. The platform has all the features inherited from E*TRADE’s acquisition of OptionsHouse technology, which includes a wealth of helpful educational resources for the developing options trader. Watchlists are integrated across E*TRADE’s platforms, and the full range of tradable assets is accessible on the mobile apps. The workflow is very smooth on the mobile apps. We also found that using Power E*TRADE on a tablet is quite pleasant.
Mobile apps are extremely well laid-out and easy to use and are among the most comprehensive and extensive apps tested.
Spectral Analysis on Power E*TRADE is a visually stunning tool that helps you visualize maximum profit and loss for an options strategy and understand your risk metrics
You can test strategies using the paper trading capabilities of E*TRADE Pro’s desktop platform, which uses delayed data so you won’t think you’re placing real trades.
On all platforms, you’ll find a ubiquitous trade ticket with streaming real-time data.
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 should look elsewhere.
You cannot consolidate your externally-held accounts to form a complete picture of your net worth on E*TRADE.
Best for Low-Cost Options Trading: eOption
- Account Minimum: $0
- Fees: $0 per stock/ETF trade, $1.99 base per leg plus $0.10 per contract for options trades
eOption charges $1.99 per leg for options trades, but the per-contract fee is significantly lower than its competitors, making it great for heavy options traders. eOption also offers commission-free stock and ETF trading so those who are options-oriented traders but also want access to other assets at a low cost will have no issues here. Clearing and exchange fees, typically a fraction of a penny per share, are spelled out on the order confirmation screen and are passed through to customers. eOption also scored highly for its relatively low margin rates.
eOption offers great value for frequent options traders.
The browser-based eOption Trader platform is easy to use.
Newsletter subscribers can auto-trade their alerts.
Limited education offerings.
News feeds are limited.
Any OTCBB (penny stock) trades must be made with a live broker.
Other Options Considerations
The commission structure for options trades tends to be more complicated than its equivalent for stock trades. Until the commission cuts that swept the industry in the fall of 2020, most brokers charged a fee for each leg of an options spread plus a commission per contract being traded. The per-leg fees, which made 2- and 4-legged spreads expensive, have been eliminated industry-wide, for the most part. We are also seeing some brokers place caps on commissions charged for certain trading scenarios.
Investors with fairly large portfolios can also take advantage of portfolio margining at some brokers. This is a practice that assesses the total risk inherent in a portfolio that contains stocks and derivatives. Investors with large portfolios can use portfolio margining to reduce the size of the margin loan.
What Kind of Options Trader Are You?
The first and most important piece of information to consider before selecting an options trading account is what kind of trader you are. What is your trading style and risk appetite? Which tools would you like to have handy?
Options are complex products to understand and trade. All of the brokers listed above allow customers to build complex options positions as a single order. Some brokers, such as Vanguard, only allow one position per order, leaving it to the individual trader to place multiple orders one at a time to create a combination position. Merrill Edge lets you place two-legged spreads, but anything more complex will require an additional order.
If you’re just getting started with options trading, the quality of education and help offered by your broker is important. Frequent traders and those who trade a large number of contracts will be more sensitive to commissions and fees, so check out your prospective broker’s charges and make sure you understand them.
Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on its platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting thousands of data points that we weighed into our star-scoring system.
In addition, every broker we surveyed was required to fill out an extensive survey about all aspects of its platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of its platforms at our offices.
Our best options brokers have a wealth of tools that help you measure and manage risk as you determine which trades to place. These brokers include valuable education that helps you grow in sophistication as an options trader. Investors with fairly large portfolios can take advantage of portfolio margining at certain brokers, a practice that assesses the total risk inherent in a portfolio that contains stocks and derivatives, and can reduce the size of your margin loan.
Our team of industry experts, led by Theresa W. Carey, conducted our reviews and developed this best-in-industry methodology for ranking online investing platforms for users at all levels. Click here to read our full methodology.
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