In the stock trading world, speculators purchase stocks at a lower price in hopes of selling at a higher price later for a larger profit. Unfortunately, buyers won’t know the stock market price when it’s time to dumb it.
For this reason, investors usually prefer trading options to protect them against losses from unfavorable changes in stock prices. It is highly beneficial to understand the ins and outs of options trading and learn about the best options trading platforms.
What are stock options?
Options are contracts that give investors the right (not the obligation) to buy or sell the underlying stock with a pre-agreed price and date.
This means the contract allows the investor to buy or sell shares at a fixed price before the agreed expiration date regardless of those shares’ market price.
You will notice there are two kinds of options; call option and put option.
- Stock call options give holders the right (not an obligation) to purchase a stock. The value of a call option rises when the price of the underlying stock price also increases.
- Stock put options allow holders the right to sell stocks. The stock put value goes down when the price of the underlying stock price also falls.
What to look for in an options trading platform:
Take a look at some of these critical points to consider when choosing a brokerage platform for options trading.
- Account minimums: Many brokerage firms expect clients to deposit several thousand dollars to open an account, whereas others allow you to open an account with no minimum deposit.
- Trading commissions: Seek brokers whose margin rates and trade commissions won’t impact your overall returns.
- Customer service: The options trading platform that brokers offer should have well-trained customer service representatives prepared to respond to your calls and emails.
- Research and trading tools: Good options trading platforms need to grant you access to a wide variety of research and trading tools that help you make the most of your trades.
Top online brokers for trading options
TradeStation was founded approximately 40 years ago as “Omega Research.” It has grown to be one of the best brokerage firms for traders and investors of every type.
It is a popular platform for investors who often trade stocks, forex, futures, and high volume options. TradeStation offers the following:
- Powerful mobile, web, and desktop platforms with real-time data in the form of charts and watchlists
- No options trading commissions through a service called TSgo.
- Comprehensive research
- High-speed execution
- A large amount of historical data equipped with back-test trading strategies
- Phone and online chat support on weekdays between 8 a.m. to 8 p.m. ET
TO open an account, the minimum balance requirement for options traders is $2000 on TradeStation. While options traders who use TSgo don’t incur a commission charge, they are still required to pay $0.50 per contract.
Thomas Peterffy established Interactive Brokers in 1978. It is now one of the world’s largest brokerage firms with a daily average of one million client trades.
IB offers its clients a vast line of products to trade, including stocks, futures, forex, ETFs, mutual funds, bonds, and options. They also have an incredible reputation for providing access to a substantial amount of international financial markets.
This platform includes:
- Easily customizable workstation with integrated tools like Model Navigator, IB Risk Navigator, and Options Analytics.
- Powerful analytical tools
- Real-time data for watchlists and charts
- An AI-powered assistant bot to help options traders easily find features
- Ability to trade options in over 30 countries, using 23 currencies
New investors may steer away from IB for options trading due to the lack of high balance requirements, educational resources, and inactivity fees.
Nevertheless, this platform still offers a promising choice for active traders who seek to investigate international markets.
The standard IB platform charges $0.70 per share that can drop to $0.15 per contract for high volume traders with 100,000+ monthly contracts.
TD Ameritrade was founded in 1975 and claimed $1 trillion in total client assets. This platform is deemed a great selection for options trading because of its excellent features, including;
- Free research tools
- Commission-free options trades
- Zero account minimum
- 24/7 customer service over the phone
- Advanced trading mobile and web platforms
TD Ameritrade trades cost $0 per trade but $0.65 per contract. New clients can take up to $600 bonus cash (on deposits over $250,000) with 60 days of free trades upon opening a new account. It is possible to earn up to $1,000 bonus cash when you refer a friend.
Options trading continues to be one of the most popular kinds of investing. The appeal is clear; it is a chance to bet on movements in stock prices and earn higher returns on your investment, generating income from covered calls.
Beginner and expert investors still require good brokerage firms. These firms need an abundance of high-quality research, good customer service, low trading fees, and stable trading tools to assist options trading. The best platforms for options trading offer exceptional choices and are designed to improve your overall performance.