Best Brokers for Trading Options in 2020: Top 5
If you want to get into options trading, you need the best possible options broker. Trading options is a huge difference from trading stocks. Options trading strategies are more complex and require flexible trading platforms to place orders fast and easy. Here are my top five brokers for trading options.
1. Charles Schwab: Best for Beginners
Charles Schwab acquired TD Ameritrade in 2019, and merging both brokerage houses will unfold impressive potential for investors, day traders and options traders. Both platforms, Charles Schwab Streetsmart Edge and TD-Ameritrade's thinkorswim, are excellent trading platforms. Options traders enjoy competitive rates as low as $0.65 per options contract. Once trading activity rises, traders can call them and ask for lower rates. I have seen rates going down as low as $0.30 per contract. thinkorswim and Streetsmart Edge are one of the best trading platforms for stocks. And they are also excellent for options trading, making Charles Schwab one of the best options brokers. The tools provided are functional and easy to handle. Another benefit of using Schwab or Ameritrade is that all finance products can be traded within one platform.
2. EOption: Best for Cost-Focused Traders
EOption has its specific strength in low-cost options trading, which makes it one of the best options trading providers right now. To get an advantage compared to Charles Schwab, traders need to trade more frequently. That's because the fee per options contract is only $0.10, but every trade has a base fee of $1.99 attached. Traders buying and selling options in lots of 5 contracts and higher benefit from this commission structure. If you trade only one contract at once, then EOption is not an option for you since the costs would eat up your profits quickly. The account minimum is low, and the tools provided comprehensive. The trading platform is robust, and the integrated paper trader is a safety net. Again EOption is excellent to save money by trading larger lot option sizes.
3. TradeStation: Best for Retail Traders
TradeStation offers one of the lowest rates to options traders. The account minimum is small, and options can be traded for as little as $0.60 by using TradeStation select. One of the big benefits of using TradeStation is an excellent trading platform. Similar to TD Ameritrade and Charles Schwab, also with TradeStation, commission-free stock trading is possible now. The customer service is reliable, and it is one of the best options trading platforms available. Trades can be placed by using the OptionStation Pro, which is free to use for clients.
4. Interactive Brokers: Best for Experienced Traders
Interactive Brokers wins in nearly any trading category. Their TraderWorkstation is considered the best platform for trading stocks, and it is also an exciting trading platform for options traders. But one thing is clear. The TraderWorkstation is a highly configurable trading platform with lots of configuration options. Beginners will need some extra time to get into it. But once you grasped the concept, one of the best options brokers is there for you. Interactive Brokers provides direct-market access. Therefore commission-free stock trading is not possible. But direct-market access leads to lightning-fast order executions, which gives traders an edge. Active traders like their API and discount commission rates. Trading options with Interactive Brokers means to pay as low as $0.25 per options contract. But to get this rate, you need to trade at least 50,001 contracts per month. Otherwise, you pay the entry commission level of $0.65 per options contract, which is in the same range as most bigger brokerages. Experienced and high active options traders consider Interactive Brokers an excellent all-in-one solution with a high-end trading platform, API functionalities and tons of configuration opportunities.
5. tastyworks: Best for High-Volume Options Traders
tastyworks lately became the go-to place for option trading beginners, more active traders, and professionals. They don't have the best trading platform for stocks, but they have one of the best platforms for options trading. tastyworks is one of the best options trading brokers and offers rates per contract as low as $0.50 per contract, even if only one option contract is traded. The real efficiency unfolds once a higher number of options are traded per leg. That's because commissions are capped. If you trade 25 lots and more, then tastyworks has one of the most competitive rates out there. Beginners like the easy to understand the platform, which makes it easy to get into options trading. Read my tastyworks review to learn more about the functionalities, costs and features.
Best Options Brokerage Conclusion
Charles Schwab, EOption, TradeStation, Interactive Brokers, and Tastyworks are the five best Options Brokerages out there. All of them have competitive rates and excellent options trading tools. The price per contract is always around 60 cents per contract, no matter what broker you choose. The account minimum and customer service are great with all those brokers, and the tools provided offer excellent functionalities for any experience level.
You are well-advised to test the platforms via demo-accounts or live-demos before making your final decision. The most important aspect is that you can handle the option trading platform fast and accurately. Therefore it is crucial to understand all functionalities before placing the first trades. My personal favorite is Charles Schwab, primarily due to the acquisition of TD Ameritrade. I think that there is a lot of positive potential for clients of both brokerage houses and the Schab's financial strength speaks for itself.