Here  you have the list of brokers that I am posting a small review:

 

 

 

 

Some of my students are questioning what the best online broker for options trading. This is a difficult question to answer because I want to be independent of any brokerage or options trading platform, although I have my preference, as you may imagine. Each of my students should make their own decisions, especially regarding contract fees and the functionality of the platform.

As some of you know, I am using TD Ameritrade Thinkorswim platform to manage my Hedge Fund options trades.  Also, I am publishing screenshots of filled prices on that platform to my trading community that is following the fund trades and learning from them.

Nevertheless, from my perspective, the two best ones to trade options at the moment are widely used among top options traders (Tastytrade and TD Ameritrade / ThinkorSwim). There are many more, which I am listing below and make a short review (based on several reviews from other websites, for which I am giving credits). 

There are several online options brokers offering powerful platforms with features that were only available to institutional investors in the past. But, from the options trading platforms listed,  I want to inform you that I started to understand options trading (and get the sense of it) due to ThinkorSwim platform even before have been bought by TD Ameritrade. Nowadays, with faster computational performance, it is possible to have options trading platforms with flexible and powerful simulation tools. And ThinkorSwim is clearly the best out there! And at a fraction of the trading costs (trading commissions and fixed fees), that was available 5 or 6 years ago. When I started to trade options more than 10 years ago, options trading commissions were a big part of the profitability equation… but not anymore. This had brought down the need to have a big account value. Everyone now can be trading options with a minimum of $1000 and start to get profits.

The difference between pro traders and individuals/retail traders in terms of technology (not in investment capacity) is really shrinking in the last few years with the ease of access to technology and brokerages' continuous investment in advanced trading platforms and the tools offered. Beginners and advanced traders (either retail or institutional) can trade options with access to top risk management analysis tools.

This article will not intend to be an exhaustive review of any listed broker, but a framework with the goal you select the best broker for your needs and investor profile. And understand that there are no free lunches. Free means usually lack features (ex, Robinhood) that may impact your trading capabilities. Robinhood may be attractive for stock trading but for options trading, its simplified interface could not be suitable if we want to control several options variables to manage risk properly. In resume, Robinhood simplicity will serve the beginner options trader that is simply willing to buy Calls or Puts... sooner or later you will be eager to evolve to a platform with more capabilities.

Where can you practice options trading?

If you are new to options trading, I recommend practicing before putting your own money into it. You can choose an options trading platform that offers a free paper trading account. With paper trading, virtual money is used to place options trades in a simulated environment. TD Ameritrade (ThinkorSwim), Interactive Brokers, and more recently, Tastyworks, offer paper-trading for options.

Tastytrade: Best for Specialized Options Trading

 

Tastytrade (former Tastyworks) is a brokerage focused on options trading delivering one of the best platforms for options trading with ease of access to option chains. It also allows access to futures trading. It is a discount brokerage launched by the founders and developers (led by Tom Sosnoff) of ThinkorSwim platform that was bought by TD Ameritrade. It is a focused options trading platform that seeks options trading experts.

The platform is designed to help options traders to evaluate risk and make decisions and find stocks or ETFs based on implied volatility, probability of profit, manage Greeks, etc. Tastytradeplatform is geared towards fast decisions and action with ease of navigation.

Tastytrade’s executions are fast and costs low. Commissions are capped for opening orders for options on equities and futures at $10 per leg. No closing commissions are included. This was the first move in the industry and, along with its content counterpart, Tastytrade, is contributing to the financial industry disruption.

Tastytrade is suited for active options traders who want advanced options tools. While the platform has some educational content, gathered from Tastytrade. it’s mainly used by experienced traders. In fact, you do not need charts to trade on this platform and you can easily manage all the Greeks in your portfolio.

There are three ways to use Tastytrade platform:  website, mobile app, and Desktop version.

Accept Customers:  USA, most Central and South America and Europe

Pros

• Conveniently trade multiple leg options spreads (among different platforms) and using different ways to place trades (directly on the option chains or in a graphical representation)

• Offers options expert tools (indicators like IV Rank, liquidity, etc); All of the tools you’ll need for analyzing options are built into the platform

• $1.00 open options trades and $0.00 to close, with max $10.00 per leg 

• Fast, accurate executions

• Very stable and fluid tools on the web browser platform

• Focused on derivatives in particular (options and futures)

• Portfolio risk management (as well as individual underlying) position Greeks are available 

Cons

• Beginners to options trading may be overwhelmed by tastytrade at first

• Not all asset classes are available

• Does not include strong portfolio analysis when compared with Thinkorswim

 

ThinkorSwim / TD Ameritrade: The Best Options Trading Tools Pack

 

 

The ThinkorSwim options platform can be easily mastered and is very intuitive, even for beginner options traders. The interface is super easy to use and does everything you may need and is one of the best options trading platforms available.

Thinkorswim desktop platform is considered, by most professionals, the best and most powerful options trading software in the industry. It includes a powerful simulation tool for the analysis of options strategies (simple or complex) and checks the impact of changing any variable you may want to test. As you know, I am using this platform to trade at the moment my 10k account. Moreover, I can say that I learned options trading using its simulation tool and I am using it to teach options trading. It is very powerful and flexible relative to variables that we can change.  

There are several tools that also serve both stocks and options traders, like screeners, a charting package with strong technical capabilities (for the ones that like to use them). Also, it is available portfolio risk management tools and Greeks analytics.

Beginners to advanced traders choose to TD Ameritrade as their tools and resources stellar. If you are a serious retail options trader, the ThinkorSwim options platform offers a full pack of tools and research options for expert options traders. 

Thinkorswim platform can be accessed using the web, desktop, and mobile.

Pros

• Offers tools for options strategies, rolling spreads, and risk assessment

• Strong charting package with the possibility to develop indicators

• Huge selection of underlyings to trade

• Flexible ways to place complex spread trades

• Charges $0.65 per options contract (Open and Close)

• Offer demo account to practice trades, before going live

 

Cons

• Relatively high margin interest rates

• Can be difficult to use at the beginning due to the high number of tools

Ally Invest: Best Low-Cost for Beginners Options Traders

 

 

Ally Invest has really worked hard at attracting new investors for quite some time now, and options traders are not an exception. Ally Invest doesn't provide a dedicated mobile app. They use HTML5 and can be viewed on any device.

They offer excellent value for money, and their volume discounts make them an unbeatable deal. Their discount pricing is a great deal because it also applies for any balance amount.

 Ally invests in educational content. Get to know everything from the basics of options trading to an introduction to option greeks. Have a browse through their educational options articles to see if they might help improve your trading.

Fees are where Ally really shines. If you're on a budget and/ or want to minimize the impact high expenses can have on returns, then jump on the Ally Invest offers wagon.

The broker offers affordable, transparent, competitive fees, that won’t slow down your financial targets. 

 

 

Interactive Brokers:   Best for Large Accounts and Active Options Traders

 

InteractiveBrokers is the best choice on this list for high-volume professional options traders seeking customized per-contract pricing and access to options markets outside North America.

Pricing is complex but broadly reasonable (tiered or fixed pricing) based on your trading patterns and strategy. Per-contract pricing begins as low as $0.10 apiece and possibly lower for higher-volume trades, but $0.25 to $0.50 per contract is more common at low to moderate volumes, which makes them the cheapest platform (but fo big volumes).

Interactive Brokers (IBKR) was one of the original online brokers. Over time, they've niched their focus to advanced traders, and offer a full suite of tools that can help active traders to profit.

While they may not be the best for some, they do have a compelling offer for those who are highly active.

Interactive Brokers ranks high in most reviews because of its variety of smart, and advanced tools for investors interested in global investing trends. Although catered specifically to active and advanced trading, they have expanded and evolved their offerings to suit less active and less experienced traders.

OptionTrader Combo supports sophisticated strategies, including multi-leg trades with visibility into all available options chains, advanced analytics, and automatic hedging in the underlying equity position. Impressively, Interactive Brokers clients can access any electronic exchange around the globe to trade options, equities, and futures.

Traders can download Trader Workstation (TWS) app, or access it on the website. The platform has become increasingly more user-friendly and customizable, helping traders of all levels strategize and implement a winning plan. The TWS OptionTrader feature displays market data, and allows you to easily create and implement more complex strategies such as combination orders. 

 

 

 

. E*Trade: Best in Research Tools

 

E*Trade spares no effort to make novice options traders feel right at home. Start in its knowledge base, where helpful articles and videos define terms and introduce basic options trading strategy. 

The Power E*TRADE platform, where you can evaluate planned trades using advanced analytics or “execute” them without risking real money using a sophisticated paper trading tool.

E*Trade started off as the only online broker, and it has a long history of supporting beginner investors with educational tools and courses. However, expert-level traders can use its OptionsHouse platform to find more data and research the latest spreads.

If you are an options trader, E*Trade offers some of the best research tools and spread options. Recently, the company bought OptionsHouse and then relaunched as Power E*Trade.

This broker lets you work on complex spreads and customized options. For example, you can set up an iron condor strategy and define the strike width of your option spread. Only the data relevant to your options spread will stream for you.

Technical Insights is another analysis feature that gives you access to spectral analysis charts and shows you how your spread might perform in the future. With other tools like LiveAction scanners, you’ll see all of the potential trades based on the criteria you set in real-time.

 

 

. Tradestation:   Powerful Platform for the Advanced Trader

 

TradeStation has a powerful options trading setup built for active, experienced and professional traders seeking the flexibility to trade on the go. Contract pricing starts at just $0.50 per contract on the mobile-friendly TS GO platform. TS SELECT members, who enjoy a more comprehensive array of desktop trading capabilities, pay $0.60 per contract.

Tradestation is one of the most customizable platforms and is really geared towards options traders (and other traders in general). TradeStation has dedicated desktop and mobile apps. The big drawback here is that their platform can be a bit complicated for the inexperienced. However, if you're trading options, you need to be a strong investor.

TradeStation started as an advanced software just for traders. Now it has more options and a mobile app to help those expert traders who love stocks, options, and futures.

For research, TradeStation also earns high marks with more than 150 indicators to include in your test strategies. While you will love access to a plethora of options research tools, there are some drawbacks to this platform. It’s made for advanced users, so when it comes to trading, you’ll need to go through some tutorials first. There are also additional fees and a subscription to access some of the “pro” features.

Cons

 

Robinhood: A Limited Trading Platform With Low Fees

 

Robinhood positions itself as the free trading platform not being considered one of the top options trading platforms (there are some other platforms that you may find that are targeting more advanced traders). This minimalist stock mobile trading app gained notoriety for being the first stock trading platform to offer commission-free trading.  And this “no” cost approach is attracting a vast number of traders, especially beginner traders to a trading platform with limited functionalities namely risk management tools that a serious options trader requires.

If you are the kind of options trader that would like to “gamble” instead of managing an options portfolio, Robinhood platform will serve. The serious retail or individual trader that is willing to analyze their positions and take decisions based on Greeks risk management, there are better trading platforms. This means that free trading could cost you more than you could possibly believe due to the lack of tools for managing risk. If you are simply buying puts or calls Robinhood is a platform to consider. But, if you want to enter more complex spreads and manage the Greeks or have a Delta Neutral strategy, Robinhood will not be the right platform. Robinhood platform is not sophisticated to open advanced options trades (or spreads). 

But this does not mean that Robinhood is not good. It depends on what is your trading style and what you want to trade. If you want seamless access to both stocks and options without having the complexities of powerful brokerage apps like ThinkorSwim or Tastyworks and you are focused on most liquid underlyings, this should be considered. 

Robinhood options trading platform is only available on mobile.

Pros

• No commissions for both stock and options

• Streamlined mobile app

• Great for new investors who only want specific options and simple options trading 

• Easy and low-cost margin trading
 

Cons

• Poor trading platform and simulating tools for options trading

• No portfolio analysis tools / Greeks

• Limited number of underlying to trade with options 

• It has been reported some difficulties in filling prices

• Very limited in education resources and online tools

What is Options Trading?

Before entering in detail what is the best options trading broker, I would like to define options trading. The most common financial trading assets are stocks. There are also other financial asset classes like forex that are also widely traded. But focusing on stocks, they are part of a company's share capital. Trading stocks means, for the majority of people, that it is buying and selling individual stocks. Options trading is very similar to stock trading. However, a stock option is a contract to buy or sell a stock at a pre-negotiated price (usually called Strike Price) and by a certain date (Expiration Date). It is that simple... but, unfortunately, it is not as simple as stock trading where there is only one variable that is changing: the stock price. Options Trading is more complex because other variables influence an option price (or premium), like time, implied volatility, and, of course, the stock price. Additionally, a stock options trader can combine buying and selling options contracts in the same expiration and/or different expirations formulating options spreads. These have different risk profiles... But, this flexibility brings complexity because options are derivatives that are playing in a multidimensional plane. This is a more complex reality than stock trading which only deals with price changes...

In the last years, options trading is gaining interest amongst individual traders or retail investors. This is because the leverage options are given to traders.

What Type of Options Trader Are You?  

One thing to consider when choosing an options broker and platform is what type of trader are you. If you already trade options, you probably understand options risks and you have a strategy with complex spreads and you need to manage your positions by the Greeks. Or you want to buy Calls and Puts and have a highly speculative trading style. Also, how often do you trade? If you are an active trader, fees can hurt profitability. Some platforms have different tools and offer more complex spreads. Others are focused on simplicity. Options can be complex even for the advanced options trader. For beginner options traders, probably an easier platform to start would be the best approach.

 

Note: This broker review was made on my own experience with Tastytrade and TD Ameritrade. Other options brokers and platform reviews were based on independent third parties (nerdwallet, Tokenist, and brokerchoser).