When it comes to the best options brokers, Tastytrade stands out as our top choice. Why? Well, let us break it down for you. Tastytrade offers competitive options trading commissions, an array of powerful trading tools, and a treasure trove of educational content to boot.
We believe in giving you the straight scoop, so you should know that our product reviews are totally unbiased. We don’t let anyone twist our arms or open their wallets to influence us.
Our opinions are ours alone, and we’re here to help you make informed decisions. If you’re curious about how we make our money, you can delve into our advertiser disclosure to get the lowdown.
In today’s market, options trading is like a shining star. The current financial landscape has tilted the scales in favor of options, thanks to stricter monetary policies. Stocks often seem to take a nosedive faster than they climb, which makes options trading an appealing choice.
But what’s options trading, you ask? Well, it’s like having a special right, but not an obligation, to buy or sell something at a certain price on or before a specific date.
We’ve done the legwork for you. Our team dug deep, researched, and reviewed the best options trading platforms out there. Why? So you can make a smart choice!
We wanted to find out which platform offers the best blend of education, speed, affordability, handy tools, research resources, and more, all tailored to your needs.
|Broker||Minimum Deposit||Per Contract Options||Max Options Legs||Total Options Chains Columns||Avg. PFOF Per Contract|
|E*Trade||$0||$0.50 to $0.65||4||31||$0.39|
What you'll learn:
1️⃣ Tastytrade (Best Overall)
- Account Minimum: $0
- Fees & Commissions: $0 for stock trades, $1 for opening options trades (max $10 per leg), $0 for closing options trades
Why Trade with Tastytrade?
We’ve given the crown to Tastytrade (formerly tastyworks) for a good reason. It’s our top choice because it offers some of the most competitive options trading commissions in the market. Plus, it’s packed with fantastic options trading tools and a wealth of educational content, including live videos.
Pros & Cons of Tastytrade
|Competitive options trading commissions||Limited investment choices|
|Powerful trading tools||Weak portfolio analytics|
|Abundant educational content||No news or fundamental analysis|
|Unbiased product reviews|
|Transparent advertiser disclosure|
Tastytrade comes from the brains behind TD Ameritrade’s thinkorswim® app, which is known for its excellence. The founders aimed to create a platform that empowers self-directed retail traders by granting them access to markets and sophisticated analysis tools. Tastytrade primarily caters to active investors and traders, offering stocks, ETFs, options, and cryptocurrency trading.
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One of Tastytrade’s biggest advantages is its competitive fee structure for options trading. They charge $1 per contract to open each leg of an options trade, but the fees are capped at $10 per leg, no matter the trade size.
There’s also a $0.10 per contract clearing fee. The standout feature here is that Tastytrade doesn’t charge a commission for closing positions, making it extremely cost-effective for options trading.
For instance, if you were to open and close a 50-lot vertical call spread (a total of 200 contracts traded for opening and closing the position), it would cost you just $40 at Tastytrade. This comprises the maximum $10 per leg for the two legs ($20) plus the $0.10 clearing fee for 200 contracts ($20).
In contrast, the same trade at E*TRADE would set you back $100, using its $0.50 fee per contract for higher volume traders. The cost for the same vertical spread trade with 100 contracts would be $60 at Tastytrade ($20 for the two legs and $40 in clearing fees) and $200 at E*TRADE. Tastytrade becomes even more cost-effective for high-volume, frequent traders.
Tastytrade doesn’t just offer low commissions; it also provides robust options analytics, a user-friendly platform workflow, and seamless trade input.
You can access the Greeks for specific multi-leg strategies, profitability graphs for options positions, and an easy order entry that automatically sets up the trade structure for chosen options strategies, like a vertical spread or butterfly, via an intuitive drop-down menu.
It’s also simple to adjust expiration dates and strike prices for your chosen options strategy. The platform even provides probability estimates for the potential profitability of various options strategies.
Tastytrade’s desktop and mobile platforms are designed to have a consistent look and feel, although some adjustments are made to accommodate the smaller screens of mobile devices. While you get real-time streaming quotes, you won’t find fundamental research or live-streaming news here.
However, Tastytrade offers a “Follow Traders” feature, allowing users to track the trades of in-house celebrities. When it comes to customer service, Tastytrade shines, earning an excellent rating from over 350 reviewers on Trustpilot, known for its prompt and capable support.
2️⃣ Interactive Brokers (Best for Advanced Traders)
- Account Minimum: $0.00
- Fees: $0.00 commissions for equities/ETFs on IBKR’s TWS Lite; Low costs scaled by volume for active traders with advanced features like order routing; $0.65 per contract for options on TWS Lite (base rate for TWS Pro users, scaled by volume); $0.85 per contract for futures.
Why Trade with Interactive Brokers?
Interactive Brokers (IBKR) stands tall as the go-to choice for advanced options traders, and here’s why: It offers low options commissions, continuously enhances its already stellar trading and analytical tools, and is steadfast in delivering efficient order execution.
Pros & Cons of Interactive Brokers
|Exceptional options screeners and probability calculators||Advanced platform features may be daunting for newcomers|
|Top-tier order execution and order routing controls||Order routing not accessible to all clients|
|Widest array of trading vehicles and market locations||Lack of backtesting for custom algorithms|
|Attractive low margin rates|
|Paper trading available|
About Interactive Brokers
Interactive Brokers (read real reviews on Trustpilot) has taken the crown for advanced options traders, surpassing last year’s champion, Tastytrade. The shift happened because Tastytrade still doesn’t provide streaming news or fundamental research, while IBKR continues to make strides in constructing a top-tier platform.
Founded in 1978 by the current chairman, Thomas Peterffy, under the name T.P. & Co., the company made history by creating the first handheld computers for trading and opened its doors to the public in 1993 when it became Interactive Brokers Inc., a U.S. broker-dealer.
Over time, IBKR has become the go-to choice for sophisticated traders because it offers virtually every type of security across most markets on a single platform.
In 2021, IBKR introduced IMPACT, a trading application aligning investors’ values with their investments, and Global Analyst, an online tool for identifying undervalued companies. The company has also developed innovative tools to enhance trading analysis and automation, supporting options trading globally across more than 30 market centers.
Interactive Brokers boasts low options commissions for active traders, ranging from $0.15 to $0.65 per contract.
However, it’s important to note that the $0.65 per contract commission applies to customers trading fewer than 10,000 contracts per month, which can be on the higher side for lower-volume options traders. There are volume-based breakpoints that vary with premium levels, with the lowest rate of $0.15 per contract requiring trading volumes of over 100,000 contracts per month.
IBKR also shines in execution, allowing larger clients to route their own orders and offering commission-free trading (excluding options), which comes with payment for order flow.
Interactive Brokers has developed outstanding options analysis tools, also available on their mobile app. These tools include options spread templates for easy strategy comparison and one-tap options strategies for making adjustments to strategy legs.
Additionally, they display key options Greeks on the quote page and enable strategy fine-tuning through filters. The platform even allows the exercise of all or some options and provides indicators for assessing early options exercise benefits.
Beyond these features, Interactive Brokers equips traders with tools for graphing potential payouts on options strategies and estimating option profitability probabilities. Specific options tools include a write option tool that calculates the number of covered options to write against uncovered stock positions and rollover tools for soon-to-expire options.
Moreover, options analytics at Interactive Brokers enable traders to manipulate options pricing data, including price, time, and implied volatility.
Lastly, Interactive Brokers’ Options Portfolio actively scans market data to identify low-cost options strategies aligned with user objectives. While it might seem like a lot to digest, it’s a treasure trove for advanced traders seeking a comprehensive toolkit.
3️⃣ TD Ameritrade (Best for Mobile Traders)
- Account Minimum: $0.00
- Fees: $0.00 for equities/ETFs; $0.65 per contract for options; $2.25 per contract for futures
Why Trade with TD Ameritrade?
Our top choice in the mobile options trading category is TD Ameritrade. What sets it apart? The remarkable options analytics, research resources, and trading tools offered through its thinkorswim® mobile app made the decision easy.
Pros & Cons of TD Ameritrade
|Wide array of product offerings||No fractional shares trading|
|Excellent educational materials||Lack of automatic cash sweep|
|Strong options analytics via thinkorswim®||Limited cryptocurrency trading (restricted to Bitcoin futures)|
|Almost equal capabilities between desktop and mobile platforms|
About TD Ameritrade
TD Ameritrade (read real reviews on Trustpilot) has claimed the crown as this year’s Best for Mobile Options Traders, displacing last year’s winner, Tastytrade. While the competition between Tastytrade and thinkorswim® has been close in recent years, Tastytrade’s absence of news and fundamental research gave TD Ameritrade the edge.
Founded in 1975 and acquired by Charles Schwab in 2019, TD Ameritrade is a full-service online broker renowned for its comprehensive educational resources, which cover the fundamentals of investing and more. The platform caters to all types of investors, whether they’re active traders or more passive in their approach.
Although TD Ameritrade’s options commissions are slightly higher than some competitors focused solely on stock and options trading, the ability to access a wide range of financial products from a single platform can make it a worthwhile choice.
The thinkorswim® desktop application can be tailored to individual preferences and typically offers more features than the web and standard mobile platforms. However, TD Ameritrade’s thinkorswim® mobile app does a commendable job of replicating the functionality of its robust desktop counterpart.
It boasts features like watchlists, real-time streaming data, and the capability to chart and trade directly from charts. While it lacks the ability to draw trend lines, its charting capabilities still surpass those of the standard mobile app. Consequently, thinkorswim® mobile serves as the primary mobile tool for options traders.
Similar to the desktop version, the mobile variant allows traders to execute multi-leg options trades. Traders can opt for TD Ameritrade’s order routing technology or direct their orders to specific exchanges. Additionally, traders can backtest their strategies and set orders to trigger automatically when predefined criteria are met.
TD Ameritrade, while not exclusively an options platform, offers a broader spectrum of services that includes robust customer support options, industry-leading educational resources, and tools that extend beyond trade analysis to assess your overall financial situation.
Within this expansive offering, thinkorswim® mobile stands out as the go-to experience for options traders seeking mobile market access.
4️⃣ E*Trade (Best for Beginners)
- Account Minimum: $0
- Fees: No commission for stock/ETF trades; Options fees range from $0.50 to $0.65 per contract, depending on trading volume.
Why Trade with E*Trade?
E*Trade clinches the top spot for beginning options traders due to its outstanding investor education tools, user-friendly platform design, and top-notch customer service, all tailored to the needs of beginners.
Pros & Cons of E*Trade
|Excellent educational content||Higher commissions for options trading|
|Robust and user-friendly desktop and mobile platforms||Higher fees for less frequent traders|
|Paper trading available||No support for international trading, forex, or cryptocurrency|
E*Trade (read real reviews on Trustpilot) is our top pick for beginners, even though it may charge higher fees compared to other online brokers in the options trading realm.
What sets E*Trade apart is its powerful yet user-friendly desktop, web, and mobile platforms, catering to both novice and experienced investors and traders. E*Trade, established in the early 1980s as one of the first online brokers, was acquired by Morgan Stanley in 2020.
E*Trade provides a wealth of tools, analytics, and educational materials on options and various investing concepts, making it an ideal choice for new options traders looking to learn the ropes. One notable advantage for beginners is the option to practice with paper trading, allowing users to experiment with different options strategies without risking their own capital in the market.
It’s worth noting that E*Trade’s fee structure becomes more pronounced as trading volumes increase. E*Trade charges fees on both sides of the trade, with no maximum fee. For instance, a vertical spread trade involving 10 contracts would cost an active E*Trade trader $20, while on Tastytrade, the fees would total $14.
As trading volumes rise, these differences become even more evident. A 100-contract spread trade, for example, would result in a $200 commission at E*Trade but only $60 on Tastytrade.
E*Trade offers more than just options; it competes strongly with major full-service brokerages across a broader range of asset classes. Alongside its options trading capabilities, E*Trade provides customers with streaming quotes, news, fundamental stock research, and multiple screeners for stocks, ETFs, mutual funds, fixed income, and options.
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So, while E*Trade may not be the most cost-effective choice for high-volume, high-frequency options traders, it presents a comprehensive solution for investors with traditional portfolios of stocks, funds, and bonds who are venturing into options trading for the first time.
5️⃣ Webull (Best for Low-Cost)
- Account Minimum: $0
- Fees: $0 commissions for stock, ETF, options, and cryptocurrency trading (a small markup is priced in)
Why Trade with Webull?
Pros & Cons of Webull
|No-cost stock, ETF, and options trading||Limited to stock, ETF, options, and cryptocurrency trading|
|Strong desktop and mobile platforms||Less robust options analysis tools compared to larger competitors|
|Access to pre and extended hours trading||Weak portfolio analysis tools|
|Free real-time streaming quotes, news, and fundamentals||Payment for order flow (PFOF) may result in less favorable price execution|
|Above-average research capabilities||No interest earned on uninvested cash|
Webull (read real reviews on Trustpilot) commenced operations in 2017 and introduced its mobile brokerage platform in 2018. The company’s mobile-first strategy aligns with its target audience, which skews young, values technology, seeks on-the-go information, and consists of active, self-directed traders. In 2021,
Webull expanded its platform to include CBOE products, such as S&P options (SPX), CBOE Volatility Index (VIX) options, and Mini-S&P 500 Index options. Fractional share trading was also added to its platform offerings.
Webull maintains a narrow focus, granting customers access exclusively to stocks, ETFs, options, and cryptocurrencies.
Despite not imposing commissions or fees on these assets, Webull offers excellent tools and features, including real-time streaming quotes, news, technical and fundamental analysis, market calendars, and clear graphics displaying ratings from multiple analysts. However, it does not facilitate trading in mutual funds or fixed income.
Both Webull’s desktop and mobile platforms are user-friendly. The stock screener provides multiple filtering options, and custom screens can be saved as watchlists. Webull has improved its charting capabilities and offers tools for constructing common one, two, and four-leg options strategies, such as vertical and calendar spreads, straddles/strangles, and butterflies/condors.
Users can also view a payout graph at maturity for each strategy and customize it by adjusting strike prices and maturities.
As Webull doesn’t charge commissions or fees directly to customers, it transparently generates revenue through payment for order flow (PFOF). Additionally, it earns revenue from customer cash balances, as it doesn’t offer interest on idle cash. Webull recently introduced options trading capabilities within its paper trading platform, albeit currently limited to single-leg option strategies.
This means users must purchase each leg of an options strategy as individual single-leg options instead of placing a single order for a spread, as on the primary, non-paper trading platform.
Given that many brokers still charge fees for both opening and closing options positions, the cost savings can accumulate, especially for highly active, high-volume traders. Consequently, Webull is a worthy online broker to consider, particularly for traders with higher trading volumes.
➤ How to Choose the Best Options Brokers
Options contracts provide investors with the valuable right to buy or sell an underlying asset at a predetermined “strike” price on or before a specified “expiration” date. This privilege comes at a cost known as the premium.
Two fundamental types of options exist: call options (granting the owner the ability to purchase a stock at a fixed price within a set timeframe), and put options (bestowing the owner the ability to sell a stock at a predefined price within a specified timeframe).
Options, categorized as derivatives, derive their worth from the price fluctuations of the underlying stock or ETF. Given that stocks and ETFs commonly offer multiple call and put option contracts featuring various expiration dates and strike prices, diverse combinations of options can be utilized to create specific strategies, managing expectations of price movements while mitigating risk.
The primary options for price expectations include:
- Bullish Expectations: If you anticipate the stock price will rise, consider buying a call option or selling a put option.
- Bearish Expectations: If you expect the stock price to decline, contemplate buying a put option or selling a call option.
- Neutral Expectations: In cases of stability, explore selling both a call option and a put option with strike prices near the current stock price for either or both options.
What is leverage in options trading?
A crucial aspect of options is leverage. For option buyers, the risk is confined to the premium paid for the option, while sellers could potentially face unlimited risk, especially in the case of call options.
Put sellers, on the other hand, are exposed to risk limited to the stock price plummeting to zero. Consequently, options sellers, unless they employ hedging strategies, often bear higher risk than the premiums they collect.
Options offer substantial leverage. Each exchange-traded option contract relates to 100 shares of the underlying stock. Thus, the cost for a stock option amounts to 100 times its trading price, reflecting the contract’s 100 shares. This feature allows traders to control a significant number of shares while investing only a fraction of the underlying stock’s value.
For instance, if a stock trades at $100, acquiring one hundred shares would necessitate $10,000 ($100 x 100 shares). In contrast, an option could cost just a few dollars per contract to control a substantial number of shares.
A call option priced at $5 would demand only $500 (100 shares x $5 option premium) to control 100 shares of stock worth $10,000. The appeal of options, therefore, lies in the substantial leverage they offer for speculative purposes.
How do I get started with options trading?
To embark on options trading, investors must open an account with a brokerage firm that supports options trading. Existing account holders at such brokers must obtain approval to engage in options trading.
Approval relies on your investment objectives, trading experience, and financial circumstances, including factors such as annual income, employment status, net worth, and total assets.
Upon approval, your broker will assign an options trading level, which dictates the types of strategies you can employ. Depending on your broker and strategy, you may also need approval for margin trading.
The specific types of options you’re permitted to trade, along with your broker’s policies, will influence the minimum investment required for options trading. Typically, level 1 (entry-level) options trading demands a minimum deposit of $1,000.
However, level 2 or level 3 options trading might necessitate a minimum deposit of at least $10,000. Even with a low minimum requirement, it’s advisable to start with $5,000 to $10,000 when venturing into options trading.
After gaining approval for options trading, the next step involves determining your intended use of options: hedging or speculating. Subsequently, identify the most suitable options strategies. This process is facilitated by employing an “option chain” or “matrix” listing various expirations and strike prices for a given stock.
Expiration dates range from days to years, with shorter-term options carrying more risk due to their expiration date and the associated decay of value over time.
What are the key factors to consider?
Before selecting an options trading account, consider your trading style, risk tolerance, and desired strategies. Are you a conservative trader aiming for steady income, or are you more inclined toward speculative, high-reward strategies? Different traders have varying preferences.
Take note of the cost structure. While most options are reasonably priced, it’s essential to comprehend your broker’s charges, especially if you’re a frequent trader or deal in a substantial number of contracts. Ensure you have a clear understanding of commission and fee structures.
Educational resources offered by your broker are invaluable, especially for novice traders. Look for brokers that provide comprehensive education, such as articles, videos, and webinars. For intermediate and advanced traders, a robust trading platform equipped with options-specific tools is crucial.
What are some common options strategies?
Investors frequently employ options in conjunction with existing stock or ETF holdings. Two prevalent options strategies include:
- Covered Calls: This income-enhancing strategy involves selling “covered” calls against a stock or ETF holding. The option is “covered” because the seller can fulfill their obligation using the stock they own. The downside is limited upside potential.
- Protective Puts: Investors use this strategy to hedge an existing stock or ETF holding by purchasing puts. If the stock’s price falls, the put option’s value rises, offsetting losses in the stock holding. However, if the stock remains above the put’s strike price, the option expires worthless.
☞ Read More: Understanding the Short Put Options Strategy
Remember to assess the risks associated with each option strategy to ensure it aligns with your exposure to price changes.
In conclusion, options trading offers diverse opportunities for investors and traders alike. Careful consideration of your objectives, risk tolerance, and strategy, coupled with a robust understanding of options, will pave the way for successful options trading
➤ Final Thoughts
With the surge in retail options trading intensifying competition among online brokers, the industry has witnessed remarkable product innovations, deeper price reductions, and simplified pathways to executing advanced options strategies.
While Tastytrade may need to work its way back up the ranks following our revised methodology, which prioritizes research resources, its competitive commissions, options-centric content, and well-optimized options tools are robust enough to maintain its position as our top overall choice.
Webull’s provision of free options trading, combined with a solid platform, makes it an appealing option for knowledgeable options traders who possess a firm grasp of the market and require less education and trading support. E*Trade’s impressive improvements this year have intensified the rivalry with TD Ameritrade in the realms of best mobile and best beginner platforms.
For sophisticated traders well-versed in options trading and capable of executing substantial positions to benefit from favorable commissions, Interactive Brokers remains at the pinnacle, offering an edge that’s tough to surpass.
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