Table of Contents
Introduction
Like other trading strategies, options trading requires a trading platform that suits your needs. The needs of options traders can vary widely, from swing traders who trade on a stock’s current movement to super technical traders who prefer options-specific technology. Whether you are a new trader looking for your first broker or an advanced trader looking to switch, this guide will help you find the best options trading platforms for 2023.
What is Options Trading?
Options trading involves financial contracts that give the buyer the right, but not the obligation, to buy or sell an asset (like a stock or ETF) at a set price (strike price) on or before a certain date. Call options give you the right to buy, while put options give you the right to sell. It’s important to note that options trading is a strategy for more advanced investors and carries substantial risk.
Options trading is a complex yet rewarding strategy when done right. It allows you to diversify your portfolio, manage risk, and generate an income stream. However, it requires a deep understanding of the financial markets and a robust risk management strategy. If you are interested in diving deeper into options trading, check out this comprehensive guide on Options Trading.
Top Picks for the Best Options Trading Platforms
When evaluating options trading platforms, it’s essential to consider the platform as a whole. You should look for a platform that not only caters to your options trading needs but also offers a wide range of features for stock trading. Here are my top picks for the best options trading platforms:
- TD Ameritrade (Merging with Charles Schwab)
TD Ameritrade is a heavyweight in the brokerage and banking industries, and their platform thinkorswim is top-notch for options trading. With an impressive range of analytics tools, charts, and a highly customizable interface, thinkorswim is suitable for both beginner and advanced options traders. It’s worth noting that TD Ameritrade is merging with Charles Schwab, which may result in changes to their platform.
- Robinhood
Robinhood is a pioneer in commission-free trading and is known for its user-friendly platform. While their options trading tools may not be as extensive as some competitors, the free trades make it an attractive choice for investors looking to keep costs low.
- Ally Invest
Ally Invest is known for its customer service and easy-to-use platform. They offer a wide range of investment options and strike a good balance between user-friendliness and comprehensive data. They also provide managed portfolios for those who prefer a more hands-off investment strategy.
- E-Trade
E-Trade is a long-standing player in the industry and offers a robust platform for options trading. With Power E-Trade, users gain access to a plethora of tools and resources, including risk analysis tools, real-time data, and customizable charts.
- TradeStation
TradeStation offers a powerful platform for options traders. It is packed with features, including advanced charting, real-time market data, and fast order execution. TradeStation is suitable for serious traders who need high-quality tools and are willing to pay for them.
- Interactive Brokers
Interactive Brokers (IBKR) is well-known for its low-cost trading. Their Trader Workstation platform provides advanced features and tools, making it a good choice for experienced traders. They also offer a simpler mobile and web platform for beginners.
- Webull
Webull is a newer player in the brokerage space but has quickly gained popularity with its commission-free trades and robust trading tools. They offer a wide range of investment options, including options trading. Their platform is user-friendly, and they provide in-depth market data and real-time quotes.
- Tastytrade
Tastytrade is a platform focused on options and futures traders. It offers a unique approach to trading with its “trade small, trade often” philosophy. Tastytrade provides a wealth of educational content, making it a great choice for traders wanting to learn more about options trading.
- StocksToTrade
StocksToTrade, although not currently offering options trading, is likely to become a top options trading platform once it finishes building options trading into its platform. It is a favorite stock trading platform for many traders due to its clear, customizable charts, wide-ranging news scanner, and the incredible Breaking News Chat.
Trading Fees Comparison of Top Rated Options Trading Platforms
Trading fees can vary from one platform to another. Here’s a brief overview of the fees for some of the top-rated options trading platforms:
- TD Ameritrade: $0 base commission and $0.65 per contract.
- Robinhood: No commissions on options trades.
- Ally Invest: $0 base commission and $0.50 per contract.
- E-Trade: $0 base commission and $0.65 per contract.
- TradeStation: $0 base commission and $0.50 per contract.
- Interactive Brokers: $0 base commission and $0.65 per contract.
- Webull: No commissions on options trades.
- Tastytrade: $1 per contract to open positions, $0 to close.
It’s important to consider not just the contract fees but also the tools, resources, and overall platform experience when making a decision.
What to Look For in the Right Options Trading Platform
When choosing an options trading platform, consider the following criteria:
- Trading fees and options commissions: Compare fees across platforms to find the most cost-effective option.
- Reviews and ratings research: Look for platforms with positive reviews and high ratings from users.
- Platform functionality: Consider the desktop, mobile, and online options offered by the platform.
- Range of investment options and shares available for trading: Ensure the platform offers the investment options and shares you are interested in trading.
- Competitive margin rates: Compare margin rates to find a platform that offers competitive rates.
- Customer service: Look for a platform with responsive and helpful customer service.
- Educational content: Consider the availability of educational resources and content to support your learning and trading journey.
- Research tools: Look for platforms with advanced research tools to help inform your trading decisions.
- Real-time data: Ensure the platform provides real-time market data for accurate and timely trading.
- Advanced charting: Look for platforms with advanced charting capabilities to analyze market trends effectively.
It’s also important to consider if the platform is suitable for day trading if you are a day trader. Not all platforms are created equal, and some are better suited for day trading. Check out this guide on the best trading platforms for day traders to help you make an informed decision.
Conclusion
In conclusion, the best options trading platform for you will depend on your individual trading needs and experience level. There are many platforms to choose from, each offering different tools, fees, and features. It’s crucial to do your research and choose a platform that aligns with your trading goals and strategies. Keep in mind that options trading carries a high level of risk and may not be suitable for all investors.
If you’re just starting your options trading journey, consider seeking expert guidance. One mentor worth considering is Mark Croock, a former student of mine who has earned $4 million in his career, mostly from trading options. He has adapted my penny stock trading strategies to options and offers mentorship through his program, the Evolved Trader.
What’s your favorite options trading platform? Let me know in the comments – I love hearing from my readers!
