TradeStation (Best Low-Cost Options Brokerage)

4-star brokerage firm rating

Options Per-trade plan: $5 + $0.50.

Options Per-contract plan: If you trade in small blocks, you could save even more with $1.00 per contract pricing with no base/ticket charge. Minimum 1 contract market or limit.

Minimum to open: $5,000 for non-daytraders; $25,000 for daytraders; $5,500 for IRA accounts.

TradeStation is also included in the Barron's top 5 brokers in the category 'Best for Options Traders'. The broker offers low options trading cost, in two different pricing plans, per-contract and per-trade. Frequent traders receive the cheapest pricing.

TradeStation's trading platform is highly customizable, one of the best in the industry, includes within a very fast and intuitive options trading platform, OptionStation Pro. The OptionStation Pro platform, specifically designed for options traders, offers numerous powerful scanning & search tools, analysis tools for the options market, tools for fast order executions, and even advanced real-time risk management tools. As Barron's said in its survey this year: "When it comes to trading tools, the sky is the limit at TradeStation." Since that time these words have become a company's motto, and it fits the company well. Also, TradeStation received 4 stars out of five in the 'Best for Frequent Traders' Barron's ranking.

 

TradeStation Advantages

  • Great commissions for frequent traders
  • Excellent education amenities
  • Powerful trading platform and research tools
  • A diverse array of investments
  • Trader community
  • Virtual trading

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Ally Invest (Top Low-Cost Options Brokerage)

TradeKing brokerage firm rating

Options: $4.95 + $0.65 per contract.

Minimum to open: $0 for a cash account, $0 for an IRA.

Ally Invest is also included in the Barron's top 5 brokers in the category 'Best for Options Traders'.

"Ally Invest offers great value, especially for those who trade options spreads," Barron's said this year. The firm offers one of the lowest options commissions among the largest investment companies in the country. Ally Invest Live, an extremely customizable trading platform, allows investors to trade complex options. Extensive educational materials - articles, charts, videos, tutorials and even live events - are available at no charge for options traders of all levels. Access to a free third-party research is another great advantage of low-priced Ally Invest. The company provides only one source of independent research, which is better than nothing as often third-party tools are benefits provided by higher-priced discount brokerage firms.


Ally Invest Advantages

  • Very low commissions
  • Excellent customer support via email, phone and chat
  • Customizable trading platform with responsive design
  • Free DRIPs/Dividend Reinvestment plans (whole and fractional shares)
  • Free real time streaming quotes for active traders
  • Free access to MarketGrader's research reports
  • Extensive educational resources
  • Online banking
  • Extra hours trading

Review

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Low-cost options commissions do not always mean poor trading tools or low quality service. All brokerages below offer the cheapest fees for options and at the same time provide sophisticated trading platforms and numerous powerful trading tools designed specifically for options trading. Educational material for better understanding of the nature of options - the benefits and risk, pricing and trading strategies - are offered by each investment company. In addition, lowest options fees brokerages ranked highest among all options brokerages.


The Basic Concept of the Options Trading

The lack of understanding of the idea of leverage often creates a strong belief for many investors that options are riskier investments than stocks. However, if used wisely, options are less risky than a similar position in a stock. After all, options were originally created as a risk management tool, but it can also be used as a speculation and an income tool.

There are plenty of options strategies. Some of them are more conservative than others and can even be used by investors in their retirement accounts.

 

Types Of Options and Basic Options Strategies

Options are sold in contracts, and the price of an options contract is called the premium. Options are also priced at a fraction of the price of the stock. There are two kinds of options - calls and puts.

Call options act very much like a stock. If a stock goes up, the value of the call will generally increase with the price of the stock. If investors think that prices are going to drop, there are put options, which generally move in the opposite direction of the price of a stock. Usually, when a trader buys a call or a put, he is speculating on a stock price. It allows investors to potentially profit from a stock price movement with a small initial investment for the options contract.

Income-oriented traders can use options to create an income as options allow investors to trade in any market conditions - up, down and even sideways markets.

 

Trading Options Requires Approval

Trading options requires a brokerage firm's approval. There are different approval levels in trading options. The higher the level the more complex the strategy and the higher the risk that it carries. Investors can apply for options trading privilege or ask for an upgrade of a current options approval level through their online account by providing their financial information, options investment objectives and level of experience in trading options.