Firstrade (Lowest Cost Options Brokerage)

Firstrade rating

Options Cost: $0 base + $0 per contract.
Minimum to open: $0 for a cash account.

Firstrade is the lowest priced priced brokerage company for options traders. They priced all options trades at $0. Yes, it's really zero and there is no catch. No wonder we named them "Lowest Cost Broker for Options Traders" in 2018.

Firstrade does not offer an advanced trading platform or sophisticated options tools. For this you will need to use other broker. But they do offer a beautiful website and impossible to beat pricing.

Firstrade Advantages

Firstrade offers good securities trading services at a rock-bottom commission of $0. This is much lower than at the majority of online brokers, such as Schwab ($4.95), TD Ameritrade ($6.95), and Fidelity Investments ($4.95). Add to this the lowest pricing on mutual funds and some of the best margin rates, and it's no wonder this broker draws lots of new customers.

Aside from great commissions, there are a lot of services at Firstrade that are available to clients for free. These include dividend reinvestment, and IRA's. Furthermore, the broker's mobile trading app will appeal to busy investors on the go.

Firstrade offers ALL ETF's with no trading fee - this is the best selection in the industry. Other brokers have fewer commission-free ETF's: Etrade (101), TD Ameritrade (296), Fidelity (90), and Ally Invest (115).

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Ally Invest (Best Low-Cost Options Brokerage)

Ally Invest rating

Options commissions: $3.95 + $0.50 per contract for anyone making 30 trades in the last 90 days or $100K account balance ($4.95 + $0.65 per contract for others)
Minimum to open: $0 for a cash account, $0 for an IRA.

Ally Invest has been named by Barron's magazine the "Best for Options Traders". "Ally Invest offers great value, especially for those who trade options spreads," Barron's said in its review. The firm provides one of the lowest options commissions among major online brokers in the country.

Ally Invest Live is a customizable trading platform offered by the broker. It 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.

Ally Invest Advantages

  • Very low commissions
  • Excellent customer support via email, phone and chat
  • Customizable trading platform
  • Free 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
  • Great online banking rates

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What Option Traders Should Look For in a Best Options Brokers

Buying and selling option contracts requires specific trading tools, which may not be available at all brokers. Traders who are interested in options would also benefit from educational resources, such as videos and webinars. These types of services for derivative investors can vary widely from one brokerage house to another. The following categories are particularly important for option traders.


Customer Service for Option Investors

Not all brokers provide the same level of customer support. Because option trading is a very esoteric financial strategy, having a brokerage firm that offers customer service specifically for derivative traders can be a big help.

Most brokers don’t have representatives who specialize in option trading. Capital One Investing, for example, does not offer option specialists over the phone. Other brokers do provide access to agents who specialize in derivative trading. Interactive Brokers, for instance, has a stock and option trading desk, although its number isn’t toll-free. optionsXpress has representatives who are licensed option specialists.

Derivative traders may also need customer service available over the phone and via on-line chat. While all brokers have customer service over the phone, not all of them offer an on-line chat feature. Vanguard, for example, does not; although E*Trade does.


Best Options Brokers


Option Pricing

If you’re going to trade options, obviously the commission schedule for derivatives will be an important factor to consider. Like the other topics in this article, there is wide variation from broker to broker on option commission schedules. Some firms are on the low end of the pricing schedule, charging just 65 cents for contracts on top of a base charge of only $4.95. This is Fidelity’s schedule.

Other firms, like Vanguard, are on the opposite end, charging as much as $1 per contract plus a per-trade fee of $20. This price is for small accounts. Clients who have more than $500,000 in assets receive an $18 discount on the base charge.

TradeStation, one of our Best Options Brokers in 2018, has a unique pricing schedule. It charges just 50 cents per contract plus a $5 base charge, but but gives lower rate for IRA accounts - $4 base charge and 30 cents per contract.

Many brokers also charge for option exercises and assignments. WellsTrade clients, for example, must pay $25 plus the broker’s regular equity commission, which is either $3 or $5.95. Schwab, on the other hand, charges just its regular stock commission, which is $4.95. Because wide variation exists in the industry on this issue, be sure to learn your broker’s pricing for assignments and exercises.


Option Research & Education

Having adequate learning materials is of paramount importance to trade any security, and derivatives are no exception. Some brokers have a large amount of educational and research materials for option contracts, while other firms have nothing. Robinhood, for example, does not even offer trading in options, so naturally the broker has no resources for option traders.


Best Options Brokers


On the flip side, optionsXpress, strong contender for Best Options Broker, offers its clients many opportunities to learn more about derivatives. The company offers webinars every week that discuss option trading strategies. There are also local live events that the broker occasionally hosts. optionsXpress clients can sign up for a daily newsletter that is free of charge. Not all brokers offer so many option resources. WellsTrade, for example, provides option chains and the ability to trade options, but not much else.

Fidelity has an extensive educational section on its website, and there are plenty of materials for option traders. The broker hosts articles, videos, and webinars that cover many derivative trading strategies. One article discusses seven common mistakes that option traders commonly make. A video demonstrates how to place a bull call spread, while a webinar covers income strategies with options. The broker has nearly 100 option materials. Beginning option traders would obviously be much better off at a broker like Fidelity rather than WellsTrade.


Option Trading Technology

Once you’re ready to start placing option trades, you’ll need a broker that has sufficient trading tools. Some brokers offer just a website with a simple order form that is produced after clicking on a price within an option chain. Vanguard is one example. Other brokerage firms will offer much more sophisticated trading tools.

TradeStation client, for example, have access to OptionStation Pro. This is a desktop platform designed to trade derivative contracts. It has advanced option analysis with 2-D and 3-D graphs. Option searches can be performed with results that are ranked by various characteristics, such as expiration date and strike price. A unique feature is SpreadMaster, which can open and manage multiple spreads simultaneously.

Other advanced derivative trading tools can be found at optionsXpress. The broker has several option tools that can find potential trades. One is called Idea Hub. This program scans the securities markets looking for trading ideas and returns a list with some important numbers, including the break even stock price, and percent change in static return, which is the gain or loss in the position assuming the underlying stock price doesn’t change. Unfortunately, optionsXpress brand will be discontinued by the end of the year.

Some brokers will also provide a paper trading platform where you can practice buying and selling options before committing real money. TD Ameritrade, for example, offers both a desktop and a mobile platform where option contracts can be traded with a virtual currency. Called thinkorswim, the software is very sophisticated, so learning to trade any product first is a good idea before placing real trades. optionsXpress also provides a virtual platform.


Best Options Brokers Summary

Having the right tools is an essential part of any investment strategy, and perhaps even more so with options. Make sure to do thorough research on any potential broker to determine if it has everything you need to be a successful trader.


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.

Lowest Price Options Trading

Low-cost options commissions do not always mean poor trading tools or low quality service. All brokerages above offer cheapest fees for options traders and at the same time provide sophisticated trading platforms and numerous powerful trading tools designed specifically for options traders.

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