Firstrade (The Lowest Cost Options Brokerage)
Options Cost: $0 base + $0 per contract.
Minimum to open: $0 for a cash account.
Firstrade is the cheapest brokerage company for options traders. They priced all options trades at $0. Yes, it's really zero and
there is no catch. In 2020 TopRatedFirms.com awarded Firstrade "The Lowest Cost Broker for Options Traders" title.
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. 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.
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Ally Invest (Best Low-Cost Options Brokerage)
Option commissions: $0 + $0.50 per contract
Minimum to open: $0 for a cash account; $2,000 for margin account
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 free third-party research is another great advantage of this low-priced broker.
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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.
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.
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 50 cents for contracts on top of a base charge of $0. This is All Invest’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 2020, has a unique pricing schedule. It charges just 50 cents per contract plus a $5 base charge,
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 $0. 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.
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.
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.
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.
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Best Options Brokers
reviewed by TopRatedFirms.com.
Rating: 5