The Best Option Trading Platform – Our 12th annual publication, the Best Online Brokers 2022 Review, took three months to complete and generated more than 40,000 words of research. This is how we test. Our editorial content is independent and impartial; This is how we make money.
Options trading offers online brokers much higher profit margins than stock trading, and as a result, competition to attract clients is fierce. This type of market climate is great for marketers because healthy competition encourages product innovation. Every broker strives to offer the best platform for options trading.
The Best Option Trading Platform
For our 2022 review, we tested and rated 15 different trading platforms. In addition to platform usability, our tests cover option strings (e.g. optional views, total optional columns, stream quality, full Greeks offered), option analysis (e.g. profit-loss calculator charts) and option position management (e.g. if Greeks forward, continuous functionality, pool availability and advanced position analysis). Since most brokers offer similar prices, trading costs were not a factor in our score.
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For the 11th year in a row, TD Ameritrade takes the top spot in our annual review of trading platforms and tools, thanks to desktop-based thinkorswim that’s also great on mobile. Whether you’re trading options, day trading or futures, TD Ameritrade is a winner. read the full review
For beginners, casual and active options traders, Power E*TRADE offers the perfect combination of ease of use, great tools and perfect position management: custom grouping, real-time streaming Greeks, risk analysis and more. read the full review
Trading tools within the Trader Workstation platform are designed for professional options traders, including Algorithmic Trading, Options Strategy Lab, Volatility Lab, Risk Navigator, Market Scanner, Strategy Builder and Portfolio Builder. Warnings: TWS requires a $110,000 deposit to trade on margin and is not suitable for beginners. read the full review
Fidelity’s Active Trader Pro desktop platform is great for active trading, including day trading and options trading; the platform includes many analytical tools. The broker is also known for its educational and research offerings. read the full review
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TradeStation is a leader in trading technology. Options trading is child’s play with OptionStation Pro, TradeStation’s desktop platform tool for simplified trading and robust analysis. Options tool options include custom grouping of current positions, real-time Greek streaming and advanced position analysis. read the full review
In 2022, in addition to our five most popular options trading platforms, we also review 10 other brokers: Ally Invest, Charles Schwab, Firstrade, J.P. Morgan Self-Directed Investing, Merrill Edge, SoFi Invest, Tradier, Robinhood, Vanguard and Webull. If you want to dig deeper, read our review. (Not all brokers currently offer options trading.)
To practice options trading, choose an options trading platform that offers a free paper-based trading account. In paper trading, virtual money is used to trade options in a simulated environment. E*TRADE, TD Ameritrade, TradeStation, and Interactive Brokers offer paper trading for options.
Here is a summary of the main options trading features offered by the best options trading brokers. See the end of the guide for a definition of each function.
Easy Steps To Learn Options Trading Free [for Beginners]
TD Ameritrade took first place in this year’s platform and asset review and trailed closely in virtually every other category. This is especially evident in options trading. Both desktop and mobile, the thinkorswim platform offers everything you could want for successful options trading, including extensive customization, impressive tools, and great education. thinkorswim’s Strategy Roller feature allows customers to create custom rules and automatically roll existing options.
Our other winners also offer great platforms. Web-based Power E*TRADE offers all the tools an options trader could want and presents them beautifully. Attention to detail such as automatic distribution sets, easy scanning through StrategySEEK and easy-to-understand risk/reward data through tradeLAB make Power E*TRADE a truly unique experience.
TradeStation’s OptionsStation tool makes analyzing potential trades a breeze and even goes so far as to include 3D profit and loss charts. However, investors note that although it was visually pleasing, we did not see any particular advantage over the traditional 2D P&L chart. 3D charts aside, there is no doubt that TradeStation is one of the best options trading platforms in 2022.
For professionals, Interactive Brokers is the best option platform. There is no base fee and the contract fee is only $0.70. Additional savings can also be achieved with more frequent operations. However, Interactive Brokers requires a minimum deposit of $110,000 for margin accounts. Finally, their trading platform, Trader Workstation, is the most challenging platform to learn from among the brokers tested in our 2022 review.
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Fidelity was our top choice for 2022 for both research and education. He stood out even among the beginners with his offers and support. Fidelity’s commitment to excellent customer experience is reflected in everything it does, including options trading. Tools like the option builder and option scanner, great data including options statistics, and thorough education for options traders put Fidelity on the list of winners.
In the world of options trading, you can choose from a wide range of reliable brokers. At a minimum, investors should expect their broker to perform scanning, P&L analysis, risk analysis and simple order management. Platforms like TD Ameritrade thinkorswim and Power E*TRADE combine position management functionality and experience.
The best trading platform for options trading in 2022 is TD Ameritrade. For beginners, the TD Ameritrade platform offers the perfect balance of ease of use, education, and functionality. The ability to view option positions and adjust Greeks is invaluable and there is a good reason why thinkorswim is the leading platform for many leading options traders.
While Robinhood is easy to use, it lacks the research and trading tools that the best options trading platforms offer. In addition to a limited selection of options education articles, Robinhood also does not offer paper-based trading, so there is no way to practice options trading with fake money. Therefore, we do not recommend Robinhood for beginner options traders.
Best Options Trading Platform For Beginners
Free options trading is like free stock trading. This comes with some costs, such as Pay Per Order Flow or PFOF. While many brokers no longer charge commissions for options trades, almost all charge contract fees (including some brokers who claim to have “free” option trades). Exceptions to this are Robinhood, SoFi Invest, Firstrade and Webull, which do not charge commissions or fees for options.
In its most basic form, a call option is used by investors who want to bet that the price of a stock will rise. Buying a call option contract gives the owner the right (but not the obligation) to buy shares at a predetermined price for a predetermined period of time. As the share price rises, so does the value of the option contracts held by the investor. Conversely, if the share price falls, the value of the call option also falls. Each contract represents 100 shares.
In its most basic form, a put option is used by investors who want to bet that a stock (or other security such as an ETF, commodity, or index) will decline. Buying a put option gives the owner the right (but not the obligation) to sell the shares at a predetermined price (strike rate) before a predetermined date (expiration). The longer the stock falls below the strike price, the more valuable each contract becomes. Alternatively, an increase in the stock price reduces the value of the put option.
Each online broker requires a different minimum deposit to trade options. For most brokers, the minimum deposit is less than $1000 for level 1 options trading. Some option strategies, such as net credit spreads, may require up to $10,000 in your account and are considered Tier 2 or Tier 3. with its approval, investors fill out a short questionnaire on their brokerage account.
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Could you? Yes, but trading at $100 is not a good path to success. Most custom options are over $100. For example, on the XLF ETF, a low-cost ETF that trades for just $39, a 30-day cash call costs $90. An option is for 100 shares, so if the trade price is $0.92, the total cost of the option is $92 + any contract fees or commissions. Buying cheap, out of stock options is an almost guaranteed way to lose your $100.
Yes, options trading is a form of leveraged investing and is therefore inherently risky. Every time an investor uses leverage to trade, they take on additional risk. Often this risk is unpredictable and not easy to quantify.
At the most basic level, investors who buy a call or put option are only risking the money invested in the contract. However, when selling a call or put option, if the trade is not hedged (also known as bare), the investor takes on potentially unlimited risk.
As a measure of protection, there are five levels of option approval, each of which requires an application through the online brokerage platform to unlock. The riskier the option strategy, the more approval is required to trade.
Investment Products Options Trading
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