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Best Options Broker Review

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These brokers are excellent for stock equity trades as well!

As you may have read in my review of The Options Playbook, I’ve started to get interested in trading stock options. As has been the case with everything I try, I do a lot of research first and then I dive right in. As my dad always said, you learn in the classroom or you learn on the street. Learning on the street is always more expensive. I prefer the classroom. :)

In my limited knowledge of options, it appears that there are two main discriminators: price and tools. For price, it’s a matter of comparing the cost per trade and per contract. For tools, it’s having the ability to quickly make complicated trades without having to jump through too many hoops. In my review of the Options Playbook, I talk about two types of “plays.” The more complicated plays involve several “legs,” or options trades, that hedge each other and the better options brokers let you setup those plays with one screen. In fact, most brokers make that transaction easy because it results in more trades, which means more profit, so it’s almost not even worth comparing brokers based on that (remember, I’m a total novice in this so I may be wrong).

So, it may just come down to price.

How Options Commissions Work

With stocks, you generally pay a set commission per trade, regardless of the number of shares purchased or sold. Per share commissions on stock trades only come into play when you transact penny stocks (stock price under $1) and they usually add a per share surcharge for those.

With options, it’s slightly different, there is usually a “per trade” commission plus a “per contract” commission. With options, you are buying and selling contracts, rather than the underlying shares. The contract usually exerts control over a block of 100 shares, either to sell or buy, and you can buy multiple contracts with one trade. So if you’re buying 2 contracts, you will pay one “per trade” commission and then 2 times the “per contract” commission.

Best Options Broker

OptionsHouse Logo

OptionsHouse

OptionsHouse is one of the few brokers that charges $5 for up to 5 contracts or only $8.50 plus 15 cents per contract. While relatively new to me, OPtionsHouse is backed by market maker PEAK6 and was rated #1 in trade experience in Barron’s 2009 Online Broker Survey, beating out OptionsXpress and E*Trade, also on this list. Also, they only have a minimum account balance of $1,000 for cash accounts and $2,000 for margin accounts.

TradeMONSTER

TradeMONSTER

TradeMONSTER is a broker that has earned several quick awards (Barron’s awarded them four stars). On TradeMONSTER you can trade stocks, options, ETFs, mutual funds, and bonds – just like any other broker but they offer very competitive pricing if you’re an options trader who doesn’t do a whole lot of options trading. On a single leg options trade of 10 or 20 contracts, you’ll pay a mere $12.50. At 50 contracts, you double the price to $25, a third of what you’d pay at optionsXpress. For stocks, it’s a flat $7.50 a trade up to 5,000 shares, then it’s a penny a share. As for tools, they have as competitive a suite of tools as nearly any other broker.

Open a TradeKing account today

TradeKing

TradeKing, one of my favorite brokers for stock trades, charges $4.95 per trade and then $0.65 per contract, which puts it as one of the cheapest commission rates of any broker. When you combine this commission schedule with their $4.95 per stock trade and the slew of awards they’ve won, TradeKing takes the lead for the best options brokers of the bunch. In terms of tools, Barron’s 2009 Online Broker Survey gave them high marks for their options trading tools and an overall score of four stars for the third straight year. Finally, they have no minimum account balance and no maintenance/account fees.

OptionsXpress Logo

OptionsXpress

OptionsXpress charges $1.25 per contract with a minimum fee of $12.95, on par with many other options brokers. In terms of awards, they’ve been awarded four+ stars by Barron’s from 2002-2012. The one very appealing feature OptionsXpress offers is a virtual trading account, which gives you $5,000 in virtual cash that you can invest in stocks and options. If you’re new to either, taking advantage of this absolutely free feature is a great way to dip your toe in the water without actually putting that toe at risk. :)

E*Trade Logo

E*Trade

E*Trade is the priciest of the bunch charging $9.99 per trade and then $0.75 per contract, but again no account minimums of maintenance fees. The fees are comparable and they go down with higher volume trading, to $7.99 a trade at 150+ trades a quarter.

Is there a good broker that I missed and should be included in this survey?

{ 35 comments, please add your thoughts now! }

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35 Responses to “Best Options Broker Review”

  1. Brad says:

    THINKORSWIM!!! There is simply nothing better than TOS. They have the best options platform; it is simply unmatched in the industry and they are always striving to improve it with new software releases every month. You can sign up for a paper trading account with no obligation and download their desktop platform. They also have web-based and a nice iphone app. There customer service is handsdown the best. I’ve used a lot of brokers but cannot rave enough about TOS.

    All the brokers you listed are complete ripoffs. I’m not sure how any research would not have led you to TOS. Commissions are lower than advertised if you ask for a match. I trade options $1.25 per leg, no minimum, $1 minimum on stocks, and $2.5 per leg on futures. If you’d like a referral to get discounted commissions, I’d be more than happy.

    Depending on your volume of trades, you should also look into trademonster, they have a great web-based platform with extremely reasonable commissions if you trade in size.

    • Roy Linderman says:

      Brad,
      What do you suggest to get the best option rates from TOS.

      Any suggestions would be appreciated.

      Thanks
      Roy

    • sebastian says:

      Brad, who i have to talk on TOS to negotiate commissions

    • Scott Dowd says:

      Hi Brad !

      Thanks for your comment re: Options commissions. I’m looking for a good site/broker to open an account and TOS is on my list. Quick question: When selling Puts/Calls, does the broker(TOS)require that you be Long the underlying or have comparable buying power in a Margin Account ?

  2. Mark says:

    I second Thinkorswim. It is not so much about price, but the tools available. TOS is the best.

    • Sandra says:

      I third Thinkorswim. I’m a total novice and find options trading for call options pretty easy once you get used to the fundamentals of the charts they provide. I’m also reading the options playbook that was recommended on tradeking. TOS is really good.

  3. Tom says:

    Jim, since you are a beginning options trader I suggest you simply buy a small number of calls or puts depending on what you think the underlying ETF or stock direction will be. The tools are helpful for complicated trades but the costs are very high for multi-leg trades. Mostly left for the professionals. I would suggest that you buy options in the most liquid ETFs, namely QQQQ and SPY. The difference between bid and ask is very small so you have an actual chance of getting a good price. Also, they are offered at strike prices that differ by one dollar rather than five dollars.

  4. clicclic says:

    Jim – love your site.

    Don’t overthink this: ThinkOrSwim is the best for options trading. I’ve been a customer for 2 years. Their software is the poster-child for Java apps. There is no equal, unless you’re more interested in FOREX (MetaTrader). OptionVue is excellent too, but the costs involved add up. Also, E-Signal is amazing for charting, but their monthly fees will murder you.

    I can’t recommend TOS enough: just negotiate decent commissions ($1.50/contract) and you’ll be set…

  5. mark says:

    does TOS accepts international client’s?

  6. thinkorswim is the best. Can anyone name even one firm with a feature comparable to On Demand? Options traders can go back as far as December 2009 and test every possible transaction with real data. For older back testing, thinkorswim has features similar to some other brokers.

    The RED Option provides coaching and trade advisories at reasonable prices.

    The free seminars are excellent.

    You have a choice of major charting systems.

    You can move parts of the main screen to additional monitors.

    This is not a complete list.

  7. Wayne Lary says:

    I can’t believe that you missed ThinkOrSwim. It has one of the most competetive commission structures as well as the best tool set in the industry. In addition to that, you get a paper trade account without having to fun your account. For icing on the cake, they also offer a slew of free option trading classes. These guys have been rated #1 by Barrons, so it seems like a huge omission to leave them out.

  8. R Kendall says:

    REALLY GLAD you didn’t list Interactive Brokers (IB) as a ‘good’ broker! The brokerage firm from hell…the way they treat their customers, wonder how they stay in business.

  9. Jackie says:

    Interactive Brokers is the only broker in the world that doesn’t charge for the options assignment. Zero, Nada, Zilch. All the other brokers charge at least $20. I personally have 10 to 50 assignments per month. Do you need a calculator?
    IB is the only broker in the world that charges $0.69 total for a transaction (write or buy) of ONE options contract. (yes sixty nine cents today – Dec 08, 2010, for AMR DEC 2010 $8 Call written).
    Interactive Brokers is the lowest commissions broker in the world.
    The fact that you never mentioned IB tells me that you either paid the firms mentioned or you do not qualify for writing this article.
    Jackie. IB trader – 10 years and counting

    • Mark says:

      Jackie “Interactive Brokers is the lowest commissions broker in the world.”
      Jackie-IB is fine if you are trading one or two contracts, but as soon as you start putting on multi-leg spreads their costs are amongst the highest! The author of this article has obviously researched this pretty thoroughly, as did I, and as much as Think or Swim has probably the one of the best, if not the best platform out there, they do not compete on pricing….swings and roundabouts…if you dont need the TOS platform, there are far more cost effective brokers as mentioned…and as previously mentioned IB customer service rates way, way down the list!

  10. Bhanwaar says:

    I really agree with all, regarding TOS. I use TOS for opton/stock/future/forex charting and trading.Best option platform as far as I know of. Best broker platform next to Tradestation. I do use Interactive brokers TWS for trading only because of their dirt cheap comm on all markets. However IB stands out of the crowd because of their worst and uncivilized customer support. I think lightspeed/Mbtrading offer comparable price with IB.

  11. DG says:

    TOS has gone to hell after being acquired by TD Ameritrade… their service just SUCKS! They were down for over 4 hrs recently due to glitchy software update ran on Sunday night (impacted Monday), and not even a word of apology. Their customer service are both arrogant and stupid, always trying to blame the customer for issues, regardless of whose fault.

  12. Blain says:

    TOS has only gotten better since being acquired by TD Ameritrade. They now have unlimited resources for growth. Check out the StockBrokers.com and Barron’s 2011 reviews, they both rated thinkorswim highly.

  13. Glenn says:

    I haven’t even started trading yet. Although I been studying it for a long time. I been studying pros and cons on many brokers and have come to my conclusion that TOS would be a good place to start. After reading all these posts, I feel even better about my choice.

  14. Roger says:

    Think or Swim have decided not to service customers in the U.K.any more and have closed my account..I am very annoyed about this,but what can I do?
    Trademonster must be amongst the worst in the world to try and open an account with.They simply ignore emails requesting any kind of service.
    I have opened an account with Interactive Brokers now,so am hoping that they shape up.

    • Greg says:

      Trademonster did the same with me on a transfer of an IRA to them. It took them almost 60 days to get the account open, which is pushing the envelope from an IRS perspective.

      Their trade platform is not as robust as thinkorswim, but see my post below.

  15. Greg says:

    thinkorswim has a great platform for trading stock and options. However, their customer service is pathetic, especially since being acquired by TD Ameritrade and even more if you survived the conversion. You can ask the same question to 3 different support reps and receive 4 different answers … not a typo. If you’re a trader and don’t think you’ll need support, TOS is your platform.

  16. Ken says:

    I have used TOS for years and the platform and customer service has been outstanding. After being acquired byTDAmeritrade, service is still pretty good and research has improved. I agree, if you do not need the TOS platform, others would be less expensive for commissions.

  17. TradeKing Client says:

    Here’s an idea, use the FREE TOS papermoney for the tools and use TradeKing for placing the real money trades? You get the best of both worlds. Simply go back into TOS papermoney after you place the real trades and place them on the papermoney account so you can monitor everything all in TOS. DUHHHH!

  18. TradeKing Client says:

    Oh by the way, TOS customer service was nice and professional, but could not and would not meet or beat TradeKings fees. So tradeking gets my money, and I use TOS papermoney for free.

    • Larry says:

      How long have you traded options. Are you making money . I am rather new
      To this . Would like to speak with someone that has done tis successfully
      Larry

  19. Larry says:

    I am sort of new to options .. Who has the best Service out there for the money
    As to what options to buy with there best price to get in Ect ..want a service that
    Has enough plays each day Ect. Would also like to speak with someone out there that does this for a living and does well .. Email larrywnr8@gmail.com

  20. John says:

    When you are starting out it is best to trade very small size until you are able to make money, thus it is more important to have the cheapest commissions than any of the “tools”.

    IB are one of the best for small size cheap commissions, as well as having the advantage to trade nearly any world market. The big disadvantage of most US brokers is that they will not let you trade the European index options, which have their advantages like any market has.

    So, it all depends on what you want to do, and more importantly, how committed you are to learning what is required – trading any market for profit takes time to learn, so make sure you first of all know what you want to do, and do not get sucked in to all the bull that is out there.

    Control your risk on each and every trade and you will be way ahead of most who try to make money trading.

    J

  21. Dave says:

    Fairly new to TOS, but can say without a doubt i would not be doing the kind of trades I do without it (Iron Condors, Calenders etc..)I have noticed some glitchy things, but not too bad. Here’s the real news I have not seen here…If you have a TDAmeritrade account(which I did and still do) you can trade on the TOS platform at the TD commission rate of .75 contract plus $9.99, compared to @1.25 at TOS! That is a big savings and they don’t exactly advertise it. I noticed some differences in the settings(as far as seeing margin maintenance reqt’s and such,) but was told by reps that they can make exactly like TOS platform in every way. I haven’t done this yet so can’t advise. Mine is an IRA, but squared away with TDA to do spreads etc..

  22. A says:

    What do you guys think about MB Trading ?

  23. Joe says:

    what do you feel about MB trading ?

    Thanks

  24. Profit by Friday says:

    I personally have used TOS for 6 years. I was on OX for a while but I think TOS has unmatched customer service and a highly reliable platform. Commission is important but should not be the key decision factor. Fast execution, available tools, and reliability should rank above commission.

  25. Anthony M says:

    i also live in the UK and i now have to find another broker as e-trade are dumping UK customers unceremoniously! i tried IB but found them quite complex. better off with a UK options broker but they are hard to find. any ideas?


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