Investing 
35
comments

Best Options Broker Review

Email  Print Print  

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! }

Related Posts


RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

35 Responses to “Best Options Broker Review”

  1. jack says:

    TOS be careful they never take responsibiolity for their mistakes! Even when you prove that they were wrong, That’s what happened to me when their software had issues and I traded on bogus information and lost big. Not everyone will have issues but but once you do getting them to do the right thing is not pretty!


Please Leave a Reply
Bargaineering Comment Policy


Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2014 by www.Bargaineering.com. All rights reserved.