Ally Investments has a current promotion that allows new traders to get up $3,500 in cash bonuses. On top of that, they have some of the industry's lowest fees including $0.50 per option contract.
For traders specifically looking to trade options, choosing the best online broker can be particularly crucial.
Most major brokers have options trading capabilities, but not every platform is geared specifically for options trading.
Quicklook – Our Favorite Options Brokers
- Ally Invest – Best for low cost
- TD Ameritrade – Best for beginners
- E-Trade – Best Overall
- Interactive Brokers – Best for active traders
In general, options trading is a very profitable offering for brokers, so there are plenty of great deals out there for traders.
- What is options trading?
- Buying and selling options, and more
- Considerations for options traders
- Best Low-Cost Broker-Ally Invest
- Best For Beginners-TD Ameritrade
- Best For Active Traders-Interactive Brokers
- Best Platform-E-Trade
- Best Mobile App—E-Trade
- Best Research & Education-Fidelity
- Best Overall-E-Trade
What is options trading?
When it comes to the stock market, most people think no further than buying and selling individual stocks. Truthfully, the process of options trading isn’t much different than stock trading.
However, an option is simply a contract to buy or sell a stock at a pre-negotiated price and by a certain date. Simple as that. Learn more about how to trade options here.
Options traders bet on which direction they think the price of a stock will go. Options contracts can be based on a wide variety of underlying securities, however, and many different types of orders can be placed, which makes them more versatile than stocks.
For example, those trading options can decide whether the prices could go up or down on the following:
- Individual Stocks
- Foreign currency
Sure, it does!
Buying and selling options, and more
To buy options, you simply choose exactly what you’d like to buy and how many, and then place a buy to open order with a broker.
If your order goes up or down in value, you have some options. Ha! Get it?
At any rate, you can:
- Sell at the agreed upon price
- Sell the contract to another investor
- Let the contract expire
Enter “calls” and “puts,” too.
Considerations for options traders
Low commissions are just the tip of the iceberg when it comes to choosing the best option trading platform.
Traders need to consider hidden fees, such as platform fees and data fees. Different traders have different skill levels, trading strategies and needs.
Options trading can be complicated, and beginners need to make sure to find a platform with plenty of educational resources and guidance. Advanced traders need to look for professional-grade features and research. Before choosing the right broker, each trader needs to consider his or her trading style and which features are most important in maximizing profitability.
Here’s an overview of some of the top option-trading platforms based on several different criteria.
Best Low-Cost Broker-Ally Invest
It takes a lot of hard work to consistently turn a profit trading options, and every cent spent on commissions and fees weighs on overall returns. When it comes to minimizing option trading costs, Ally Invest is the best platform available.
Option pricing at Ally starts at only $4.95 per trade plus 65 cents per contract. For high-volume traders making at least 30 trades per quarter, pricing drops to only $3.95 per trade plus 50 cents per contract.
Traders with at least a $100,000 balance in their accounts also get access to the $3.95 per trade plus 50 cent per contract rate.
Ally invest also offers some of the lowest margin rates among major trading platforms at just 8.75% for balances between $0.01 and $9,999.
TD Ameritrade and E-Trade charge traders 9.50% and 9.75% in margin rates for similar balances. Ally Invest’s margin rates dip as and as low as 4.25% for balances above $1 million.
Best For Beginners-TD Ameritrade
There’s no better place to get started trading options than TD Ameritrade. Right off the bat, TD Ameritrade’s $0 account minimum makes the platform accessible to every option trader. The Trade Architect platform provides a simple, easy-to-navigate trading environment that isn’t intimidating for new options traders and provides easy order execution. Traders have access to 24/7 customer support over the phone, as well as email support and more than 100 local branches. The platform also offers virtual trading, so beginners can get a feel for the market without putting real money at risk.
For more advanced traders, the thinkorswim platform provides professional-grade advances option trading features, such as Options Statistics for identifying trading opportunities and the Sizzle Index for identifying the hottest contracts.
TD Ameritrade recently completed an acquisition of Scottrade, which will provide option traders with another level of flexibility as well.
Right now, TD Ameritrade charges a reasonable $6.95 plus $0.75 per contract for options trades. New users get 60 days of free trades plus up to $600 bonus cash (for deposits over $250,000) for opening up a new account. Customers also get up to $1,000 bonus cash for referring a friend.
Best For Active Traders-Interactive Brokers
The Interactive Brokers Trader Workstation provides a comprehensive list of options trading features and has been compared to the look and feel of a commercial airline cockpit. The workstation includes integrated tools such as IB Risk Navigator, Options Analytics and Model Navigator. It has a configurable format, quick-click order entry capabilities, and is extremely customizable. The OptionTrader Combo tab allows traders to monitor price variations, view all available chains or filter for specific contracts and configure columns to view calculated model prices, implied volatilities open interest and Greeks.
Interactive Brokers also helps active traders minimize commissions and fees as well. Interactive brokers charges only 70 cents per contract with a minimum of $1 per order. However, it also offers volume-tiered pricing that varies depending on geographical region that can drop commissions as low as 25 cents per contract in the U.S. In Baron’s 2016 Best Online Broker rankings, Interactive Brokers was named the lowest-cost broker for frequent traders with an average monthly cost of just $847 compared to nearly $3,000 per month for E-Trade and TD Ameritrade.
E-Trade’s OptionsHouse platform and mobile app are the gold standard of option trading platforms. OptionsHouse currently offers traders premium-quality tools without the premium price tag.
According to a customer service rep, the long-term plan is to have the OptionsHouse platform replace E-Trade Pro as the premium service, but for now, it is free for all E-Trade users.
OptionsHouse is the perfect combination of speed, quality, tools and navigation capabilities. The platform offers virtual trading for testing strategies. The option chain screen provides access to customizable real-time streaming option chains with up to 30 columns. The tradeLAB Snapshot Analysis breaks down risk/reward in an easy-to-understand way, indicating pros and cons as well as key events to watch for and a profit and loss chart. The strategySEEK tool allows users to scan market data and identify potential trading strategies.
For all E-Trade’s advances option trading features, the broker charges a reasonable $6.95 per trade plus 75 cents per contract for users making less than 30 trades per quarter. More active traders pay just $4.95 per trade plus 50 cents per contract.
Best Mobile App—E-Trade
For traders on the go, mobile trading doesn’t get much better than it does with E-Trade. E-Trade currently offers clients two free mobile apps. For the average trader, the E-Trade mobile app will likely meet all your trading needs and has even been named “Best in Class” by Stockbrokers.com.
The app live streams CNBC TV, provides access to third-party research and delivers breaking news alerts. For advanced traders, the OptionsHouse app has a wide range of professional-grade trading tools which make complex options trading a breeze, including customizable options chains and 4-legged spreads.
Best Research & Education-Fidelity
Option trading can be intimidating and complicated for new traders. However, Fidelity’s platform points traders in the right direction and provides all the resources they need along the way.
Fidelity offers a massive amount of free research and data presented in a way that’s not overwhelming for inexperienced traders. The platform provides advanced research from more than 20 reputable sources, including Recognia and S&P Capital IQ.
Fidelity also offers free webinars and online classes through its online learning center for traders that prefer a more structured educational environment. For a more personal touch, customers can attend seminars in person at more than 180 branch locations explaining how to navigate the platform.
Fidelity provides phone support 24/7, and active traders who place at least 10 trades per month and maintains a $25,000 minimum balance have 24/7 access to dedicated trading specialists via Fidelity’s Active Trader Services.
Despite the massive trove of research and first-class educational resources, Fidelity won’t break the bank with its commissions either. Fidelity charges just $4.95 per trade plus 65 cents per contract.
E-Trade let every trader know that options trading is a priority when it acquired OptionsHouse in 2016. Between the online OptionsHouse platform and the new OptionsHouse mobile app, E-trade offers traders two of the most comprehensive dedicated options trading platforms in the world.
The platform’s strategySEEK tool helps traders track down winning strategies, and its TradeLAB provides customizable access to every bit of information an option trader could ever need all on one screen.
Right now, customers who open new accounts with a balance of at least $10,000 receive 60 days of commission-free trades to get started. Customers who deposit more than $10,000 receive between $200 and $2,500 in cash bonuses depending on how much they deposit.
E-Trade may not be the cheapest game in town, but tiered commissions give active traders a discount on the platform’s standard rates. Plus, option traders can rest assured that they are getting plenty of bang for their buck with OptionsHouse.
|Broker||Best For||Commissions||Account Minimum||Choose your platform|
Get started securely through TD Ameritrade's website
1 Minute Review
This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.
Trade commission–free for 90 days & get up to $2500
||$4.95 volume discount available||$0||
Get started securely through Ally Investment's website
1 Minute Review
If investors are on the hunt for a bargain broker, Ally Invest could be the one. With low commissions across the board, Ally Invest (formerly TradeKing) stops potential investors in their tracks with its especially low mutual fund commissions. Commissions on stocks and ETFs are notoriously inexpensive as well, and for more active traders or those with larger account balances, commissions can dip as low as $3.95 per trade.
$3.95 per stock trade for Active Traders at Ally Invest
||$0.005 per share minimum $1 and maximum 0.5% of trade value; volume discount available||$10,000 $5,000 for IRAs, $3,000 for clients 25 or younger||
Get started securely through Interactive Brokers's website
1 Minute Review
If you’ve got $10,000 and you consider yourself a sure-footed professional trader, Interactive Brokers might a major possibility for you, particularly if you’re adept at navigating tricky trading platforms (can you say 124 option indicators?) or have done more than just dipped your toe a “coupla times” into the complex world of international markets.
Lower minimum activity requirements ($3/month) and opening account minimum requirement ($3,000) for clients 25 and younger.
||$6.95 for fewer than 30 trades/quarter.||$0||
Get started securely through eTrade's website
1 Minute Review
E-Trade is best known for its user-friendly browser, desktop and mobile trading platforms and its extensive research and educational information. E-Trade may not have the lowest commissions compared to discount online brokers, but customers certainly get their money’s worth from E-Trade’s comprehensive offerings.
60 days of commission-free trades with deposit of $10,000 or more
||$4.95||$0 for IRAs. Some accounts may require a minimum opening balance of $2,500||
Get started securely through Fidelity Investments's website
1 Minute Review
Fidelity's customized market research for individual investors is unmatched. Fidelity is best for experienced traders willing to make a minimum 36 trades per quarter. Not only does Fidelity offer 24/7 customer support, there are branches nationwide that offer in-person seminars and webinars to ensure that customers are always informed on the latest market research and technologies.
Commission-free trades good for 2 years