Trading options is the process of buying and selling stocks at a pre-negotiated price by a certain date. Options are a type of contract that gives the trader the right to buy or sell a particular stock in the future, but does not require them to eat the losses should they choose not to buy. And when you’re trading, your profits are only as good as the platform you use. Here are Benzinga’s favorites.
Options contracts are like “betting” on the movement of a stock—if you think a stock will increase in value but you’re not ready to commit to a purchase right now, you can “lock in” a price (called a “strike price”) to buy at a later date.
Many beginning investors choose to lace their money into the options trading market rather than stocks, bonds or forex because it requires less of an initial investment and gives the trader more time to see how the stock will move before spending money. Just like how stockbrokers have largely moved their practices online, you can now buy and sell options from the comfort of your own home.
Quick Look: The Best Options Trading Software For This Year
Characteristics of a great options trading platform
Ease of operation
Successful options trading hinges on your ability to operate your software quickly and with precision. The best options platforms offer simple, aesthetically-pleasing designs that are easy to understand and operate. Look for platforms that offer a free demo before opening an account or check out user video tutorials detailing how to use the platform you’re considering. These moves can save you a massive headache in the long run.
Comprehensive customer support
Comprehensive customer support can help you effectively troubleshoot technical problems and avoid missing out on hours of day trading, something especially important on the short-term options market.
There are a number of fees associated with trading options, ranging from an initial options base fee to a commission fee attached to each individual options contract. Carefully consider all of the fees associated with your platform of choice before making a commitment, as seemingly nominal fees can quickly snowball into significant lost profits.
The best options trading platforms of 2018
Based on the criteria above, we chose the best options trading platforms for 2019.
Tastyworks is a no-nonsense discount broker that offers stock and options trading with low fees and commissions.
Though tastyworks’ platform offers limited investment opportunities (you’ll need to be a U.S. based trader and you’ll need to use another service to invest in forex, bonds, funds, etc.) it does short-term trading exceptionally well.
There’s no minimum balance to get started on the platform, and tastyworks does not charge closing commissions.
There’s even a tastyworks mobile app that allows you to trade and track your investments on the go.
2. Ally Invest
When it comes to low-cost options investing, few brokerages have put as much time and care into their platforms as Ally Invest. Ally offers competitive rates for options traders; their fees are about $5 per trade and $0.65 per contract, which is below the average.
Ally Invest’s platform also offers a number of trading tools to help make buying and selling simpler, including a profits/losses calculator and an options chain feature that allows traders to sync multi-leg spreads with a few clicks.
Best of all, Ally Invest offers 24/7 customer service, meaning that if you’re a technophobe, the ubiquitous support team may mean the difference between a profitable portfolio and an unsuccessful one.
3. Interactive Brokers
Interactive Brokers is a platform designed for the professional trader with an understanding of international stock markets. They’re one of the few options included on this list that services stocks, bonds, options and forex markets, and you can even purchase foreign stocks directly from Interactive Brokers’ platform, which eliminates the need to coordinate with a brokerage firm working outside of the United States.
Unfortunately, the cost of entry associated with opening and maintaining an account is higher than most traders can afford—you’ll need about $10,000 to get started unless you’re under the age of 25, in which case you can open an account with $3,000. Regardless of this initial hurdle, Interactive Brokers’ fees and commissions are incredibly low, especially for options traders; you can expect to pay $1 per trade and $0.70 per contract, and there are volume discounts available for high-frequency traders.
Thus, the platform is best used by traders who can fully take advantage of the deep discounts—more experienced traders with larger investments who are looking to diversify their portfolios.
eOption is known for having some of the lowest fees when it comes to trades, with some stocks having a $3 commission. Their trading software gives you direct access to watchlists, news, charts, research, options chains, and your account information.
You can also enter, replace, and cancel stock orders with ease.
eOption has multiple charting indicators that you can customize to fit your preferences, and you have access to your software on Mac, PC, tablets, and mobile to keep your trades close at all times.
eOption is a great choice for active traders, ease-of-use, accessibility, and cutting-edge design is the goal of their trading software.
Now you can choose wisely
In many ways, buying options contracts is the ideal way for a beginner to get started day trading—the initial financial investment is low, and there is a lowered level of risk due to the fact that the contract can stay unfulfilled and expire should it become unfavorable to the buyer. Novice traders who have not yet been approved by their broker to begin trading options can use a brokerage simulation software to practice their trading without risking any real money. To get started, check out Benzinga’s list of the best stock market simulators and games available online.