There’s no question about it: Options traders don’t have time to deliberate. Hesitation is a killer whenever you trade the stock market. Luckily, new traders can quickly improve their skills by practicing. How can you practice trading? With fake money, of course! Most brokerages now offer demo accounts using the best paper trading options software.
Just like Monopoly, paper traders are given a bankroll of fake cash and can buy or sell any securities they wish. Paper trading takes place during open market hours so price changes can be tracked in real-time. If you’re a trader who wants to learn options, a paper trading account is a necessity for honing your skills.
Best Paper Trading Options Platforms:
- Thinkorswim by TD Ameritrade
- eOption Paper Trader
- Interactive Brokers TWS Paper Trader
Why Paper Trade Options?
Options can be risky trading vehicles, especially during volatile markets. Profits and losses can be multiplied exponentially when using options and an uneducated trader might see a bankroll evaporate quickly. Reading articles or books about options trading can help, but there’s no substitute for experience.
Paper trading allows you to can gain experience without putting any money at risk.
Testing different options strategies and techniques is easy because you can watch trades unfold in real-time. Though paper trading is crucial for anyone trying to learn a new market, it’s also important to understand the limitations. Paper money isn’t real — you won’t feel the same pain after a big loss that you would with actual money.
Keeping your emotions in check is a huge part of trading and paper accounts simply can’t recreate these mental hurdles. In fact, too much paper trading might lead to overconfidence and you could develop some bad habits.
Trading fake money is great practice for the real thing, but make sure you understand the difference between a scrimmage and a game.
Key Features of Great Paper Trading Platforms
Paper trading software needs to be as close to the real thing as possible, so you’ll want to choose a software with plenty of research and tools, real-time market prices and an interface that allows seamless trading.
Paper trading is a great way to familiarize yourself with how various technical indicators work and how they react in different types of markets.
Here’s what to look for when searching for paper trading software:
Highly customizable analytical tools
Don’t be shy about incorporating new technical indicators or chart patterns into your trading strategies. The point of paper trading is to learn how to trade options.
Reading up on technical analysis is one thing, but seeing it in action is entirely different. Make sure your paper trading software is loaded with analytical tools. There’s little consensus on what works best so each trader will have different favorites.
Accurate market quotes
You don’t want to be trading on old data, do you? Most free paper trading programs will have some kind of delay on price quotes, but anything older than 20 minutes won’t help you if you want to practice during open market hours.
A clunky or archaic paper trading program will provide a lot more frustration than education. A little trial and error might be required to find an interface that works, but avoid anything that requires a dozen mouse clicks to execute a simple trade.
Realistic user experience
Paper traders have no skin in the game and don’t face any real consequences for losing money. If it feels too easy like a video game, you might not get much out of it.
The best paper trading platforms don’t just simulate the experience — they’re identical to the platforms used by traders who risk real capital.
Our Top Picks
Using the above criteria, we’ve chosen the best paper trading programs for options. You’ll recognize plenty of names on this list, but there are a few newcomers who have competed to make the options market simpler and more accessible.
Try to keep your paper trading activities in line with how you’d throw around your own personal capital. If you manage risk well in your paper trading account, you’ll be better prepared for live markets.
Remember, brokers want you to have success in paper trading. The more success you have with fake cash, the more likely you’ll be in putting money into a brokerage account, and that means commissions for the broker.
1. Best Overall: Thinkorswim by TD Ameritrade
Thinkorswim remains one of the most sophisticated platforms on the market. If you have a TD Ameritrade account, you’ll get 2 different paper trading accounts. One is a standard margin account, the other is an IRA; both come fully funded with $100,000 each.
TD Ameritrade isn’t the first company to come to mind when you think options brokers, but the Thinkorswim platform has some terrific tools specifically for options trading. And it’s all available for both live and paper trading accounts.
Take the Strategy Roller, for example. This feature allows you to develop your very own covered call strategies using certain rules established in advance. Strategy Roller will take your predetermined strategy and roll it forward each month until you stop it manually.
Thinkorswim also has Options Statistics, specialized tools for traders to find entry and exit points on options trades. The Sizzle Index measures the day’s options volume in comparison to the last 5 trading days.
With over 400 technical indicators and access to the CBOE’s TradeWise options newsletter, Thinkorswim gives paper traders more than any other platform.
2. eOption Paper Trader
eOption may not be a household name, but it has offered low-cost brokerage services for options traders since 2007.
Commissions are only $3 for equities plus $0.15 per option contract and clients can even trade the underlying stocks and ETFs themselves. Automated trading programs and mobile apps are available too, but new traders can test their hand using eOption’s Paper Trader.
Using Paper Trader, you’ll get $100,000 in fake money to trade both options and equities.
The platform is completely customizable, so users can change the layout to suit their preferences. The probability calculator lets you know the odds of your potential trades and you’ll have access to the full quotient of eOption newsletters and research. Note that there are no commissions on paper trades.
To open an account with eOption, you’ll need $500 (and $2,000 to use margin).
3. Interactive Brokers TWS Paper Trader
Interactive Brokers has a tremendous platform in Trader WorkStation, capable of analyzing all kinds of markets with hundreds of technical tools. It’s definitely an intimidating program to the inexperienced trader, but thankfully Interactive Brokers offers a paper trading account with nearly all the features of the live platform.
With $1,000,000 in fake cash, you can play around with different things, especially the options trading tools.
The Options Portfolio algorithm with automatically adjust your account to the Greek risk dimensions (delta, theta, vega or gamma) while factoring in commissions and decay. In the Options Strategy Lab, you’ll be able to enter your own intricate option orders and compare up to 5 different strategies at once. You can filter by characteristics like strike price or expiration and enter orders based on your experiments.
Not well-versed in options lingo? The Probability Lab explains options strategies in simple terms without the head-spinning math formulas.
TradeStation’s platform used to only be best for professional traders who needed a highly technical platform. Now, with TradeStation’s new TS GO account option, novice traders will have access to professional-grade stock screeners and extensive educational and development tools to help them develop as investors.
Another strength of TradeStation is the number of offerings available to trade. From stocks to ETFs to futures contracts to cryptocurrencies, TradeStation offers a wide variety of tradable assets. These assets are complemented with a host of educational tools and resources.
Furthermore, as is the case with other brokerages on this list. TradeStation offers $0 commissions on stocks and most ETFs.
Firstrade is a solid choice amongst the dizzying array of brokerages in the market; all fees are set to mirror (or beat) robo-advisor pricing. In fact, Firstrade offers free trades on most of what it offers.
You can monitor your portfolio’s performance easily with the Firstrade mobile trading app, which offers a more dexterous option compared to a desktop. You’ll be exposed to a touch ID screen for iOS devices, equity ratings and fundamental data, advanced charts, comprehensive dashboard and improved research and trading interface.
Since the advent of Firstrade’s fairly recent Navigator, it’s possible to manage your account, place orders, get market updates and do research, all almost simultaneously. The single screen allows traders to immediately intuitively grasp Firstrade Navigator’s account dashboard. Take note, however, that a lot of the options available on Navigator are geared toward active traders.
Tradier is a high-tech broker for active traders. Tradier differentiates itself by using application programming interface (API) technology to partner with popular trading software to offer a wide range of platform choices.
Tradier invented the idea of an API-integrated brokerage firm with customizable interface options. Most brokers lock you into a pre-set interface, allowing you limited ways to customize your trading station, but not Tradier. You can integrate your platform of choice into your Tradier workstation while you take advantage of Tradier’s low fees and commissions.
Tradier is compatible with a wide range of platforms:
- Orion Multi Trader
- And more!
Its tradable assets include stocks, options and ETFs and its TradeHawk mobile platform is available for an additional fee with fast-streaming data options.
It requires a $0 minimum investment and two fee schedules. The standard equity and options trading comes with $0 fees per order and $0.35 per contract. If you’re a particularly active trader, you might prefer Tradier’s all-inclusive subscription model.
- It’s $30 a month for commission-free equity and options trading.
- You’ll pay $10 for broker-assisted trades, which is significantly less expensive than competing brokers.
- Tradier’s current margin rate is 5.25% for all traders, no matter how much margin you use.
Make Your Choice
You’re going to need an actual brokerage account to get full access to the best paper trading platforms for options, but many offer free demo accounts for prospective clients to try out. Take advantage of these demo accounts and sample a few different platforms. Paper trading is all about gaining experience, so taking a platform for a test drive is the best way to make a decision.
Once you master paper trading, you’ll need the right broker and strategies. Check out Benzinga’s picks for the best options brokers, our guide to all the brokers that offer free options trading, and our favorite options trading books.
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