Best Options Trading Platforms

Options enable you to go long or short on stocks and other asset classes with a much larger position size than your brokerage account balance allows.

In this comparison guide, I discuss some of the best options trading platforms for supported markets, low fees, and other important metrics.

Also consider: My guide to choosing a broker

Top forex brokers at a glance

• Robinhood
• Interactive Brokers
• E*Trade
• Webull
• TD Ameritrade

How to pick the best broker for options trading

In the sections above, I reviewed some of the most popular brokers for options trading. However, no two options trading platforms are the same, so it is important that you do your own research.

When searching for the best options trading platform, consider the following metrics.

Supported options markets

The first metric to consider when choosing an options trading platform is the type of markets it offers access to.

In most cases, you will be able to trade stock and ETF options from the US markets. Some online brokers, such as IBKR, also offer access to more than 30 global exchanges. This will give you a lot more flexibility when it comes to entering and exiting suitable options positions.

Some options trading platforms also support other asset classes, such as currencies and commodities.

Ultimately, just make sure that your chosen options trading platform supports your preferred market before proceeding.

Options trading fees

You should also consider what fees you will need to pay when options trading. All of the brokers that I discussed earlier enable you to trade US-listed options without paying any commission.

However, it is likely that you will still need to pay contract fees. This fee is charged for each options contract that you trade.

For example, TD Ameritrade and E*TRADE both charge $0.65 per contract. In the case of Robinhood and Webull, however, there are no contract fees to pay at all.

Minimum deposit requirement

You should also consider the minimum deposit requirement when selecting an options trading platform.

Most brokers in the US support fee-free payments across ACH and bank wires, but this is worth checking nonetheless.

Options trading suite

When trading options online, you will be entering a highly complex financial marketplace. And as such, you will need to ensure that your chosen options trading platform offers a suitable trading suite that aligns with your prior experience.

For example, I found one of the best options trading platforms for beginners is Robinhood. The reason for this is that the Robinhood options platform is a lot more basic when compared to other providers, such as IBKR.

With that said, Robinhood still supports a range of notable tools that will appeal to traders, such as technical indicators and solid pricing feeds.

On the other hand, if you have prior experience in trading options online, the Robinhood charting platform will likely not suffice.

Instead, you might be more suitable for an advanced trading suite, such as thinkorswim by TD Ameritrade.

Supported options strategies

In addition to the trading suite itself, you should also consider what options strategies the respective broker supports.

This generally follows suit with what I discussed above. By this, I mean that beginner-friendly platforms like Robinhood come with support for basic options strategies.

In comparison, at E*TRADE, traders will have access to more advanced strategies such as naked calls and iron butterflies.

Strike prices and expiry dates

Another important consideration to make when choosing a broker for options trading is how much flexibility you will have with strike prices.

This is the price that your options trade will need to surpass to make a profit, should you hold until expiry.

It’s best to choose a platform that offers a broad selection of strike prices, as this will give you more options when deploying a position.

Additionally, it is also important to assess what options you will have regarding expiry dates. For instance, some brokers offer options on a weekly, monthly, and quarterly basis.

American-style options

I should also stress the importance of choosing an online broker that offers American-style options. In doing so, you will have the freedom of closing your options positions at any given time on or before the expiry date.

In contrast, European-style options must be held until the date of expiry. This means that you will be unable to lock in profits or limit a losing trade before the options expire.

All of the brokers that I discussed earlier offer American-style options.

Options demo account

If you are getting into options trading for the first time, I strongly suggest that you consider an online broker that supports a demo account.

This will allow you to trade puts and calls without risking your own money. The demo account will mirror the actual options markets in real-time, which will enable you to learn and perfect a suitable trading strategy.

Webull is a top option when it comes to paper trading accounts. There are no limits to the amount of paper money that you can utilize, nor any time restraints.

Mobile app

Options trading requires you to stay abreast of short-term volatility. As such, it is wise to select an options broker that offers a native mobile app.

This will enable you to cash out a winning or losing position at any given time, rather than needing to wait until you are back at your desktop device.

How much money do you need to trade options?

This is because when trading options, you will only need to cover the premium. This is the fee that you pay to enter the trade and it generally averages 5-10% of the position size.

The premium that you pay will need to be deducted from any profits that you make from the options trade.

Moreover, if your options expire above or below the target strike price (depending on if you have puts or calls), you will lose the premium in its entirety.

Pattern day trader rule

Options trading is a short-term strategy and as such, you will need to factor in the pattern day trader rule.

Put simply, you will need to have $25,000 in your brokerage account if you enter more than four options trades within a five-day period.

To avoid the $25,000 balance requirement, you will need to ensure that you do not trade more than the pattern day trader rule permits.

How do you start trading options?

In this section, I explain the basic steps required to get started with an options trading position with an online broker.

Step 1: Choose a suitable broker for options trading

The first step is to ensure that you choose a suitable online broker that supports options trading.

Make sure that the broker offers a demo account facility, alongside low fees and plenty of supported markets.

Step 2: Review strike prices and expiry dates

Once you have access to a demo account that supports options, then the next step is to review the current markets in terms of strike prices and expiry dates.

As a simplistic example, let’s say that you are interested in trading Apple stock options.

Your broker will list a selection of strike prices alongside the respective premium that needs to be paid to enter the market.

For instance, let’s say that Apple stock options have a strike price of $160 and will expire in three weeks.

This means that you will need to speculate on whether you believe that Apple stock will be trading higher or lower than $160 on the date that the options contracts expire.

Step 3: Evaluate options premium

In order to place an options trade, you will need to pay a premium. The premium can and will vary considerably depending on the strike price and expiry date, as well as the asset that is being traded.

The key takeaway is that the higher the probability that the options trade will land in the money (ITM) on the date of expiry, the more you will need to pay via the premium.

The premium will be quoted per contract and then multiplied by the number of contracts that wish to buy.

Crucially, the total premium that you pay represents your total exposure to the options trade. For instance, let’s suppose that the premium is $16 per Apple options contract for your preferred strike price.

If you decide to buy 20 contracts, this arepresents a total premium of $320. This means that if you allow the options contracts to expire and they do not land ITM, then your total loss will amount to $320 – and no more.

Step 4: Calls or puts

At this stage, you should have selected a stock or ETF to trade and have assessed the current state of play in terms of strike prices, expiry dates, and premiums.

Next, you will need to decide whether you wish to purchase calls or puts.

In simple terms, if you believe that the value of the asset will be higher than the strike price when the options expire, then you will need to purchase calls.

If you believe that the options will close below the strike price upon expiry, then you will need to purchase puts.

Step 5: Place order

The final step is to place your chosen options trade. Just remember, when trading options via a demo account, you will not be risking any money.

As such, it’s best to spend as much time as you need before using your own capital to trade.

Nevertheless, after you have purchased calls or puts and confirmed the order, you will then need to watch over the markets.

As you will be trading American-style options, you can close the trade whenever you wish, during standard market hours.

The value of your options trade will rise and fall throughout the day, depending on the market forces of demand and supply.

Do you need a broker to trade options?

The broker you choose may depend on your trading style or the level of risk you want to expose yourself to. The broker will connect you to the chosen market and ensure that your options trade is executed in real-time.

In return for facilitating your trade, the options broker will likely collect a fee for each contract that you purchase.

Some brokers also charge a commission when trading options, but this is now more of a rarity.

Conclusion

In summary, I have revealed some of the most popular options trading platforms in the US to suit all investor profiles.

Most options brokers enable you to get started without meeting a minimum deposit requirement. But do remember that if you execute four or more options trades within a five-day period, then you will be defined as a pattern day trader.

This means that you will need to have at least $25,000 in your brokerage account to continue trading.