Intermediate and sophisticated investors and traders use stock options to manage and mitigate market risk. Although not essential to ensure adequate portfolio diversification, options have tremendous strategic value and can dramatically increase returns when the bets they enable pay off.
Of course, options trading is not without risk, which is why you should steer clear of them when you’re first starting out. Once you feel more confident as an investor, you can dip your toe into the sometimes choppy waters of options trading.
And when you do, you’ll embrace the opportunity to do so with the same platform that handles your stock and exchange-traded fund (ETF) trades.
Best Stock Brokers for Options Trading
These are among the best online stock brokers for low-cost options trading. Most offer free stock and ETF trading as well, making them one-stop shops for investors looking to build diversified equities portfolios.
Each of these platforms does at least one thing really well, whether that’s educating beginners about the pitfalls and potential of options trading, generously rewarding new customers, or making it easy to trade options on a smartphone. Our top pick, TradeStation, offers the best overall value and experience for the widest range of options traders.
Best Overall: TradeStation
TradeStation has a powerful options trading setup built for active, experienced investors seeking the flexibility to trade on the go. Contract pricing starts at just $0.50 per contract on the mobile-friendly TS GO platform.
TS SELECT members, who enjoy a more comprehensive array of desktop trading capabilities, pay $0.60 per contract. If you’re new to the options game, download TradeStation’s Ultimate Guide to Trading Options for a crash course.
Additional features:
- No minimum opening deposit for TS GO
- Earn up to $5,000 in bonus money with a qualifying deposit after opening your account
- Commission-free stock and ETF trading
- Advanced analysis and trading strategies with OptionStation Pro (free with membership)
- Simulated trading at no additional charge
- Access to alternative investments like futures
Open an Account With TradeStation
Best for Beginners: E*TRADE
E*TRADE spares no effort to make novice options traders feel right at home. Start in its knowledge base, where helpful articles and videos define terms and introduce basic options trading strategy.
Then move to the Power E*TRADE platform, where you can evaluate planned trades using advanced analytics or “execute” them without risking real money using a sophisticated paper trading tool.
Additional features:
- $0.65 options contract fee for <30 trades per quarter
- $0.50 contract fee for >30 trades per quarter
- Dime Buyback Program lets you close short options contracts (<$0.10 per) with no contract fee
- Commission-free stock and ETF trades
Best for Sophisticated Traders: Interactive Brokers
Interactive Brokers is the best choice on this list for high-volume professional options traders seeking customized per-contract pricing on their preferred instruments and access to options markets outside North America.
Pricing is complex but broadly reasonable. Choose from tiered or fixed pricing based on your trading patterns and strategy. Per-contract pricing begins as low as $0.10 apiece and possibly lower for higher-volume trades, but $0.25 to $0.50 per contract is more common at low to moderate volumes.
Additional features:
- OptionTrader Combo supports sophisticated strategies, including multi-leg trades with visibility into all available options chains, advanced analytics, and automatic hedging in the underlying equity position
- The IB SmartRouting system improves pricing by an average of $0.47 per 100 shares versus competitor benchmarks
- Low margin rates (50% lower than competitor benchmarks)
Open an Account With Interactive Brokers
Best for Mobile Traders: Robinhood
Robinhood is a mobile-first trading platform that’s easy to use on the go. While it doesn’t have the same sophisticated analytics or research tools as professional-grade competitors, it’s the most user-friendly product on this list and it looks great on a small screen. Do your research elsewhere, then get to work.
Additional feature:
- No trading commissions or contract fees
- Trade stocks, ETFs, and crypto too
- No minimum deposit required
- Upgrade to Robinhood Gold ($5/mo) for advanced market data, margin investing, bigger instant deposits, and professional research from Morningstar
Open an Account With Robinhood
Best for Low Cost: Webull
Webull is virtually fee-free. For options traders, that means no commissions coming or going and no contract fees. You’ll never pay stock or ETF trading commissions here either.
Additional features:
- Extended-hours trading for all users (rare for a commission-free broker)
- Professional-grade analytics and screeners
- Multiple account opening bonus opportunities
- No minimum deposit required
Best Account Opening Incentive: Ally Invest
Ally Invest has the best account opening incentive of any options trading platform. Deposit at least $10,000 in new money to claim a piece. The more you deposit, the bigger your bonus.
The bonus thresholds are:
- $100: Deposit $10,000 to $24,999 in new funds or assets.
- $250: Deposit $25,000 to $99,999 in new funds or assets.
- $300: Deposit $100,000 to $249,999 in new funds or assets.
- $600: Deposit $250,000 to $499,999 in new funds or assets.
- $1,200: Deposit $500,000 to $999,999 in new funds or assets.
- $2,000: Deposit $1,000,000 to $1,999,999 in new funds or assets.
- $3,000: Deposit $2,000,000 or more in new funds or assets.
Fund the account within 60 days of opening and maintain the combined bonus and qualifying deposit (less any trading losses) in the account for 300 days after Ally Invest credits the bonus.
Additional features:
- $0.50 per contract
- No minimum deposit required
- Commission-free stock and ETF trading available
- No asset management fee for managed portfolios with 30% cash balance
Open an Account With Ally Invest
Methodology: How We Select the Best Options Trading Brokers
We use 7 key metrics to evaluate the top options trading platforms on the market. Each metric relates to an important aspect of the trading experience, such as its overall cost (lower is better) or the availability of tools to make you a better trader.
Trading Commissions
Trading commissions are rarer today than in the past, but some online brokerages still charge them. They may apply when you purchase the contract in the first place (assignment fee), when you exercise the option (exercise fee), or both.
While a few dollars’ commission doesn’t seem like much, it can eat into your profit margins on borderline trades. So unless you’re really set on a particular brokerage that charges trading commissions for options activity, we recommend looking to commission-free providers.
Contract Fees
Options contract fees are more common than options trading commissions these days. These are small fees — usually less than $1 per contract — tacked onto your purchase (assignment). If you buy 50 options contracts with a contract fee of $0.50, you’ll pay $25 plus whatever the options actually cost.
Analytics and Charting Capabilities
Basic options trading is straightforward, if not simple. You’re placing a bet that the price of an underlying asset will rise or fall and positioning yourself accordingly.
If your bet pays off, you make money. How much you make depends on how many contracts you purchased and how far in the money they got before you exercised them.
But that’s just the appetizer for more sophisticated options traders, some of whom prefer not to exercise their contracts at all. They place bets on price movements of the contracts themselves or use options as part of much more complex trading maneuvers. Their activities are even riskier than run-of-the-mill options trading (which, to be clear, is pretty risky) and they rely on advanced analytics and charts to mitigate the downside.
If you’re serious about options trading, you need an options trading platform with first-rate analytics and charting capabilities, even if it’s not the cheapest choice around. There’s too much at stake to do otherwise.
Mobile Experience
Most of the trading platforms on this list have decent mobile apps.
Some, like Robinhood, qualify as mobile-first or even mobile-only. They’re not meant to be used on larger screens and they’re designed for more casual, on-the-go traders.
Others strike a better balance between mobile and desktop functionality. They’re designed for a wider range of users, including sophisticated options traders inclined to spend the entire day at the trading terminal.
Educational Resources
Every platform listed here has some amount of educational resources for options traders. No matter how experienced you become, there’s always something more to learn about trading.
Options education does disproportionately benefit less experienced traders, however. That’s why the platforms we consider to be beginner- and intermediate-friendly tend to have lots of training modules, explanatory articles, and other educational content for users who need them.
Other Investment Options
Most traders prefer not to switch between trading platforms. They want an all-in-one interface where they can trade options alongside stocks, ETFs, fixed income securities, and maybe other types of investment instruments too.
None of the platforms listed here are options-only. But we give preference to platforms with a broader array of investment options.
Account Opening Incentives
Finally, the icing on the cake: account opening incentives. Many brokerages offer them, and they can be quite generous. Our top pick on this point, Ally Invest, offers up to $3,000 to qualified new account holders.
Your account opening bonus won’t make or break your options trading career. But it can definitely ease the pain of an early misstep or two.
Become an Options Trading Expert: Your Questions Answered
You have questions about options trading. We have answers.
What Is an Options Contract?
An options contract represents the right to buy or sell an underlying security, usually a stock, at a particular “strike price”. One option is usually equivalent to 100 shares of the underlying security.
Every options contract has an expiration date. You can exercise (use) the option at any time before the expiration date, but you’re not obligated to do so. If you do nothing, the contract expires worthless and you lose whatever you paid for it. If the option is “in the money” — above or below the strike price, depending on the type of contract — as the expiration date approaches, you can exercise the option and lock in a profit.
Options trading can produce significant profits and significant losses. For example, let’s say you buy a single call option for $30. The strike price is $20. The value of the underlying stock rises to $30 the week before expiration. That’s well in the money, so you exercise the option to buy 100 shares of stock for $2,000 total. You can immediately turn around and sell the batch for $3,000 total — locking in $970 in profit after subtracting the contract price.
Why Should I Trade Options?
Most Americans who own stock don’t also purchase options contracts, not least because options contracts aren’t essential to the construction of a diversified portfolio with a long time horizon. Options hedge near-term market risk; they’re less useful over periods measured in years or decades.
Still, for active investors with enough market experience to avoid getting burned, options trading can pay dividends. (Not literally, of course.)
The benefits of options trading include:
- The potential to magnify trading profits in short periods of time
- Greater leverage for everyday investors with high risk tolerance
- No obligation to buy or sell the underlying security
- A built-in hedge against market downturns
- The potential to profit off the contract itself (by selling it before expiration)
How Do I Start Trading Options?
Begin by opening an account with one of the online brokerages on this list and familiarize yourself with the ins and outs of its trading process, research capabilities, and account management tools.
Then, complement your brokerage account with a subscription to a premium options research platform to get acquainted with the options market. We recommend Motley Fool Options. Soon enough, you’ll feel comfortable taking the next step in your journey as an investor.
How Much Does It Cost to Trade Options?
Maybe not as much as you’d think. But options trading does have some costs.
First, there’s the contract price. Every options contract has a price that fluctuates over time. As the expiration date approaches, these price movements intensify. The farther into the money the contract gets, the higher the price; the farther out of the money, the lower the price.
Then there’s the cost of exercising the option. Many options trading platforms waive exercise fees — the commission charged when you exercise the option. But if the contract requires you to buy a load of stock, you’ll need to come up with the funds at exercise.
Finally, there are contract fees and buying commissions. Many brokers waive buying commissions as well, but many still charge contract fees — usually less than $1 per contract — at the point of sale.
How to Choose the Best Options Trading Platform
Each of the options trading platforms on this list qualifies as one of the very best around. How do you choose the very best for your needs?
Begin by assessing your comfort level with options trading. Even if you have experience trading stocks and ETFs, you should approach options carefully. Options trading carries more risk than buy-and-hold stock and ETF trading and truly isn’t appropriate for everyone. Start slow, with a beginner-friendly broker, and try to decide early on whether it’s right for you.
If you do know your way around the world of puts and calls, consider which platform best suits your trading style and objectives. Do you value industry-leading analytics and charting tools? Do you like to research the underlying stocks before placing a trade? Do you prefer to trade from your desktop, mobile phone, or both?
Your answers will determine how you proceed and which service you ultimately select. There’s no wrong answer here — you can’t go wrong with any of the choices on this list.
