There are a lot of options brokers available for the online options trader. In fact, many online stock brokers also offer options products as well. So, how do you sort out all the features offered to find the one that is perfect for you?
I have my own criteria that I have used. I’ll share these here
If you are going to do online options trading, the platform will likely be one of your most critical components.
Trading platforms are often broken into two categories… web-based and desktop. Ok… mobile if you are a real trading nerd. Most desktop platforms are either a native Windows™ program or they are Java-based. In either case, desktop trading platforms usually offer the richest user experience. I say usually because you will find a few online brokers who have pushed the limits of web-based platforms and offer a rich experience there as well.
Regardless, my preference is to have a desktop platform as my primary trading platform and use the web-based platform as a backup or in cases where I need access from someplace other than my desk.
I do use a mobile platform, but honestly… who actually places
trades from their mobile platform? Most are pretty clumsy to use.
However, for monitoring purposes they may be adequate.
When you are placing a lot of orders over a period of time, order routing can be pretty important. What I mean by order routing is:
In addition, being able to get filled at better than quoted price is a bonus. What does that mean? Let’s say I’m trying to fill an order to sell a put spread. The bid/ask for this spread is $.46 bid/$.50 ask. I’d like to get more than $.45 for the spread so I put the order in at $.48 and it gets filled. I may have to wait 5 or 10 minutes or longer to get the fill but I still get it at somewhere near the mid price.
Many options brokers will route the order directly to the
exchange and allow the market maker to accept the price even though it
is higher than their bid.
For me, there are three key areas of support.
A really good broker offers all three of these services in some form or another.
Two other areas I’d consider as part of support are...
These days, commission is starting to become a non-issue. However, I still find some brokers who have ‘per-leg’ minimum fees, which means a $12.95 minimum for a 1 contract vertical spread would be $25.80 and twice that if I put on an Iron Condor. The biggest problem I have with that is that you may second guess a decision to do the right thing – like close the trade early because the commission has an impact. Or… you may decide to put on larger orders than you should to get your “money’s worth”.
Here are a few brokerages I've used that I can comment on using the above criteria. I’ll also mention a few others just based on research I've done but obviously they won’t be as detailed.
|OptionsXpress||A pretty decent options broker with a platform and services geared toward the serious options trader. They offer other trading instruments as well, including futures.|
|Thinkorswim||My current favorite options broker. These guys clearly get the options trader and make it easy to create and manage trades. They now support stocks, options, futures, futures options, and currencies|
|TD Ameritrade||These guys have changed a lot over the years and are on a path to entice retail traders with their tools and services. The latest news is their announcement that they will acquire broker Thinkorswim.|
|Fidelity||Fidelity also has a number of offerings to support the retail options trader. While their web platform isn't too strong, if you are a serious trader… their desktop platform is much better.|