Tips for Choosing Your Best Options Broker

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Any kind of investing can be daunting.  However, options trading can be more complicated than other investment strategies.  By choosing the best broker for their goals, options traders can become experts in their research process, placing trades, and tracking positions.

People often do not know where to begin or what to look for in an options broker.

New options investors may find it a must to consider a broker with plenty of educational resources.  Seasoned options traders as well as those wishing to expand their options trading strategies could learn something from a broker’s online trading courses.  Other learning tools could include live or recorded webinars, one-on-one online or phone advice, and some larger brokers with nationwide branches could accommodate face-to-face meetings.

New investors would be wise to take their time with learning how to trade options and gather as much advice and education as possible.  Some brokers even offer a virtual version of their options trading platform so investors can try out the process with a pretend trading account before diving in with both feet (and their savings).

Companies with great customer service are winners with people considering how to choose an options broker.

Some retailers and services have let their customer service slip, many without offering their customers much notice.  Dependable customer service from one’s options broker should be imperative, especially for new options traders.  Traders who wish to conduct complex trades or swap brokers should also look for companies with proven customer service.

Before applying for an account, prospective customers should ask questions of the company to be sure the answers and the response time meet their expectations.  It is also important to consider what kind of customer service would make them feel most comfortable.  One might prefer a telephone call to answer questions rather than read an e-mail or attempt a live online chat; it is best to be sure of what options a company offers.

Potential customers should be sure of the broker’s hours, if there is a dedicated trading desk on call, when technical support is available (weekday business hours, or 24/7), and when their customer service representatives can answer questions about their accounts.

A user-friendly trading platform is an important factor in researching the right options broker.

There are many different options trading platforms; potential customers should thoroughly research their prospective broker’s websites for a lineup of their tools and platforms.  Again, the ability to test drive a broker’s simulated platform could prove important in determining how the broker will meet the customer’s needs.

A potential customer should consider these points:

  • The ease of trading
  • Is it a user-friendly platform or is it a challenge to search around for what is needed?
  • Does the platform do everything the customer wants (for instance, the ability to fill out trade tickets in advance or create different alerts)?
  • Are there annual or monthly fees just to sign up with the broker?  If the answer is, “Yes,” can the fees be waived by keeping a minimum account balance or conducting a minimum number of trades within a certain period?
  • Is the website reliable and how quickly are trades carried out?  (This will be a huge consideration for strategies involving swiftly entering and exiting positions.)
  • Do they have a mobile version of their website and is it full service or only capable of basic function?  Depending on the customer’s style, this may or may not be important.

When considering how to choose an options broker, advanced traders may have different needs than those new to trading options.

To evaluate the cost and depth of data, the tools vital to all options traders include:

  • Rudimentary charts to aid in choosing one’s entry and exit points
  • A regularly updated quotes feed
  • Screening tools
  • An analyzing tool to portray a trade’s potential rewards and risks (peak upside and lowest downside)

Traders dipping into more complicated strategies may want more advanced analytical and trade modeling tools including:

  • Real-time market data from a number of providers
  • Personalized screensavers
  • The capacity to build, track, test, and back test trading strategies.

Commission fees are often the first thing people consider when trading options, but, it should not be a huge factor in what to look for in an options broker.

Comparing commission fees gives people a side by side look at brokers; however, the cost of commissions is really the least important consideration when choosing a broker.

These are a few points taken into account when determining how much brokers charge for trading options:

  • Trade fees are made up of two parts: the base rate, which is the trading commission paid when the stock is bought; and the much lower per-contract fee.  Commissions generally range from $3 to $9.99 per trade while contract fees range between 15 cents and $1.25.
  • A number of brokers combine the commission and per-contract fee into one flat fee.
  • Some brokers offer active trader or high volume discounts to their customers.  These discounted rates based on average account balance, trading volume and trading frequency vary by brokerage firm.

New or occasional options traders may opt to choose a broker offering a single flat fee or a firm that charges a commission plus per contract fee.  More active traders should review their trading habits to evaluate if a tiered pricing plan would be more cost-effective.

When choosing an options broker solely by low commission fees, investors may find they “get what they pay for.”

As mentioned, there are more fees associated with trading options than just commissions.  If one is paying extra for inactivity fees, data fees, platform fees, and whatever else can be tacked on, the low commission broker can actually end up costing a trader more money.  One might end up paying a higher commission at some of the larger, well-known brokers, but, they will receive, in return, the value of free access to all the information necessary to perform due diligence.

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