Online Brokers for Options Trading

The ability to trade financial instruments like stocks, funds, futures and options have made trading much easier with high degree of automation and analysis. Traders can now trade options on different financial instruments over internet with discount commission schedules and on advanced trading systems. There are now a variety of online brokers offering options trading services including NobleTrading, OptionsXpress, Scottrade, and so on.

There are many things to be considered when choosing an online broker for options trading; most important ones are discussed here.

Products Available: Not all online options brokers allow traders to trade options on all financial instruments such as stock options, futures options, currency options, and so on. Choose the broker who enables you to trade your choice of options contracts.

Account Type: Some online options trading brokers offer single account to trade options, stocks and other financial instruments, while others offer different account for trading different instruments. Choose the broker who offers better connivance for you.

Commission and Charges involved: Different online brokers have different commission plans. Often there is a minimum amount required (which can be as low as $7 per contract) and additional charges ($1, $1.5 or $2) for each additional contract traded. Also look for other fees involved such as minimum account requirements, maintenance fees, wavy charges, etc.

Access to Markets: The market access you want should correspond to your trading style. Where option investors need delayed market access day traders and other active traders need real-time/direct/level 2 market access. Also not all brokers allow to trade all exchanges such as ISE, AMEX, PHS, PSE, CBOE, etc.

Trading Software: Successful options trading require good trading platforms. There are both web based and direct access (installable) options trading systems available today. The charting packages, greeks and technical analysis tools of these systems vary considerably. Find a suitable trading software and demo trade on it; almost all online brokers for options trading offer free practice accounts.

Options Trading Strategies: Options are powerful profit building tools for any market condition. Options traders follow a wide range of trading strategies from simple call and put options strategies to multi-legged complex options trading strategies. Make sure that you will get enough support from your brokerage firm to practice your strategies.

Order Types: Enquire which market and limit orders are supported by your broker and trading software. This is important as it is a major factor in practicing complex trading strategies.

The best place to start your quest is search engine results. You can get really good idea about the brokers from their websites and there are also many sites which provide comparison charts and reviews of online options brokers. Before we end one note – what ever broker you are associated, it is ultimately your trading knowledge and skill, and market performance which determine profit and loss.

Article