Does the broker have a dedicated trading desk on call? What hours is it staffed?
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What about representatives who can answer questions about your account? Even before you apply for an account, reach out and ask some questions to see if the answers and response time are satisfactory. Options trading platforms come in all shapes and sizes. They can be web- or software-based, desktop or online only, have separate platforms for basic and advanced trading, offer full or partial mobile functionality, or some combination of the above.
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Is the platform design user-friendly or do you have to hunt and peck to find what you need? Can the platform do the things you need, like creating alerts based on specific criteria or letting you fill out a trade ticket in advance to submit later?
How reliable is the website, and how speedily are orders executed? This is a high priority if your strategy involves quickly entering and exiting positions.
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Does the broker charge a monthly or annual platform fee? If so, are there ways to get the fee waived, such as keeping a minimum account balance or conducting a certain number of trades during a specific period?
Some of the basics to look for:. Basic charting to help pick your entry and exit points. Those venturing into more advanced trading strategies may need deeper analytical and trade modeling tools, such as customizable screeners; the ability to build, test, track and back-test trading strategies; and real-time market data from multiple providers. Check to see if the fancy stuff costs extra. For example, many brokers provide free delayed quotes, lagging 20 minutes behind market data, but charge a fee for a real-time feed.
Similarly, some pro-level tools may be available only to customers who meet monthly or quarterly trading activity or account balance minimums. But because commissions provide a convenient side-by-side comparison, they often are the first things people look at when picking an options broker. A few things to know about how much brokers charge to trade options:. The two components of an options-trading commission are the base rate — essentially the same thing as the trading commission that investors pay when they buy a stock — and the per-contract fee.
Some brokers bundle the trading commission and the per-contract fee into a single flat fee. Some brokers also offer discounted commissions or contract fees based on trading frequency, volume or average account balance. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page.
However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money. The investing information provided on this page is for educational purposes only.
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NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks or securities. What are options? While many brokers have eliminated fees for trading stocks or exchange-traded funds ETFs , these still exist for options. Commissions may range from a flat rate to a per-contract fee based on the amount you trade—both when you buy or sell options. As a result, options traders must take into account these fees when considering the profitability of an options strategy. Then you should outline what your investment objectives are, such as capital preservation, generating income, growth or speculation.
Your broker may have additional requirements, such as disclosing your net worth or the types of options contracts you intend to trade. What Are ETFs? What Is A Brokerage Account? What Is A Bond? Economy Is Healing. Investors Are Nervous. What Gives? By Kat Tretina Contributor Forbes adheres to strict editorial integrity standards.
Misconception: Almost All Options Expire Worthless
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What Are Options? To understand options, you just need to know a few key terms: Derivative. Take stock options, where the price of a given stock dictates the value of the option contract.
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Call option and put option. A call option gives you the opportunity to buy a security at a predetermined price by a specified date while a put option allows you to sell a security at a future date and price. Strike price and expiration date. Intrinsic value and extrinsic value. Extrinsic value represents other factors outside of those considered in intrinsic value that affect the premium, like how long the option is good for. In-the-money and out-of-the-money.
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