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6 Best Option Trading Platforms in 2021

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Option trading has become a popular option in the industry. Some find that options trading holds fewer risks, which makes it an attractive option for people who don’t want to risk losing too much. Option traders in the United States make an average of $112,853 each year. The lower spectrum, however, makes about $63,000 each year.

About 92% of traders are currently considered beginners, with only 8% at the top who can truly be called experts. Among the top 8%, about 85% of trades seem to be successful. When you’re only starting out, you have to find a platform that is right for you. If you have found an interest in options trading, then this article will help you discover which platform will suit your needs.

What Is Option Trading?

The trading industry is growing and several new methods and opportunities have surfaced over the past years. Options trading has been around for some time, but has seen increased interest in the last few years. This is a trading opportunity that has a lot in common with CFDs but still differs enough to fall into its own category.

An option is essentially a contract. The obligation to buy or sell an asset is eliminated when switching to options instead of some of the traditional trade options. Instead, the person initiating the options trade will gain the right to initiate a buy or sell at a specific position. These are financial contracts related to a specific asset - called the “underlying asset”.

When initiating an options trade, you do not own the asset that you are buying a contract for. Options work with estimations. You may estimate that a value will increase over a specific period of time - and then profit if your prediction was correct.

There are different types of option trading terms that you should understand. Many of these relate to the type of trades or positions that you initiate - and knowing them can help you avoid disappointing trades.

  • Call and Put - When you want to initiate a trade, you can press “call” or “put”. Call options mean you think the value of the stock or commodity will increase within the specified timeframe. With a put option contract, you estimate that the value will fall instead. You can profit if your prediction was correct, but you will lose money if the value goes the other way.

  • Hedging - Another term sometimes used. By utilizing a hedging strategy, it is possible to minimize potential losses that may come from other open positions that you have on a platform. If you have stock in an open position and find that the value is falling, options can be used as a hedge to minimize the risks of losing a significant amount of money.

  • The Money - There are three terms used to describe the current position of your trade. These include in the money, out of the money, and at the money. In the money means the value of the stock has moved in the direction you predicted; thus leaving you with a positive balance. Out of the money means the opposite. If the term “at the money” is used, it means that the contract has ended at an equal value compared to the initiation.

Is Option Trading Risky?

Yes, options trading has risks involved, just like CFDs and other trade methods that are offered on online platforms. Sufficient research and limited leverage can, however, be used to reduce your risks and eliminate the need to worry about losing large investments at once.

Pros and Cons of Trading Options

With options trading comes a series of benefits but, at the same time, also some negative factors that should not be overlooked. We will take a closer look at what the benefits and drawbacks are when talking about options trading. This should give you a better understanding of whether or not options trading might be for you.

? Pros of Options Trading

  • You are not required to buy actual assets or stock in the commodity you trade with. Instead, a financial contract is opened, which gives you an opportunity to estimate whether a specific asset value would increase or decrease over a period of time.

  • There is a significant number of brokers and trading platforms that can be utilized for options trading. The popularity of options trading has caused numerous platforms to start offering this as an opportunity.

  • Options trading can be used as a hedge. This limits your losses if other positions you hold open start to fall in terms of value.

  • There are several demo trading accounts that can be used to help you get used to how option trading works.

? Cons of Options Trading

  • Some companies require a large initial investment if you want to perform options trading. This can be a drawback as many beginners want to start with just a small amount of money at first.

  • Options trading can sometimes have more limited variations of assets that you can use when initiating a financial contract.

  • Even though there are methods to reduce the risks, you can still lose a significant amount of money.

  • While leverage can be used to boost your earnings, this also creates an opportunity to lose much more of your investment.

How To Get Started Trading Options

Getting started with options trading is not a difficult process, as most online trading platforms now offer these types of trade opportunities. Your first step, however, should be to get yourself acquainted with how the process works. This is why setting up a demo account first is useful. The majority of options trading platforms will give you a chance to trade on a demo account. The account will not hold any real money, which means there’s nothing to lose.

Once you get the hang of options trading, you can make your first deposit and start trading with real money.

It is also useful to equip yourself with an arsenal of tools. Being able to investigate the latest news-related events and having graphs to analyze can be tremendously helpful when you are setting up a trading strategy.

How Much Money Do I Need To Begin?

There are a few companies out there that give you an opportunity to start trading with as little as $10 or even $5 sometimes. While this may be an attractive way to begin your journey, with options trading, these are generally considered too low. You need a larger initial investment if you wish to take full advantage of options trading and aim for a good amount of profit.

It is recommended to invest at least $5,000 when you get started with a real account. Some beginners prefer funding their account with as much as $10,000. This gives you more funds to invest and bigger profits when you complete a successful trade. It does, however, also mean you have more to lose.

3 Tips To Choose The Best Broker For Options Trading

Choosing a broker to use for options trading can be tough. With too many options on the market, how do you know which one is right for you? Trustworthiness, fees, and many other factors should be considered to ensure you find a broker that you can work with for a long period of time.

We share three essential tips to help with your decision below:

  • Always check to ensure that the broker is licensed. If no licensing information can be found on the official website, skip ahead to the next broker.

  • Take a look at the fee structure and the minimum deposit. Can you afford the minimum deposit? And will the fees charged per transaction take away too much from the profits you make?

  • Start with a demo account at the companies you choose. Try a demo account at one or two platforms. See how the platform works and then decide where you want to invest your money.

Comparative Table Of 6 Best Option Trading Platforms

After our research process, we came up with a list of six option trading platforms that are great for both beginners and experts. We share a thorough overview of these platforms, including a few factors to help you understand what to expect.

Best Option Trading Platforms

  • AvaTrade
    Platform: AvaTrade WebTrader, AvaOptions, MetaTrader, ZuluTrade, DupliTrade
    Options Fees: n/a
    Markets: Forex Pairs; CFDs
    Best for: Platform Versatility
  • Swissquote
    Platform: eTrading, Swiss DOTS, Themes Trading
    Options Fees: $9 - $190
    Markets: Forex; Indices; Commodities; CFDs
    Best for: High Volume Trading
  • Webull
    Platform: Web and desktop trading software
    Options Fees: $0.045 per contract
    Markets: Stock; ETF
    Best for: Desktop Trading
  • Interactive Brokers
    Platform: Trader Workstation, IBot, IBKR Mobile
    Options Fees: $0.65 per contract
    Markets: Options; Stocks; Warrants; BATS
    Best for: Experienced Traders
  • TD Ameritrade
    Platform: Thinkorswim Web, Thinkorswim Desktop, Thinkorswim Mobile
    Options Fees: $0.65 per contract
    Markets: Bonds; Options on Futures; Forex; ETFs; Mutual Bonds
    Best for: Mobile Trading
  • RobinHood
    Platform: Robinhood Trading Platform
    Options Fees: $0.002 per contract; $0.000119 per share
    Markets: Stocks; Options; Funds; Cryptocurrency
    Best for: Beginners

1

AvaTrade - Best for Platform Versatility

AvaTrade is an established brand in the trading industry. The company is fully licensed and regulated by numerous authorities. There are several options available that you can use when setting up a financial contract. AvaTrade also offers access to a wide variety of trading platforms. This ensures you can trade no matter where you are - on your desktop, web browser, or even a mobile phone. Transaction charges depend on the contract you initiate and the trade value.

  • Minimum Deposit: $100

2

Swissquote - Best for High Volume Trading

Looking to make a more substantial investment? Then Swissquote is the company you want to take a closer look at. Swissquote has a high minimum deposit but does offer access to several benefits that are tailored toward high volume traders. VIP discounts are also available, as well as bonuses for active traders. Option fees are charged based on your trading volume, which may seem high at first - but could potentially be cheaper in the long run for high volume trading.

  • Minimum Deposit: $1000

3

Webull - Best for Desktop Trading

Webull is a trading platform that has its own desktop software. The software is easy to install and can be used to analyze trends, access a variety of Webull tools, and initiate new option contracts. No minimum account balance is needed to utilize options trading at Webull, but some account types require an initial deposit of $2000.

  • Minimum Deposit: $0 - $2000

4

Interactive Brokers - Best for Experienced

Interactive Brokers is not one of the more beginner-friendly options on our list. Instead, this company aims to offer a high-quality, advanced trading system for traders who are already experienced. The minimum deposit of $10,000 also means you need to make a more significant investment if you wish to trade on this platform.

  • Minimum Deposit: $10,000

5

TD Ameritrade - Best for Mobile Trading

TD Ameritrade has made a platform that is great for people who prefer to initiate trades and check on their current open positions from a smartphone. The company has a large focus on frequently updating their mobile trading platform, but also offers trading software for web and desktop environments. Options trading is only available for users who are able to make an initial deposit of $2,000.

  • Minimum Deposit: $2,000

6

RobinHood - Best for Beginners

A platform that is easy enough for beginners, but also complex enough to help new traders get access to quality tools. The features of the platform continue to remain useful for traders who gain more experience. No minimum deposit is required to start trading, but if the user opens a Robinhood Gold account, they do need to invest at least $2,000.

  • Minimum Deposit: $0 - $2,000

Methodology

To bring you a list of top option trading platforms, we had to do extensive research. The industry feels overrun with a vast number of platforms that one can choose from. Unfortunately, these are not all trustworthy, reputable, or even licensed trading platforms.

We looked at a number of factors to help us scale down to a list of just six top platforms that you can use to get started with options trading. Factors we considered during the research process:

  • The reputation of the company. This included checking for licenses and regulators. We also considered reviews on third-party platforms, such as TrustPilot.

  • The specific options trading opportunities offered on the platform. There’s no use in registering for options trading if only a few opportunities exist.

  • Fees associated with each transaction. Some companies are too costly when it comes to initiating an options contract.

  • The platforms used. We focused on exploring options that had mobile and web-based platforms for ease of use.

  • Withdrawal and deposit methods were also taken into consideration. We had to ensure that our readers would be able to easily add funds to their account, while also being able to withdraw their profits without any issues.

Summary

Options trading is an attractive trade type that many people opt for, especially when looking at hedges and longer-term investments. While several platforms are able to give you access to options trading, it is important to understand that not all can offer you the same experience. We’ve outlined some of the top options trading platforms in this post, helping you understand what to look for, who to turn to, and what to avoid.

While risks associated with options trading may be slightly lower compared to some of the other trade opportunities, caution is still advised. Failure to be thoroughly educated and do sufficient research can yield significant losses.

Option Trading Platforms Reviews

reviews on AvaTrade:

I was completely new to trading when I first joined AvaTrade. Support is excellent, and the training really helped me brush up my skills. I was able to learn the basics quickly and use the knowledge to start my own trades. While I've had a few bad trades, I have learned a lot and have made some profits.

Jack Roberts, 45,

Sidney


reviews on AvaTrade:

The support staff at AvaTrade are great for answering my questions. The web platform is really detailed, allowing me to see trends in real-time and make decisions based on my analysis.

Melissa Grey, 21,

Liverpool


reviews on Swissquote:

Excellent platform with everything I need to make my trades. Definitely worth a look for newbies, but also powerful for those with more experience. I enjoy the on-the-go trading experience due to the mobile features of the platform.

Arthur Johansson, 31,

Geneve


reviews on Interactive Brokers:

Not the best software for those who are beginners, but definitely one of the more advanced tools for experienced traders. A lot of trading opportunities to explore, which helps me maximize my portfolio diversity. An ideal broker and platform for professionals - with support for high volume trading.

Omar Suleiman, 49,

Istanbul

FAQs

Where can I practice options trading?

Due to risks involved in options trading, as well as other types of trades, it is important to get some first-hand experience before investing real money. The good news is, several platforms offer what is known as a demo account. These are “dummy” accounts that are loaded with funds - the funds loaded in these accounts are not real, however. By giving you an account loaded with money, you can start exploring different opportunities with options trading.

Which trading platform is best for options?

A number of different trading platforms are available for you to explore. Some of these offer a variety of trading opportunities, while others are more focused on specific trade types. When it comes to options trading, you may find that a large number of platforms do offer such opportunities.

AvaTrade and Swissquote are two of the top options that you should consider when looking for an options trading platform. Apart from these two, be sure not to overlook the great platforms and features offered by Webull, Interactive Brokers, Robinhood, and TD Ameritrade. All of these platforms are great for options trading, but there are some factors that set them aside from each other. That is why you should do thorough research on each platform to help you determine which your best one would be.

What are the best options trading tools?

There are a few tools that can be used to improve the chances of a successful trade. Some of these tools can be accessed for free, whereas others may have a fee associated with their use.

The OptionsStation tool at TradeStation is a good tool for people who want to investigate and analyze the current pairs that can be traded. This platform focuses specifically on people who are interested in options trading. It is relatively easy to use and features an attractive interface.

Another useful tool to consider is the TD Ameritrade ThinkorSwim platform. You gain access to this platform if you decide to initiate options trading with Ameritrade. The TradeStation system is also a useful tool that lets you analyze the history of specific pairs and make predictions for future trades.

Is options trading risky?

Options trading is similar to other trades that people make. Even though there are some unique factors in options trading, the risks related to initiating trades still exist with these opportunities. There are tools that can help you make predictions, but there is no guarantee that such predictions would be accurate and lead to a profit. Thus, the answer is yes - options trading is definitely risky. With thorough training and a good understanding of how all elements work, you might be able to reduce the risks that you would lose your investment; but there is no way to completely eliminate the risks that are involved.