Are you ready to start options trading on your own? Before you jump in, take some time to learn the basics of options trading and some of the best investment research platform to check out.
Options Trading Basics
If you buy an option, you pay the option premium upfront, which gives you the right to purchase the underlying stock should the price move the way you want it to. All options have an expiration date, meaning you either need to execute the option within a certain time frame or let it expire with no value. If the price doesn’t change in the direction you want, you can let your option expire and only lose the premium you paid. You could lose a lot less than if you paid for the stock upfront.
Many investors use options trading to help hedge risk and reduce costs. Since you only need to pay a fraction of the asset’s price to buy an option, you free up more money for other trades or expenses. You also don’t actually own the stock unless you execute the option, so you can save money if the stock drops too much in price.
Best Options Trading Platforms
Below are four of the top options trading platforms that can help you navigate various options strategies and techniques:
- TD Ameritrade: With no account minimums, zero commission fees, and a host of tools, courses, and products, it’s no wonder TD Ameritrade is so popular. You can also explore forex markets and futures, which you may not find with other brokerages. For in-depth statistics and trading tools, check out the thinkorswim platform. It’s a paid service, but it offers plenty of useful insights that can guide your options trading decisions.
- Merrill Edge: In addition to no-commission stock and ETF trades, this self-directed platform offers plenty of research functionality, and Bank of America customers can link their accounts to simplify transactions. This platform also lets you make trades of any amount, and you don’t need a minimum balance. Merrill Edge also offers a paid platform option that gives more personal guidance to make informed trading decisions.
- TradeStation: This discount broker gives you commission-free trades, no minimums, and real-time Greek streaming. Now you can stay abreast of stocks with the best gamma options to keep you one step ahead. TradeStation also offers a variety of features for both beginner and experienced options traders.
- E*TRADE: Perfect for the active trader, E*TRADE offers multiple platforms, zero-commission trades, and no minimums. They also offer a huge number of mutual funds and ETFs that you can trade for free. Another interesting feature is the Dime Buyback Program, which lets you buy an equity option that’s less than 10 cents without paying any contract fees.
Take some time to research each trading platform to find one that’s right for you. Even though most brokerages offer commission-free trades, some fees usually do apply. Look at the fees for executing options contracts for each platform to find one that works best for your budget.