How to Select the Best
Options Broker
Before you can even begin to
start selecting trading opportunities and making an investment,
you'll be faced with perhaps one of the most important
decisions of your investing career: choosing the best options
broker to fit your individual needs.
No technological innovation has
been better to investors or traders than the internet.
Today's investors can research stock opportunities, look at
charts dating back to the early 1900s, and buy and sell in a
moment's notice through the internet. Subsequently, it
should come to no surprise that the top options brokers, from
Scottrade to OptionsXpress, are all internet-based.
Before plunging into a broker and
filling out the pages upon pages of paperwork now needed to
open an options account, there a few things investors should
consider.
1.Initial Investment
2.Expected Market
Activity
3.Funding
The amount you wish to invest will
have a dramatic impact on the selection of brokers, as well as
the features and options you have within your brokerage
account. For instance, some brokers allow traders to
trade options with a minimum deposit as low as $1000, while
others not specialized in options require minimum account
balances of $1000-2500. Some brokerages also offer
special promotional rewards and better interest on account
balances for traders with $25,000 or more.
The amount of trades you plan to
complete, as well as the amount of volume you will be trading,
are very important to your choice of broker.
TradeKing, for example, charges
$4.95 per trade plus $.65 per contract, whereas OptionsHouse, a
specialty broker, charges $8.50 per trade plus $.15 per
contract. A trade of only five lots would cost $8.20
through TradeKing and $9.25 through
OptionsHouse.
However, as volume increases,
OptionsHouse becomes considerably less expensive. A trade
of 100 lots, for example, would cost just $23.50 through
OptionsHouse, but a whopping $69.95 through
TradeKing.
For the active trader trading
large lots, OptionsHouse would be the best online options
brokerage. However, for small volume traders, TradeKing
would be the recommended options broker.
Also important to selecting a
broker is finding one with funding options that suit your
needs. Whether you want to be able to ACH transfer money
from your bank account to your broker or even access your
account balance via a debit card, each broker has different
opportunities to access your cash. In addition, each
broker has different fees for withdrawals, often charging $2
for a check by snail mail or $10-20 to withdraw your cash via
wire transfer.
This is where broker selection is
incredibly important, and some traders may be better served to
opt for a more premium discount broker. Scottrade may be
the best options brokerage for a trader looking for
face-to-face communication and withdraws or deposits on the
spot at their offices.
When you boil down the process of
selecting the best options broker, ultimately it is one that
fits your individual needs. No, you won't be able to meet
every need perfectly, but with many different brokers to choose
from, it is certain that you can at least find the best options
broker for your individual needs.
Want to discover the top online
options brokers? Visit our website to compare the best options
broker online and receive bonus promotion codes for signing
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