Choosing an online options brokerage is an important step, and should not be solely based on the least expensive option. It is in your best interest to take some time and research the brokerage that best suits your investment needs.
The first step to any investing endeavor is to ask yourself what are my profit taking goals?, how do I fell about risk and risk-management?, and what is my available capital? Answering these questions honestly is the key to finding the best online options brokerage for you.
Discount Versus Full-Service Brokers
The two main types of options brokerage that are available are the discount brokerages and the full service brokerage. Both options have their benefits as well as drawbacks, so weigh each carefully against your investment objectives.
Self-directed discount online options brokerage is aimed at the independent trader, as they merely execute their clients market orders, and do not provide investment advice. While full-service brokerages or traditional brokerages provide a variety of services at an additional cost to the investor.
Certain brokerages offer both services to their clients, with the investors being able to chose from options based on their needs.
The majority of investors who participate in the options market opt for the discount brokerage option for the simple reason that if you are advanced enough in your trading to take on options, you probably do not need trading advice from your broker.
Research The Quality Of Service
Commission charges should not be the only consideration when it comes to the best online options brokerage . You should also consider ease of use, speed of execution, as well as site availability in addition to cost.
It is already difficult enough to trade options, so a complicated trading platform only adds an additional obstacle. You can minimize costly errors by utilizing an easy to use trading interface, a potential savings of thousands of dollars. Opt for a brokerage that offers single-screen order entry forms for butterflies, condors, covered calls and various other multi-legged option investment strategies.
Responsiveness and site availability are two of the most critical aspects to look for when choosing an online options brokerage. There is no amount of money you can save on commissions that would be worth it if your brokerage’s site is too overloaded to execute your orders.
The site’s responsiveness also affects the accuracy of the quotes you receive, and even a one second delay can be costly in certain markets. It is also important to note that your internet connection should be up to speed, and you should have a high speed connection for best results.
Your trades should also be executed according to the rules and regulations set forth by the NBBO (National Best Bid Offer) which was enacted by the SEC to guarantee investors the best available ask price when purchasing securities and the best available bid price when selling.
Shop around for online options brokerages that guarantee trade execution prices that are at or above the NBBO.