The Best Online Brokerages For Options Trading

The Best Online Brokerages For Options Trading

Best Online Brokerage for beginners: This article discusses how to choose the best online brokerage so that you can get started towards your journey of becoming a consistently profitable options trader.

Online stock trading is something that people oftentimes overcomplicate.

Regardless of which broker you choose, your returns will likely not be materially impacted.

As a result, I recommend doing ~20 minutes of research and then simply getting started.

This article provides an online brokerage comparison between your best choices, depending upon your account size (and provides you with tips on getting sign up bonuses and negotiating the best rates).

Best Online Brokerage Key Points

  • I use E*Trade – but I recommend Tastytrade if you have a smaller account (use this signup link to to receive a FREE week of trade alerts)
  • Minimizing your commissions is one of the most important factors when choosing a broker
  • Overall, online stock brokers are a commodity. In 2024, virtually all of the legitimate brokers offer very low commissions. Many brokers are similar and my results would be the same with any legitimate broker.
  • If you’d like to practice, then TD Ameritrade's Thinkorswim offers a free paper trading account (paperMoney)
  • I place all my trades using the Power E*Trade Android App
  • Brokers offer sign up bonuses and new account promotions that you should use

Which Online Broker Do I Use?

Choosing an online stock broker can be very stressful and it seems that everyone has an opinion on the best trading platform for stock trading beginners and the best trading platform (if you're in Canada).

Bankrate recently came out with a good article, the Best online stock brokers for beginners and it provides a good online brokerage comparison.

While many blog posts write a top 10 brokerage firms, I believe that's excessive. US residents can use TD Ameritrade, E*Trade or Tastytrade.

The best online brokers for non-us residents is Interactive Brokers.

The good news is that there aren’t substantial differences between the top online brokers.

Also, your results will not be materially impacted by your choice – so please don’t get anxious when choosing a broker for the best online stock trading for beginners.

I use the Power E*Trade Android App mostly because I'm comfortable with them and see no reason to switch.

I negotiated my commission structure with E*Trade and I currently pay only 10 cents per contract.

I also do not pay any commissions to close out or buy back options that are trading under 10 cents.

I make every trade using their Android App.

I can't recall ever using their website or desktop software to place a trade.

I have never used advanced charts, analyst research or any other premium product that online brokers offer.

As a reminder, I believe that Technical Analysis does not work.

Want to make money in the stock market? Keep things simple, don't get overwhelmed, and make good decisions.

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Choosing the Best Online Brokerage for Beginners

I’ve read a few other articles on how to find the best online brokerage and many of them say that investor education is very important.

My personal opinion is that if you're reading research reports then you probably aren't making any money.

As I've said numerous times, I believe that profitable trading is not about knowledge.

Most of educational materials provided by online brokers should be viewed as entertainmentsimilar to SeekingAlpha.com.

When you trade the way we teach, by selling option premium on the largest companies, all of the publicly available information is already priced into the current market price.

Yes, of course an occasional person will be correct with their random predictions (just like there will always be a person to win the lottery).

Yet overall, reading research reports (or listening to “stock experts” on CNBC) is not a good usage of time.

There is one exception though, Tastytrade provides good content, for beginners, via its tastylive network.

You can sign up for Tastytrade here (this is a referral link) - I'll provide you with a FREE week of Trade Alerts when you sign up with the referral link.

I also provide an in-depth Tastytrade Review blog post.

I do not agree with some of TastyTrade's philosophy and I don't believe that their traders are profitable, but I believe Tastytrade provides incredible education for beginning traders.

But, overall, their content is valuable.

Be a Successful & Profitable Trader with our Trade Alerts Special Offer

Prior to selecting E*Trade, I tried Interactive Brokers and Fidelity.

I found Interactive Brokers difficult to use and I always got charged small monthly fees.

Fidelity is decent, but it felt more antiquated and less flexible (I haven't used it since 2014 though).

I have also used Tastytrade.

I find Tastytrade to be the best online stock broker for beginners

But...it's not perfect.

Tastytrade is incredibly slow when entering new trades.

It also relies too much on a visual interface and it took me 5x more effort to enter orders than it takes me with E*Trade.

Regarding price, Tastytrade (formerly known as Tastyworks) is competitive, however at $1 / contract (even with no closing commissions) it's still much more expensive than what I usually pay (10 cents a contract).

Additionally, Tastytrade passes on all exchange fees (about 14 cents per contract) - that's about 6x more than I pay with E*Trade.

If you have a small account, Tastytrade is definitely a good choice - primarily because it permits its users to easily get approved for selling naked options.

However, as I said, I'm not a fan of the Tastytrade user interface platform.

I find it very tedious, slow and annoying to place trades.

Plus, as mentioned previously, Tastytrade is incredibly expensive.

My clients / followers use virtually every online brokerage firm. Their returns are not impacted by their choice.

It's best to go with a brokerage that offers a signup bonus and which allows you to trade naked options.

The best online broker for beginners is one that you feel most comfortable with.

RobinHood is Not a Great Online Brokerage

I am not a fan of RobinHood or the RobinHood App; I wrote a Robinhood review here.

The primary reason is because it doesn't permit you to sell naked options.

Selling naked options is one of the best options trading strategies

Selling naked options can be safer than trading vertical credit spreads as I explain in this video about why naked options can be better than vertical credit spreads.

A few of my students also told me that they had their positions closed out automatically without being contacted by RobinHood.

New Online Trading Account Promotions

I would highly recommend going with the online brokerage that offers you the best sign up promotion.

The best online brokerage new account promotions are listed here and here.

If you have a large account ($100,000+) you should always call the online broker and ask them if they can offer you a special rate.

With a larger account, you can almost always negotiate your commissions by calling the online brokers - all it takes is a phone call!

Here is a recent article about online brokerage signup bonuses

Quick tip to save money on trading: Most online brokerages will negotiate on their commission structure (or even offer cash signup bonuses). All you have to do is call and ask!

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Be a Successful & Profitable Trader

Follow My Trades with Real-Time Trade Alerts

Tastytrade Review - Receive a FREE Week of Trade Alerts

Many of my students use Tastytrade.

Use this Tastytrade link and fund your account with at least $5,000 to receive a FREE week of trade alerts.

Your Best Online Brokerage Depends Upon Your Account Size

If you have a small account ($3,000 and below), I recommend Tastytrade because they are easy to get started with and allow for trading naked options.

Sign up for Tastytrade here and receive a FREE week of my real-time trade alerts.

If someone with a small account were to use RobinHood, I wouldn't necessarily say that it's bad.

However, once you have over ~$3,000, then I feel that using RobinHood will hurt your performance because you won't be able to trade naked options.

Recommendations of the Best Online Brokerage Based on Account Size

  • <$20,000 ⇒ Tastytrade
  • $50,000+ ⇒ E*Trade or any other online stock broker that's offering a good promotion

Important Online Brokerage Reminders

  • You should ALWAYS call and request the ability to sell naked calls and puts when opening a new account
  • Some brokers will ask you a series of questions or ask you to take a quiz prior to approving you
  • Accounts with $150,000+ should ALWAYS request portfolio margin (minimum account size for PM depends upon the brokerage - sometimes it's as high as $175,000)

Call your broker & request the ability to sell naked options.

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Best Online Brokerage Conclusion

The best online broker for beginners is usually the one you're most comfortable with.

Remember that when learning a new skill, it’s important to not become overwhelmed.

Try to focus on taking small steps (open an account, place a few trades in the practice account, etc.) so that you make incremental progress towards your goal of earning ~2% - 3% every month.

For accounts under $20,000, I recommend Tastytrade

For accounts that are $20,000+, I recommend E*Trade or whatever online stock brokerage is offering the best new account sign up promotion.

You should definitely do a quick Google search for the best online brokerage promotions and the best online brokerage for options.

Also, remember to always ask for the ability to sell naked options.

And accounts over $150,000 should call and request portfolio margin (and negotiate their commissions).

If you have any questions, leave a comment below and let me know what your opinion is about the best online brokerage for beginners and for trading options 🙂

Latest article: Best Online Stock Brokerage

Frequently Asked Questions (FAQs)

What brokerage should a beginner use?

If you have an account less than $3,000, then Robinhood is best. If you have between $3,000 and $20,000 then Tastytrade is best. If you have over $20,000 then E*Trade is best.

International traders can use Interactive Brokers.

Which online broker is easiest to use?

E*Trade is easiest to use. In general, many of the brokerages are very user-friendly and they're similar.

What type of brokerage firm is best for trading for a beginner?

E*Trade is easiest to use. In general, many of the brokerages are very user-friendly and they're similar.

Is Schwab good for beginners?

Yes, Schwab is very good for beginners. In general, there isn't much difference between many of the established brokers.

How do beginners invest?

1) Open a brokerage account

2) Buy QQQ or SPY

What's the best broker for trading?

Interactive Brokers, Tastytrade or E*trade are the best brokers for trading.

Best online brokers for non-US residents?

Interactive Brokers is the best online broker for non-US residents.

Best trading platform?

Interactive Brokers is the best online broker for non-US residents. E*Trade and TD or Schwab are the best brokers for trading overall.

Did Tastyworks change its name?

Yes, Tastyworks is now known as Tastytrade.

About the Author David Jaffee

I (David Jaffee) help people become consistently profitable traders while minimizing risk. Learn more about our live trade alerts and courses. I graduated from an Ivy League University and worked at some of Wall Street's most successful investment banks. Subscribe to my YouTube channel for valuable videos - BestStockStrategy YouTube Channel​. My personal website is DavidJaffee.com.

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Leave a Comment:

14 comments
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Brad Wevodau says November 19, 2018

What disadvantage is there by using Options House if I only started with a 5000.00 account? I like what you said about the simplicity and mobile app. Also, do they offer virtual trading?
Another question that I have is how do you limit your losses on credit spreads? My experience on them is that they have a high winning percentage but if a trade went against me, I would end up giving back a lot of my previous profits. The losses seem much larger than the gains.
I appreciate your time and comments.
Thanks

Reply
    David Jaffee says November 19, 2018

    You can use OptionsHouse – your commissions will be higher.

    I don’t think they offer free trading.

    You’d want to check out paperMoney with TD Ameritrade for that.

    Regarding credit spreads…the losses are inherently limited.

    Spreads are defined risk trades.

    If you’ve taken large losses with spreads then you should:

    1. narrow your strike selection
    2. trade less contracts

    Reply
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