Choosing The Best Options Broker
A mistake that many new traders make in the beginning is spending too much time choosing the various brokerages and trying to understand the commission structure. Yes, commission does play a part in your trading, especially if you are starting out with a small account, but it is very important to note that it is not the make or break element of your options trading career. It is far more important to pick a broker that suits your style of trading and caters to your own personal needs than finding one that is just slightly cheaper.
With that said, here are the few qualities that we will look for to find the best options broker before giving them our hard earned money:
1. Full Serviced
Full service brokers offer a wide range of services for an additional charge. They may also advise their clients on where and how to invest their money. The other type of broker is a discounted broker. Discounted brokers do not offer advice to investors or traders. They mostly leave traders to their own decisions. While most options traders opt for the discounted brokers, mostly because options are complex and in order to trade options you need to have a good grasp of finance and the market, we still promote full serviced brokers for novice traders so that you can build up confidence and knowledge before taking the deep plunge.
2. Quality Customer Support
We can tell you from first hand experience that there is nothing worse than sitting around waiting for the technical support personnel to contact you when you are stuck in a live trade situation. For this reason, we would recommend that you do a check on the response time of the support team before signing up for an account. Besides this, the quality of support matters tremendously as well. Many cheap brokers outsource their support team, making response time and quality of assistance potentially second rate. You can mitigate this, and navigate your way to a reliable broker by checking reviews and feedback online.
3. Good Technical Platform
Many good brokers will provide a paid trading platform for people to use. While some platforms are free, some will require you to pay a monthly fee. Regardless of the cost incurred, it is essential that your platform is bug free and lag free. Imagine a platform that crashes while you trade or shows you delayed data, such an experience can severely affect trading outcome. It’s a good start to find out more about the trading platform service provided by the broker before making any decisions.
4. Commission Structure
Different brokers have varying degrees of commission structure. Some offer a per contract commission structure while others offer a per transaction structure. The type that you choose really depends on your trading style. Aggressive traders, or traders with more transactions, might find a per contract commission more appealing and vice versa for more conservative traders.
Ultimately, your broker should be one that you are completely comfortable with. Even if it means to pay a little more, a good broker will go a long way in ensuring the longevity of your trading career.
How To Trade Options
Why Trade Options?
Calls and Puts
How Options Work
Types of Options Orders
Valuation of Options
Leverage in Trading Options
Mistakes Options Traders Make