Our comparison table of US option brokers covers the key account features.
These include, tight pricing, financial security, regulation, range of markets, added value and reviews.
Trading and investing carries a high level or risk and losses can exceed your deposits. Featured brokers appear first.
Here are a few of the best Options brokers in the US
What are options?
In stock trading, buying ‘options’ from US options brokers effectively gives you the right to buy or sell a batch of stock in a certain price. The ‘option’ is a contract to either buy or sell some stock at a later date, and instead of actually buying or selling the stock, you merely pay a fee to hold the contract for the duration of its life. This means, instead of buying 100 shares for $1000, you buy the option for 100 shares for $100.
Difference between a put and a call
Buying the right to buy stock is called a ‘call’. Rather than actually buying the stock outright, which could cost a lot of money, buying the ‘right’ to buy that stock at the same price later on is a kind of insurance. It means that you could end up buying that stock at the same price a few months later when it’s actually worth a lot more.
Conversely, buying the right to sell a stock is called a ‘put’. If you believe the stock is going to lose value, you can sell someone else the ‘option’ to buy the stock at a given price, and get rid of it a few months later for more than it is now worth. This means that the person buying the stock takes the loss when they are obligated to buy stock that is worth less, while you get to take the money the stock was worth when you made the deal.
How to choose a US options broker
There are lots of choices out there when it comes to choosing a US options broker, which is good for consumers, because there are lots of good offers available. Firstly, you should make sure the platform they offer is comprehensive and easy to use, and that it has the range of facilities you’d like. If you’re big on mobile banking, for example, you’ll want a broker that supports trading on mobile devices. You should also take advantage of free learning opportunities if you can: The best brokers will offer courses and tutorials to help you out.
What can you trade options on in America?
Options trading involves trading the option to buy or sell stock in a company from a US options broker, so you can buy options in any publicly listed company on a given exchange. Technically, an ‘option’ can be bought in anything at all that you might want to hold back on committing to purchase, or committing to sell (such as a car, television or a house) – but in financial markets, it means stock held in companies on the NYSE, S&P 500 etc.
Risks and advantages of options trading
The advantages work similarly to an insurance policy, in that you can make a purchase or a sale at a certain price even if the value of that stock subsequently rises or falls. This means you can sell something of low value for more money or buy something of high value for less. The risk comes if the opposite happens to what you’d planned. If you buy a call from a US options broker and your option ends up falling, you don’t get the benefit of a rise in the stock’s value, and you’ve effectively wasted the money you spent on the option (but not as much as if you actually bought the stock!). Similarly, if you buy a Put that increases in value, you’ve missed out on more money further down the line than you ended up selling the stock for.