Don’t be fooled by “free” options trading brokers like Jellflin and Robinhood. Options trading with these brokers isn’t actually free.
Both brokers require a monthly subscription agreement to trade options. Basically, Jellfin and Robinhood are the only two services that advertise “free options trading” and they do it to lure in naive investors who think they’re trading for free. In reality, there are a virtually no available options trading strategies and an abundance of hidden fees.More Reasons why Jellfin and Robinhood don't work for free options trading
No iron condors, credit spreads, short call options, short put options… basically no fun. The most advanced options trading strategies that Robinhood permits are iron condors and spreads, but they require a monthly subscription fee ranging from $6 to $200/month depending on the size of your account.
There’s only one real way to have commission free options trading, and that’s by using a method called brokerage account churning.
Similar to credit card churning, where spenders take advantage of credit card signup bonuses, brokerage account churning functions the same way.
How to Actually Get Commission Free Options Trading
- Signup for a several different brokerage accounts offering free trade promotions
- Ensure that the free trade promotion applies to options trading
- Trade as much as you can for free, until you exhaust the promotion
- Transfer your funds to the other account you opened
- Repeat the process
None of these promotions start the day you open your account. The promotional period starts from the day you fund your acocunt
Plus, having multiple brokerage accounts is a common way to circumvent FINRAs stupid pattern day trader rule, where traders cannot make more than 4 day trades in one week if their account balance is less than $25,000.
There is no law or rule limiting the number of brokerage accounts a US citizen can open. I currently have an account with every major US broker.
Before you start trading, you need to make sure to read the fine print. The free trade promotion that you sign up for must cover options contracts, not just the options base fee, otherwise you won’t be trading for free.
There are only two brokers that we’ve found in 2018 who cover options contract fees in their free trade promotions: Ally Invest and tastyworks.
#1 Promotion for Options Traders in 2018
The most valuable promotion for options traders is this one from Ally Invest:
According to the fine print on Ally’s site: “New accounts receive $500 in commission credit for equity, ETF and option trades executed within 90 days of funding the new account. Commission credit applies to the per contract commission.”
Since the promo applies to options contracts, this means you could sell 750 naked put options in one order and you won’t pay a single per contract commission.
And if you transfer your account from another broker, Ally will reimburse you for the transfer fees up to $150. Ally’s promo is incredibly valuable and is the only one that we’ve found that actually covers individual options contracts entirely.
#2 Promotion for Options Traders
From the tastyworks website, “Exchange, clearing and regulatory fees still apply. All futures options and the following index products are excluded from this offer: SPX, RUT, VIX, OEX, XEO, DJX and NDX.
Even though futures options and most index options are excluded from the promo, this is a particularly good deal. If you’re trading a call credit spread, for example, and you trade 200 options, you’ll only pay a maximum of $10 per side. And since options only cost $1.00 (with free closing trades) at tastyworks, the whole trade would only cost $10.00 to open, and $10.00 to close, plus exchange fees.
This is a tremendous value for options traders, because tastyworks offers a professional options trading platform and doesn’t restrict options trading abilities.
Promotions That Suck for Options Traders
This promotion from TD Ameritrade makes you think you’re getting free options trades, but you’ll still actually pay the per contract fee:
Look at the fine print of the promotional offer:
“Accounts funded with $3,000 or more are eligible for up to 500 commission-free trade internet equity, ETF, or option trades executed within 60 calendar days of account funding. All other trade types are excluded from this offer. Contract, exercise, and assignment fees still apply.”
This promotion from Firstrade also makes you think you’re getting free options trades, but as with TD Ameritrade, you’ll still have to pay the per contract options fee.
From the Firstrade website: “Option contract charges, along with exercise and assignment fees still apply.”
E*TRADE’s promotions are also garbage for options traders. None of their promotions include the options contract fee:
From the E*TRADE website, “You will receive up to 500 commission-free stock or options trades executed within 60 days of the deposited funds being made available for investment in the new account (excluding options contract fees).”
Charles Schwab’s free trade promotion is lousy for options traders. They cap the number of options to 20 contracts per trade.
According to Schwab’s site, “Trades apply only to base equity, exchange-traded fund (ETF), and options commissions and options per-contract fees up to 20 contracts per trade (standard per-contract fees apply for additional contracts).”
To sum up, once you use the commission free options trading promotion from Ally, switch to tastyworks and use their capped options promotion.
This is the only way to truly trade large quantities of options, and not be restricted with options trading strategies, for next to no cost.