Finding a low commission options broker should not be a difficult task. We have listed the top five cheapest options trading brokers below assuming a hypothetical trade of 10 options contracts with the lowest commission rate from each broker:
List of Low Commission Options Brokers
|Broker||Commissions||Price for 10 Contracts||Current Offers||Start Investing|
|$7.95||500 free trades with $2,000 minimum deposit|
|$8.95||Get a $200 cash bonus or $500 in commission-free trades with Ally Invest!|
|$1.00 per option contract||$10.00||All new pricing & no maintenance fees for new accounts!|
|$1.00 per option contract||$10.00||Capped options commissions|
|$6.95 + $0.75||$14.45||None|
Here is the same list above but in clickable text format:
Commissions Are More Important Than You Think
Selecting an options broker with the lowest commissions is very straightforward. Although a lot of online brokerages receive payments for order-flow and lend out client balances, the number one way they make money is through trade commissions.
As a trader, knowing this is very important, because reducing the cost of transacting in the marketplace is just about the only aspect of the market you can control.
When you overpay for commissions (when there is a cheaper alternative), you are literally handing over your money and lowering your overall profitability as a trader. If you trade just 50 options contracts a month for one year, you would be paying TD Ameritrade $867.00 to execute your trades.
Because Ally Invest offers 24/7 customer service just like TD Ameritrade, we’ll use them for a comparison. The same 50 options contracts a month would cost $537.00. There is simply no valid reason to overpay by $330 every year to execute the same trade.
At the end of the day, a lot of online brokers are pretty similar. This is why picking a low-cost options broker is so important. There is no need to overpay for an identical service that you could get for far cheaper with different broker.
A perfect example of this is TD Ameritrade and Ally Invest. Both brokers offer 24/7 customer service and robust trading tools, but the cost of trading 10 options contracts with TD Ameritrade is $5.50 more than Ally Invest for each side! Why on earth would anyone want to automatically lose $11.00 on every trade?
Also, please note how Interactive Brokers (IB) was deliberately left off of this list. Interactive Brokers charges absurd account fees and auto-liquidates “risky” short options positions. You can read why IB is downright dangerous for futures and options trading here.