Best Online Brokerages for Options

Options are complex trading tools. Investors who trade options can be exposed to extreme risk of losing their investments or more. Understandably, investors who want to trade options look for ways to minimize the costs of investing. Based on our data, we’ve identified the best online brokerages offering the lowest costs to trade options.

Best Online Brokers for Options Trading

The set of 15 online brokerage companies that we considered were: Charles Schwab, e*Trade, Fidelity, Firstrade, Merrill Edge, OptionsHouse, Scottrade, Sharebuilder from Capital One, SogoTrade, T. Rowe Price, TD Ameritrade, TIAA-CREF Self-Directed Brokerage, TradeKing, Tradestation, and WF WellsTrade. We evaluated them on the basis of four main fees: base trading fees, options contract fees, options assignment fees, and options exercise fees for a hypothetical investor looking for the most cost-efficient brokers for a bucket of 10 options trade that he'll exercise once. For more information on the criteria and some additional considerations, see the fees evaluated below.

OptionsHouse

As the name implies, OptionsHouse is the cheapest and best online brokerage for options trading. Out of the 15 online brokers we reviewed, OptionsHouse ranked with the some of the lowest absolute costs across all four types of fees considered. For example, OptionsHouse has the lowest options exercise and assignment fee at $4.95 which is only 14% of the $35.00 charged by T. Rowe Price to exercise an option. OptionsHouse also has the cheapest fee per trade and options contract fee among the 15 brokerages we included in this study. Whether you're trading 10 or 100 option contracts, OptionsHouse will be your best bet with the cheapest overall costs.

  • Fee per trade: $4.95
  • Options contract fee: $0.50
  • Options exercise fee: $4.95
  • Options assignment fee: $4.95

Fidelity

While Fidelity’s fee per trade is nearly twice that of OptionsHouse, its options contract fee is the lowest among the online brokerages we looked at (tying with OptionsHouse and SogoTrade for $0.50 per contract). At $7.95, Fidelity’s option exercise and assignment fee is only 50% of the study average, making it a competitive choice for investors looking for top online brokerages to trade options. While the base trading fee is a dollar higher than our 3rd place winner, Merrill Edge, we've bumped Fidelity up based on our hypothetical trader, who's interested in 10 options contracts (since on a per contract basis, they're much more cost-efficient).

  • Fee per trade: $7.95
  • Options contract fee: $0.50
  • Options exercise fee: $7.95
  • Options assignment fee: $7.95

Merrill Edge 

Merrill Edge ranks third in cheapest options exercise and assignment fee, at only 60% of the average, for our sample options holder. Its fee per trade is also competitive at $6.95, with an options contract fee of $0.75. Merrill Edge is one of the best online brokerages for options traders and investors, especially those seeking seamless transfers between their retail banking services and brokerage account. Merrill Edge is connected to Bank of America, one of the largest retail financial institutions in the United States. 

  • Fee per trade: $6.95
  • Options contract fee: $0.75
  • Options exercise fee: $6.95
  • Options assignment fee: $6.95

TradeKing

TradeKing’s fee per trade is the cheapest we’ve found, and its options contract fee is also competitive at $0.65. TradeKing also stands out for charging different fees for options exercise and assignment. At $9.95, its option exercise fee is a bit pricier than the other companies on this list, but still one of the lowest in the study. TradeKing’s $4.95 options assignment fee is the lowest among the fifteen online brokerages we looked at, tying with OptionsHouse. 

  • Fee per trade: $4.95
  • Options contract fee: $0.65
  • Options exercise fee: $9.95
  • Options assignment fee: $4.95

SogoTrade

SogoTrade is a no-frill brokerage account, and offers one of the lowest fee per trade and options contract fee after OptionsHouse. However, once you decide to do something about the options, exercising and assigning options will add up, and potentially overtake the other cheapest entries on this list. SogoTrade’s options exercise fee and options assignment fee is three times higher than OptionsHouse, at $15.00.

  • Fee per trade: $5.00
  • Options contract fee: $0.50
  • Options exercise fee: $15.00
  • Options assignment fee: $15.00

Types of Options Fees Evaluated

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell a stock or other security at a pre-determined price on or before a certain date. It is essentially a binding contract with defined terms and properties. When an investor wants to buy an option, the brokerage will charge a transaction fee and an options contract fee. When an option is exercised or assigned, a separate fee is also assessed. 

For this study, we looked at 15 online brokerages and ranked them based on the four main fees below. Note that the title for the cheapest broker can be a bit different depending on how many contracts you purchase, and whether you actually exercise and the assignment fees charged.

Low base-trade fee (also called fee per trade): When you buy option contracts, you are charged the base trade fee in addition to the contract fee. Usually, the base trade fee is much higher than the option contract fee. Since the fee per trade makes up a big portion of the cost to trade options, we included this factor to determine the best online broker for option trading based on cheapest cost to trade. The average fee per trade is $8.90.

Option contract fee: This fee ranges from $0.50 to $2.00 per contract, with an average option contract fee of $0.84. While it is proportionally much smaller than the fee per trade, investors looking to buy option contracts in bulk should pay attention to contract fee costs. 

Option exercise fee: When option holder choose to use their right to buy or sell the stock, they are charged an option exercise fee. Sometimes this fee is the same as the option assignment fee, but not always. The average options exercise fee is $16.38.

Option assignment fee: When option holders are forced to buy or sell the stock, they are charged an option assignment fee. Sometimes this fee is the same as the option exercise fee, but not always. The average options assignment fee is $16.00. 

Types of Fees by Online Brokerage

Online Brokerage Base Trade Contract Fee Exercise Fee Assignment Fee
OptionsHouse $4.95 $0.50 $4.95 $4.95
Merrill Edge $6.95 $0.75 $6.95 $6.95
Fidelity  $7.95 $0.50 $7.95 $7.95
Charles Schwab $8.95 $0.75 $8.95 $8.95
TradeKing  $4.95 $0.65 $9.95 $4.95
Tradestation $9.99 $0.70 $14.95 $14.95
Firstrade $6.95 $0.75 $14.95 $14.95
SogoTrade $5.00 $0.50 $15.00 $15.00
Scottrade $7.00 $1.25 $17.00 $17.00
TD Ameritrade $9.99 $0.75 $19.99 $19.99
e*Trade $9.99 $0.75 $19.99 $19.99
Sharebuilder (CapitalOne) $6.95 $0.75 $20.00 $20.00
WF WellsTrade $8.95 $1.00 $25.00 $25.00
TIAA-CREF Self-Directed Brokerage $14.95 $2.00 $25.00 $25.00
T. Rowe Price $19.95 $1.00 $35.00 $35.00
Average $8.90 $0.84 $16.38 $16.04

Sample Costs for 10 and 100 Options Contracts and One Exercise

We projected costs for a sample options trader conducting in order to determine which online brokers were the best and had the lowest costs. We've kept the hypothetical scenario simple: a base trade with 10 contracts, and have assumed that the options owner will exercise his options once. Our rankings are based on the online brokerage provider with the cheapest total cost for this scenario. Included also is the same scenario scaled to 100+ contracts for those high-volume investors and options traders to illustrate how the cost per contract can accumulate. 

Total Fees for Base Trade + One Exercise
Online Brokerage + 10 Contracts + 100 Contracts
OptionsHouse $14.90 $59.90
Fidelity  $20.90 $65.90
Merrill Edge $21.40 $88.90
TradeKing  $21.40 $79.90
SogoTrade $25.00 $70.00
Charles Schwab $25.40 $92.90
Firstrade $29.40 $96.90
Tradestation $31.94 $94.94
Sharebuilder (CapitalOne) $34.45 $101.95
Scottrade $36.50 $149.00
TD Ameritrade $37.48 $104.98
e*Trade $37.48 $104.98
WF WellsTrade $43.95 $133.95
TIAA-CREF Self-Directed Brokerage $59.95 $239.95
T. Rowe Price $64.95 $154.95

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