If you’ve been successfully trading stocks for a short while, you’ll no doubt be keen to broaden your skill set and try out a few different securities. Options are probably right at the top of your list.
But trading options is fraught with danger, whilst the rewards can be great the pitfalls are huge especially for a beginner. But far be it from me to dissuade you from trying, we all have to learn somewhere right?
What I can do though is point you in the right direction. Trading options successfully requires a certain amount of dedication, there’s a lot to learn before you can call yourself a successful options trader.
One of the first steps down that long road is choosing the right broker. It’s important that the broker you choose has a vested interest in you succeeding and isn’t just hoping you’ll lose your deposit in the shortest time possible.
So let’s take a closer look at one of the most popular options brokers out there right now, OptionsHouse.
Who are OptionsHouse?
OptionsHouse were one of the first online option brokers. Initially they only traded in options but have since expanded to include individual stocks as well, so there’s no need to open a separate account for your stock trades.
OptionsHouse is a subsidiary of PEAK6, who are one of the most respected proprietary trading firms in the U.S. This background means they offer an exceptional trading platform that isn’t dissimilar to what a professional trader would use, with the added benefit that it’s much easier to use.
As if to emphasize the point Barron’s voted OptionsHouse the best options broker for 2011, an award they’ve won several times before.
Are OptionsHouse the Right Broker For You?
To find out lets take a closer look and see if they stand up to all the hype. We’ll check out the platform, features, customer service and the kind of education they offer, which is most important if you’re just starting out.
Things To Like
One of the lowest commissions I’ve ever seen
OptionsHouse offer some of the lowest fees of any mainstream broker. Their fees are considerably cheaper than the like of Scottrade and even TradeKing. Standard stock trades come in at just $4.95 per trade which is around 20% cheaper than other discount brokers.
If you’re a small options trader they charge $5 for 5 options. If you need to trade more options than this a standard options trade costs $8.50 plus 15 cents per contract. This again is a very competitive price and serious options traders will have a hard time trying to beat it.
Excellent platform for the more advanced trader
Because OptionsHouse were formed by PEAK6 Investments they have considerable experience with proprietary trading platforms. This experience shows in their retail platform which is one of the most comprehensive around.
This is in stark contrast to other brokers who make use of third party software to deliver an altogether unsatisfactory trading experience. It can’t be stressed enough that the quality of trading platform is paramount to your success as a trader.
If you’re looking to trade options for the first time you need to look for a broker that has a vested interest in your success. OptionsHouse is unique in that they offer interactive investment coaching. This is perfect for rookie traders to learn the most profitable strategies for buying and selling options.
If you find this useful you can take it one step further and arrange one to one coaching with an experienced trader for an extra fee. These kinds of webinars are incredibly useful and much cheaper than paying to attend a trading seminar from a so called expert.
Does a surgeon practice on live patients? Does a chef deliver a meal to paying customers that he’s never cooked before? No is the answer and you shouldn’t practice your trading using a live account. Unless it’s money you’re prepared to lose.
Virtual trading is a fundamental part of your trading education and as such the virtual platform should match the live platform in every way possible. OptionsHouse provides a virtual trading environment which mirrors the live environment precisely. Apart from the small matter of $5000 in virtual funds which you’re free to use and abuse.
There is help there when you need it
Trading online is one thing but what happens when things go wrong? You need to have a broker that’s contactable, preferably with a person at the other end. Believe me there’s nothing more frustrating than getting a recorded message when you’re sat waiting to see if an order has been fulfilled.
OptionsHouse makes it easy to get in touch with them, and yes you can actually speak to a person who resides in the U.S. They’re contactable by phone or email. If you need an urgent reply I’d suggest calling them up, getting a reply via email usually takes a couple of hours.
Things Not to Like
Minimum Balance Requirement
OptionsHouse still require you to deposit $1,000 to open a trading account. I know that’s not exactly going to break the bank but its more money than most of their competitors charge. Scottrade for instance only require you to deposit $500 whilst at TradeKing you can open an account without having to deposit anything at all.
OptionsHouse as the name suggests offer an excellent range of options, but other securities like mutual funds are sadly lacking. Their range of exchange traded funds (ETFs) for instance is nothing compared to the larger discount brokerage houses like TD Ameritrade or Scottrade. It would be nice to see them make a few more funds available.
Are they a good bet?
OptionsHouse are a good broker for anyone who’s looking to trade options for the first time. Their range of options training is second to none and you shouldn’t underestimate the level of training required to become proficient in options.
If options trades make up the majority of your trades then OptionsHouse is still a good bet, due to the extremely competitive pricing, world class options platform and excellent customer service.
If however you have a more balanced portfolio, or your managing your own IRA then there are better brokers to choose from. Their range of mutual funds and ETFs is not that great and you’ll find yourself looking at other brokers just to fill in the gaps.