If you are like me, and prefer to put your money to work by trading in the market, you may be wondering which broker is the best. Read on to learn what I discovered.
I will state up front that the primary goal of mine is to trade options on commodity futures. This is my bread and butter; it’s what I have found to be the most consistent way to make a profit.
At first, I searched for the lowest commissions, but what I discovered was that the cheapest fees are not always what they are cracked up to be.
These are the brokers I tried:
E*Trade, Interactive Brokers, Tastyworks, Tradestation, and TD Ameritrade
E*Trade: I really thought this would be the one. They have good commissions for futures options ($1.50 per futures option contract) and their platform is one of the best out there. Not to mention they have a wide offering of futures options. Some brokerages only have about 15, so you can’t trade things like live cattle and platinum, but E*Trade has many more. It wasn’t until I had fully funded my E*Trade account that I found out they don’t allow selling naked futures options. That was a deal breaker. Selling naked options is what I do. The probabilities of this strategy, if done correctly with risk management, are the equivalent to having the house odds of a casino in your favor. So, no E*Trade for me.
Interactive Brokers: IB is all the rage with serious traders because their commissions are rock bottom cheap ($0.85 per futures option contract). I opened an account with them, but then discovered that their trading platform is horribly dated. I mean the desktop platform looks like a high school computer science project from the 1990’s. The mobile app is full of features, but lags horribly and has terrible UI design. But I thought I could just plug my nose and trade with their platform if the cost was so low. However, I soon realized that they have lots of other odd fees. For example, you have to pay extra for real time quotes. We’re not just talking about those pesky ICE quotes (sugar, coffee, orange juice, etc) . . . . you even have to pay a monthly fee for standard US stock quotes. Oh, and there is an order cancellation fee. Yes, you can get charged for an order that doesn’t even get filled. The whole thing just started to feel shady to me. Then I read reports where IB’s automated risk management was liquidating people’s positions because of faulty quotes, taking whatever bid was available. This apparently caused huge losses in people’s accounts that they didn’t get back. So I decided to run (not walk) away from this broker that gave me the creeps. You get what you pay for, it seems.
Tastyworks: This was my brokerage for a year. They have great options commissions ($1.00 per contract to open, $0 to close). Also, their platform is very solid and geared toward my style of trading. Not to mention their sister company, Tastytrade, broadcasts the best educational options content out there. My problem is that they have been promising to roll out options on futures for a long time and they have not been able to follow through. I waited and waited until I finally had enough. I had to go to a broker that offered what I view to be the best opportunity in trading products: futures options.
Tradestation: I had a moment where I thought this was the holy grail of brokers. Commissions were good ($1.50 per contract for futures). The technology looked top notch. Their selection of futures was broad. And they didn’t have all the extra fees and costs, like Interactive Brokers. It wasn’t until I opened an account that I discovered that all futures options trading is done in a separate website, not on the platform. Even when trading them on your phone, you have to open a browser and go to this website. That was tedious and unacceptable for me.
TD Ameritrade: Originally, I had glossed over TDA because their commissions are higher ($2.25 per futures contract). Not to mention, their futures options selection is a little more limited. Yet I came around and decided to use them for several reasons. First of all, their trading platform, Thinkorswim, is arguably the best trading software in the business on both desktop and mobile. I’ve also found their customer service to be outstanding. Finally, they give you real time quotes for free and you don’t feel like you have to worry about getting charged weird fees. The brokerage is solid and polished. That was when I decided that paying a little extra in commissions is worth it for a broker that makes you feel confident and gives you the best tools to efficiently find, execute, and manage good trades.
So there you have it, TD Ameritrade is my new broker. Granted, if Tastyworks ever rolls out options on futures, I might consider going back to them. But for now, I’m selling futures commodity options on the Thinkorswim platform and feeling good about it.