|
|
|
|
|
|
 THE ABC OF... |
ABC of...
Comparing options brokers - part 2
CS journalists
Choosing an options broker will largely depend on how serious you take options as well as your level of experience. Do you specialise in options trading, or do you use options as a simple hedge against losses in your share portfolio?
Brokerage
Brokerage on options contracts is generally less than share trading.
Options brokers may charge you a flat fee every time you separately enter and exit a trade - or "per side" - or for both entering and exiting a trade, otherwise known as a "round turn". Some may charge a percentage of the gross value of the trade, while others might offer a combination of the above. See our table for the lowdown on broker commissions.
On top of brokerage, traders also have to factor in the cost of the dealing spread when determining likely profits from trading options. The spread is the difference between the price you buy an option (the offer price) and the price you sell an option (the bid price). As a tip, always remember that the bid is lower than the offer.
Data
The type of data you require will mostly depend on how regularly you trade. Clearly, day traders will require more up-to-the minute data than those who trade with a longer time frame in mind.
Brokers offer live, delayed and/or historical price data on a broad range of markets. Historical data is particularly handy if your trading is longer term, and is especially handy for back testing dummy trades before you launch into the real thing.
Trading system
Trading systems offered are either software or browser (Internet based). Internet-based systems are more convenient for those on the move, who like the flexibility to trade wherever and whenever - since you just log onto your account via the Internet. Software-based systems, which must be downloaded or installed onto your computer, are perfectly suitable for those with laptops, or for traders who intend to trade from, say their home office everyday.
It's important that the trading system you choose is easy to navigate and transact, and has the types of features you deem necessary. Most brokers will offer a period of free membership where you can trail the trading platform for size. If it takes a dozen or so clicks to place and submit an order, or if the layout and design bothers you, move on.
Remember to check out the types of charts, technical and fundamental analyst tools, market reports such as newswire services and company reports.
Markets offered
The options trading markets includes local shares, international shares, commodities such as gold, wheat and oil, financial futures such as the S&P/ASX 200.
Customer service
We can't emphasise enough the importance of choosing a broker who is easy to contact, and has plenty of experienced and knowledgeable staff on the desk to take your call and sort out your concerns quick smart. Talk to friends, get on chat rooms and ring around different brokers to get a feel for how they operate. The customer service of an options broker is definitely the most time-consuming factor to analyse, but the most important to get right.
So take your time, and start with our comparison tables.
 Email to a friend
 Print this article
|
|
