For many discount brokers, stocks and funds are the main breadwinner, and stock options are just a sideshow. Before opening a new brokerage account , options investors should be especially thorough in shopping for a brokerage, as options trading capabilities, commissions, and research vary wildly throughout the industry.
Let's review how OptionsHouse stacks up for options investing and dig into the details you should know before opening an account. Let's start with one of the most important factors of choosing a broker: Keep in mind there is often more to a broker's commission schedule than just its published prices, which we'll explore in more detail.
Importantly, new customers can frequently qualify for sign-up bonuses and commission-free trades when they open a new account. Some investors simply buy and sell calls and puts. Others write covered calls for income. And a smaller number of investors use complex options strategies that involve buying and selling multiple contracts simultaneously. OptionsHouse caters to all types, as it offers basic options trading capabilities, as well as the ability to place multi-leg options trades for complex options trading strategies.
Commissions for each leg on a multi-leg trade can make for a frustrating experience. OptionsHouse charges just one base rate on a multi-leg trade. Discount brokers rose to popularity by eliminating many of the costly services of full-service brokers, enabling them to pass on the savings to their customers in the form of lower commissions. As time goes on, though, discount brokers are increasingly offering more research and trading tools to their clients free of charge.
OptionsHouse caters to options traders hence its name and thus many of its tools are designed with a focus on options. The company's proprietary tradeLAB tool enables its clients to view options strategies graphically, charting the the maximum gain, loss, and break even point of a particular trade.
Its strategySEEK tool can be used to comb the market for trading opportunities, and find trades to make based on factors like return potential, safety, probability, and potential profit. Depending on your needs, OptionsHouse probably has a tool for you. OptionsHouse doesn't have a minimum deposit requirement to open a new account, so you don't need to worry about having to empty your savings account to get started. That said, some strategies that expose investors to elevated risk like shorting puts or calls will require a higher balance depending on the trade size.
All brokers have risk-management parameters in place to reduce the risk that a trader creates a loss so large that it exceeds his or her account balance. Realistically, there isn't any one broker that is best for all option traders, but there is a broker that is a best fit for any given investor. Some investors may like that OptionsHouse offers competitive commission prices, particularly for multi-leg options trades, as well as the fact that its trading and research tools are all designed with a focus on options trading first and foremost.
That said, those who trade options less frequently than they invest in stocks or funds may not make full use of its functionality, or may prefer brokers that offer more commission-free ETFs, for example. To be clear, The Motley Fool does not endorse any particular brokerage, but we can help you find one that is a good fit for you. I think stock investors can benefit by analyzing a company with a credit investors' mentality -- rule out the downside and the upside takes care of itself.
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