Options are financial derivatives that give the buyer (holder) the right, but not the obligation, to buy or sell an underlying asset at a predetermined price, known as the strike price, on or before a specific date.
Traders and investors use options for various purposes, such as hedging, speculation, and generating income through the collection of premiums.
But which platforms offer the best functionality to trade these in the UK?
We’ve studied the market to give you an overview of the best options trading platforms and apps, highlighting their features, pros and cons, and what sets them apart.
Whether you’re a beginner, an experienced trader, or looking for the cheapest option, we’ll help you choose.
Our Review Methodology
In order to identify and rank the best options trading platforms for our UK audience, we employed a comprehensive methodology that considered a range of factors. We began by researching and compiling a complete list of reputable platforms. We then assessed each platform based on criteria, including ease of use, fees and commissions, educational resources, customer support, available assets, and platform features.
We carefully analyzed the user experience, user interface, mobile app functionality, and overall ease of navigation. We also scrutinized the fees and commissions associated with each platform, comparing them to industry standards to ensure a cost-effective trading experience. Additionally, we assessed the quality and availability of educational resources, such as articles, webinars, and video tutorials.
Finally, we examined the availability of customer support channels, such as email, phone, and live chat, as well as their response times and level of expertise.
What are the Best Options Trading Platforms?
AvaTrade: The Best Platform for Beginner Options Traders
If you’re a beginner looking for an options trading platform that’s both approachable and feature-rich, AvaTrade has a lot to offer.
With over 40 currency pairs to choose from and the flexibility to create diverse strategies like straddles, strangles, and risk reversals, you’ll feel like a pro in no time. Plus, the platform’s powerful desktop and mobile versions ensure that you can trade whenever inspiration strikes.
AvaOptions provides an array of professional risk management tools and portfolio simulations, which we found useful. Their copy-trading functionality also rivals the best in the industry.
The platform’s interactive page lets you visualize current and historical implied volatility, realized volatility and even trade spot FX directly from custom charts.
You’ll also be able to set entry and exit limits, see how limit orders impact your trade risk, and make use of interactive sliders for setting entry and closing orders.
Regulation & Security
AvaTrade is regulated by multiple financial authorities worldwide, ensuring a secure and reliable trading environment.
The AvaOptions App
The AvaOptions app offers 13 options strategies: spot, call, call spread, call ratio, put, put spread, put ratio, straddle, butterfly, condo, risk reversal, and seagull.
Accessible on both iPad and iPhone, the app allows traders to choose any strike and expiration date up to 1 year.
Live streaming trades are available 24/5 with multibank liquidity. Option strategies can be applied to various currency pairs and commodities like silver and gold. Trade sizes range from 10,000 to 10 million.
(capital risk applies)
Interactive Brokers: Best Platform for Advanced Options Trading
Interactive Brokers (IBKR) is the best choice for advanced options traders, though you’ll first have to open an international/US brokerage account.
But what makes it stand out from the competition?
Low Margins: The fees start at 0.60p per contract for options trading, with scaled rates based on volume.
Advanced Trading Platform: The Trader Workstation (TWS) is a powerful and customizable trading platform designed for advanced options traders. It offers multi-leg options strategies, advanced risk management tools, and conditional orders to help traders effectively manage and analyze their options trades.
Superior Order Execution and Routing: Interactive Brokers is well-known for its efficient order execution and routing controls. Large clients can route their orders directly, while other customers can enjoy commission-free trading (excluding options) with payment for order flow. This focus on superior execution ensures that traders get the best possible prices for their trades.
Robust Analytical Tools: Interactive Brokers offers advanced options analysis tools that are also available on its mobile application. These tools include options spread templates for comparing strategies, one-tap options strategies for easy adjustments, and key options Greeks displayed on the quote page. The platform also provides tools for graphing potential payouts, estimating the probability of options profitability, and identifying low-cost options strategies.
Paper Trading: Interactive Brokers offers paper trading, allowing advanced options traders to test their strategies and ideas in a risk-free environment before committing real money.
Educational Resources: The platform offers extensive educational resources, including webinars, video tutorials, and articles, to help advanced options traders continually improve their skills and knowledge.
Despite its many advantages, Interactive Brokers does have a few downsides.
The advanced platform features can be intimidating for new users, and the order routing feature is not available to all clients. Additionally, the platform does not currently support the backtesting of custom algorithms.
However, these drawbacks are relatively minor compared to the comprehensive suite of available features and tools.
(capital risk applies)
Degiro: Best Platform for Low-Cost Options Trading
DEGIRO is a leading online trading platform established in the Netherlands in 2013. The platform offers access to various financial instruments, including stocks, bonds, options, futures, and ETFs.
Fees & Commissions
DEGIRO offers some of the lowest fees and commissions in the industry. The platform charges zero fees for opening an account, and its commissions are significantly lower than many other online brokers.
This makes it easier for investors to keep more of their profits and grow their portfolios faster.
DEGIRO Educational Resources
One of the most useful educational resources offered by DEGIRO is its knowledge centre.
The knowledge centre contains articles, tutorials, and videos on various topics, including investment strategies, risk management, and market analysis.
DEGIRO also offers a variety of webinars hosted by their team of financial experts. These webinars cover various topics, including market analysis, technical analysis, and trading strategies.
In addition, DEGIRO provides access to various research tools and reports that can help investors make informed decisions. This includes real-time market news, price charts, and financial data.
They also offer an economic calendar, which can be used to track important events that may impact the markets.
(capital risk applies)
Tastytrade: the Best Options Platform for Mobile Trading
TastyTrade, with its TastyWorks platform, is an excellent choice for options traders due to its free account offering, low fees, and user-friendly interface.
With zero inactivity fees, free stock trades, and competitive option trading fees, traders can enjoy cost-effective trading. While they charge $45 for cash withdrawals, the platform’s other features more than make up for it.
TastyWorks focuses on US options and stocks, providing access to a wide range of assets listed on American stock exchanges, including international companies listed through ADRs, such as top global UK companies on the FTSE100.
As with Interactive Brokers, you’ll need to set up an international/US brokerage account.
The TastyTrade Mobile APP
The app is easy to navigate, with a clean design and clear menus that simplify finding what you’re looking for. The home screen provides a quick portfolio overview, with customisable watchlists and alerts about important market events.
Tasytrade’s app also offers a range of advanced trading tools that can help you execute trades quickly and efficiently. These include customisable order types, such as limit and stop-loss orders, and real-time market data and analysis.
In addition to its trading capabilities, the Tastytrade mobile app provides access to a wealth of market insights and analysis, including daily news updates, research reports, and live streaming of the Tastytrade network.
TastyTrade Curated Watchlists
One of the features of Tastyworks is the curated watchlist.
These watchlists are created by Tastytrade experts and are designed to help you identify potential trading opportunities based on various criteria.
They cover a range of markets, including options, and are categorised based on volatility, growth, dividends, and momentum.
You’ll find information about the underlying securities, including price, volume, and volatility, and use these watchlists to identify potential trading opportunities, conduct further analysis, and trade directly from the Tastytrade app.
Overall, Tastytrade’s curated watchlists can be helpful if you want to stay informed about market trends and potential trading opportunities.
Best Platform for Options CFDs: Plus 500
Plus500 allows investors in the UK to trade option CFDs for both call and put options on 24 popular symbols.
Call and Put Options are types of options contracts that give traders the right, but not the obligation, to buy or sell an underlying instrument at a predetermined price (strike price) and expiration date. CFD Call and Put Options work in a similar way, but with the added benefit of leverage (up to 1:30), which allows traders to potentially generate higher profits but also carries a higher risk of loss.
Plus500 offers competitive spreads and does not charge commission on trades. They also offer excellent 24/7 online support, making it easy to find answers to any questions.
(capital risk applies)
Compare Options Trading Platforms in 2023
| Platform | Minimum Deposit | Fees & Commissions | Customer Support | Best For |
|---|---|---|---|---|
| AvaTrade | £100 | Competitive spreads and overnight charges | Email, phone, live chat | Beginners |
| Interactive Brokers | £100 | Low per-contract fees, account fees | Email, phone, live chat | Advanced |
| Degiro | 0 | Low trading fees, no account fees | Email, phone | Low Cost |
| Tastytrade | 0 | £1+ for opening ETF options & equities | Email, phone, live chat | Mobile Trading |
What is Options Trading?
Options trading is a sophisticated financial trading technique that involves buying and selling contracts known as options.
These contracts grant the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (strike price) within a specified time frame.
The two primary types of options are call options, which allow the holder to buy the asset, and put options, which permit the holder to sell the asset.
Investors must pay a premium to acquire the option contract when participating in options trading.
The premium represents the cost of the option and is influenced by several factors, including the underlying asset’s current market price, the time remaining until the option’s expiration, and the market’s overall volatility.
As a result, options trading provides investors with a versatile approach to potentially profit from a wide range of market scenarios and strategies.
Pros and Cons of Options Trading
Pros
- Flexibility: Options trading offers a wide range of strategies, from simple to complex, catering to various risk tolerances and market outlooks. This flexibility allows traders to profit in different market conditions, including rising, falling, or even sideways markets.
- Limited Risk: When purchasing options, the maximum risk is limited to the premium paid for the option. This predefined risk can be advantageous for traders who want to limit potential losses, especially in volatile markets.
- Leverage: Options provide leverage, allowing traders to control a larger amount of shares for a fraction of the cost of buying the underlying asset outright. This means that even small price movements can lead to significant profits or losses, amplifying the potential return on investment.
- Hedging: Options can be used as a hedging tool to protect a portfolio against adverse market movements. By buying put options, traders can limit their downside risk while maintaining their upside potential in a long stock position.
- Income Generation: Options strategies such as selling covered calls or cash-secured puts can generate additional income in a portfolio, enhancing overall returns.
Cons
- Complexity: Options trading can be complex, particularly for beginners. Understanding the various strategies, pricing models, and risk factors requires time and effort, which can be overwhelming for some traders.
- Leverage Risks: While leverage can amplify profits, it can also magnify losses. This double-edged
What are the Different Types of Options Trading Available?
There are two types of options: call options and put options.
A call option gives you the right, but not the obligation, to buy an underlying asset at a specified price (called the strike price) within a specified time frame.
On the other hand, a put option gives you the right, but not the obligation, to sell an underlying asset at a specified price within a specified time frame.
If the underlying asset’s price decreases below the strike price, you can exercise your option and sell the asset at the higher strike price, making a profit.
If the underlying asset’s price does not decrease below the strike price, you can simply let the option expire and only lose the premium you paid.
What are the Pros and Cons of Options Trading?
Pros
- Flexibility: Options offer the ability to adopt bullish, bearish, or neutral stances on underlying assets, providing traders with a diverse range of strategies to choose from.
- Leverage: With options, you can control a substantial portion of the underlying asset using a smaller investment, enabling potentially higher returns compared to traditional stock trading.
- Limited Risk: The risk in options trading is predefined by the premium paid for the option, which allows you to know the maximum loss for each trade. Early position closures can further limit losses.
- Versatility: Options trading can serve various purposes, such as generating income, hedging existing positions, or speculating on market movements, making it a valuable tool for investors.
Cons
- Complexity: Options trading demands a solid understanding of financial markets and strategic approaches, which can be challenging for novice traders.
- Volatility: Options trading can be highly volatile, with rapidly fluctuating prices. Proper risk management is essential to avoid substantial losses.
- Time Decay: The value of options declines as they approach their expiration date, requiring careful position management to mitigate losses due to time decay.
- Learning Curve: Developing expertise in options trading requires time and effort, with the need to learn various concepts, strategies, and risk management techniques.
How to Start In Options Trading?
Options trading can be a complex and challenging activity, but it can also be very rewarding if you’re willing to try to learn and practice. Here are some steps to get you started:
Do Some Research – Before diving into options trading; it’s crucial to learn the basics, including understanding the terminology, concepts, and various strategies.
Utilize educational resources such as articles, tutorials, webinars, and e-books provided by trading platforms or other reputable sources.
Choose the right trading platform: Research and select a reliable options trading platform that offers a user-friendly interface, a wide range of tradable assets, comprehensive educational resources, responsive customer support, and competitive fees. Some popular options trading platforms in the UK include AvaTrade, Interactive Brokers, Degiro, and Tastytrade.
Open a trading account: Once you’ve chosen a suitable platform, open an account by providing the required personal and financial information. Complete the account verification process by submitting the necessary documents, such as proof of identity and proof of address.
Most platforms also require you to complete a short questionnaire to assess your trading knowledge and experience.
Practice with a Demo Account – Practising with a demo account provided by some brokers can be helpful before placing any actual trades. This will allow you to get a feel for the platform and test different options and strategies without risking real money.
Develop a Trading Plan – Developing a trading plan that outlines your goals, risk tolerance, and trading strategies is crucial. This will help you stay disciplined and avoid making emotional trades.
Start Small – When you are ready to start trading with real money, you must start small and only risk money you can afford to lose. As you gain experience and confidence, you can gradually increase your trading size.
Monitor Your Trades – Once you have placed a trade, it is essential to monitor it closely and be prepared to adjust your position if necessary. Options prices can be highly volatile, and you must have a plan to manage your trades in different market conditions.
Key Options Terminology
Key definitions you need to know when options trading
- Option: An option is a financial contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price (strike price) on or before a certain date (expiration date).
- Call option: A call option gives the buyer the right to buy the underlying asset at the strike price before the option expires.
- Put option: A put option gives the buyer the right to sell the underlying asset at the strike price before the option expires.
- Strike price: The strike price is the predetermined price at which the option holder can buy (call) or sell (put) the underlying asset.
- Expiration date: The expiration date is the last day on which the option can be exercised. After this date, the option becomes worthless.
- Premium: The premium is the price paid by the buyer to the seller (writer) of the option for the right to exercise the option.
- In-the-money (ITM): An option is in-the-money if exercising the option would result in a profit. For call options, this occurs when the underlying asset’s price is above the strike price. For put options, it’s when the underlying asset’s price is below the strike price.
- Out-of-the-money (OTM): An option is out-of-the-money if exercising the option would result in a loss. For call options, this occurs when the underlying asset’s price is below the strike
FAQs
Are there any free options trading platforms?
While some platforms may offer commission-free trading or low-cost trading, there may still be other fees associated with the platform’s use, such as account maintenance or withdrawal fees.
How can I determine if a platform is suitable for beginner options traders?
Look for platforms that offer user-friendly interfaces, comprehensive educational resources, and excellent customer support to help beginners learn the ins and outs of options trading.
