The 4 Best Options on Futures Brokers (Dec-2019)
When trading Options on Futures there’s really only a few brokerages I’d even consider doing it at, due to superior commissions, platforms, and the margin requirements they have.
While Personally I use tastyworks for all my options and futures trading needs, I wouldn’t fault someone for choosing one of the other brokers I’ll mention, as truthfully they’re pretty much just as good. Really it boils down to what type of user-interface and products beyond options on futures you’ll potentially want to trade in your account.
My Personal Choice for Options on Futures (Tastyworks):
As mentioned above, I personally use tastyworks for trading options on futures. In fact, as I write this I have 5 short options on futures going right now in my tastyworks account.
I use Tastyworks over the other brokerages primary because I enjoy the interface they offer, as well as the very generous margin requirements they allow.
First off they allow you to get options on futures approval, as well as margin accounts in general, very easily, and it’s available regardless of your age, while Interactive Brokers requires you to be at least 21 years old to trade on margin with them, meaning no options on futures until you’re at least 21 with Interactive Brokers.
Secondly, as mentioned before, I think their interface is the most user-friendly of any brokerage when it comes to options trading. It’s straight to the point and provides some useful visualizations that are easy to understand. It doesn’t have a lot of the “busyness” the other brokerages have in their platforms.
The last main drive to me about Tastyworks is they have generous margin accounting practices, meaning they aren’t as strict when it comes to how much capital they require to sustain an options trade as the other brokerages in my experience. Their margin borrowing limits never really come in to play due to how they account for you using it, but they’re quite reasonable compared to most of the competition mentioned below.
What's the bad news with Tastyworks Options on Futures?
Not going to sugar-coat them; their trading fees for options on futures is slightly higher than my second choice (interactive brokers), and about the same as the third and fourth runner up’s, so they aren’t some shining bastion of cheapness in this department, but rather just about average.
The only other real downside to tastyworks in my opinion is you have limited exposure to FX-trading and international (Non-ADR) stocks, which is generally avaliable on the other brokerages mentioned in this article. You can still get exposure through ETF’s or futures contracts, but those require more capital or aren’t quite as capital-efficient, so if you’re big on FX-trading in a smaller account, or international equity trading, then tastyworks might not be for you. Otherwise Tastyworks is a great option.
The Best Low-Cost Options on Futures Broker (Interactive Brokers):
While I don’t personally use Interactive Brokers, I have used them in the past and would highly recommend them as a broker.
If you’re new to trading, especially options or options on futures trading, then I’d say tastyworks is a better option due to the simpler interface, however if you’re more experienced and want to save a bit on commissions then Interactive brokers is a great option for you.
Positives for Interactive brokers is largely down to their low-commission structure, as well as their cheap margin-rates. Beyond this they have little advantage over TdAmeritrade, my third pick for Options on futures trading.
A major positive aspect of Interactive brokers is they allow you to trade pretty much anything, including international equities that aren’t ADR’s, and including foreign currencies just like a forex broker such as Oanda would allow you to. To me, this along with it’s low commissions (if you are active on their platform) is their main benefits, or really the only benefits to their platform.
What are the downsides to Interactive Brokers?
As mentioned in the tastyworks section above, they require a minimum age of 21 years old to get a margin account, which is essentially required to trade options on futures, or any options at all, as well as they’re reluctant to give options (and futures) approval to small account sizes. But it’s still not too hard to get with Interactive Brokers.
The interface of their trading software is extremely outdated, which is perfectly fine if you’ve been in the trading sphere for many years, but if you’re new and used to nicely interfaced things using their software will be a headache and a nightmare all at the same time. But you should be able to get over the learning curve in a few weeks of frustration, and to boot you’ll save in commissions for potentially years to come by choosing Interactive Brokers.
Just an Overall Good Broker for Options on Futures (TdAmeritrade):
We all know this massive brokerage. It does everything, but normally has high fees.
Well as of late 2019 it eliminated most of it’s fees along with most other brokerages, and only has small fees (like all brokerages) on options and futures trades. TdAmeritrade is well-known for their great customer support, so if that’s something you want then they’re definitely a good choice.
The main benefits to TdAmeritrade for most people will be the massive variety of products (local bonds, FX, foreign companies) to trade and invest in, much like Interactive brokers, just with a slightly higher commission rate.
They also have good support, but I feel like most people almost never use their brokerage support, but if that’s a big thing for you TdAmeritrade has good support, although personally I feel like Tastyworks has better support for options and futures questions/issues.
Beyond that though, I feel TdAmeritrade doesn’t really have much going for it. Tastyworks was built by the same team who made TdAmeritrade, so their options and futures interface is far more developed/mature and pleasant to use.
What are the downsides of TdAmeritrade?
It’s mostly the interface (It’s quite busy) and commission rate; essentially unless you care for TdAmeritrade’s general support (or managed products) then either Interactive brokers or Tastyworks would probably be a better option for you.
My largest complaint of all though, and what really kills TdAmeritrade, is they don’t give out margin accounts easily at all. If you want to trade options on futures you pretty much need a margin account, and to get one that allows trading options on futures generally requires trading with TdAmeritrade for at least a year, or having a very large account size and yearly income.
If you care more for the interface then Tastyworks is the better choice, if you care more for saving a few buckeroos then Interactive Brokers would probably be a better option.
With that being said, there is a 4th option, one that sort of bridges the gap between all 3 of the above brokers, and that’s E-trade, what we’ll cover next. Not only is their interface pretty good, but they allow pretty much all the products that TdAmeritrade or Interactive Brokers does.
A Good Balance between TdAmeritrade and Tastyworks (Etrade):
Etrade’s basically a happy compromise between a relatively clean trading interface/platform and having pretty much any trading product at the tips of your fingers.
With E-Trade it isn’t too difficult to get margin trading, options, or futures permission, although not quite as easy as with tastyworks who practically hands it out no questions asked.
Overall I’d say E-Trade’s probably a better choice for most people compared to TdAmeritrade, but no nessecarily better than Interactive Brokers or Tastyworks.
If you’re interested in investing in bonds or FX (without futures) with efficient capital useage E-Trade may be better for you than even my beloved tastyworks, as their platform is perfectly adequate and they offer both of the above, while Tastyworks doesn’t.
What are E-Trade's Downsides?
The main downside is their fees aren’t the lowest (Interactive Brokers is the lowest), nor is their margin borrowing rate, nor is their ease of margin permission approval, but over-all these hurdles aren’t that great in the case of E-trade.
Beyond that though, E-trade is a pretty solid option. I’d say they’re increasingly becoming one of my favorite brokerage options.
Which Brokerage for Options on Futures is Best for You?
This is hard to say, as like I said I personally use Tastyworks and love them, but I can’t fault anyone who uses one of the other brokerages I mentioned in this article. I’d say if you’re a new customer TdAmeritrade should probably be a “pass” as they simply lack anything that makes them significantly better than the other companies/brokerages I mentioned here.
It pretty much comes down to your priorities. If you want an over-all good brokerage and don’t mind paying a tiny bit extra for it ($50~ a year probably at most), then E-Trade would probably be the best. If you want a brokerage that’s ALL about options and futures trading, although it allows stock trading as well, then Tastyworks is definitely your best option. But if you want to save every penny on commissions and are a hyper-active trader then Interactive Brokers may be the better choice for you, just keep in mind their platform has a bit of a learning curve.