So you have decided that you’re going to be the next Warren Buffett and start trading in options. I admit that I admire your enthusiasm but before you run out and start hitting the stock futures market, you need to look at just how competitive the brokerage field is.
I am not going to recommend any brokers to you. Like other people I have my share of great anecdotes and horror stories. Brokers have a reputation for being self-serving, greedy, stick-to-the-customer shenanigans that isn’t always earned but there have been a few times….
Anyway, I thought it would be good to look at the criteria you should use in researching brokers. There is a lot of money to be made in the business of referring new business to brokerages, so some Websites will try to pitch you on their referral brokers. I looked at the Motley Fool site, for example, and their page on “Online Brokers” looks to me like a typical affiliate table.
I don’t have a problem with affiliate Websites but I just think they should put your need for information first. So this page on choosing an online broker is a good example of how an affiliate is putting your needs first. Sure, there are ads on the page but the page is not just a table of ads.
Investopedia has an article on how to choose your first broker. I consider that site to be somewhat more neutral than most, if only because I have used it as a reference for years.
The NASDAQ exchange also has an article on choosing a broker that is pretty good (and hopefully neutral).
Finally, Yahoo! Finance has an Education Center with this article about choosing an online broker. So while none of these resources will guarantee you the best results, you should start your search with Websites that are not just trying to get you to sign up with their recommended brokers.
People often turn to their friends and family for recommendations on brokers. And, frankly, if you’re controlling most of your trades you probably don’t need a top-notch financial adviser anyway (or maybe you do — are you really that good at stock trading?).
Trading in the options market can be fun and rewarding but there are a lot of challenges. You don’t want to bet the mortgage payment on your ability to navigate through the options contracts. Only use money you don’t need so that A) your investments have time to mature and B) you have the luxury of learning from your mistakes.
Good luck.
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