Options allow people to trade financial securities more specifically stock or equities, bonds, ETFs Exchange Traded Funds or mutual funds without making a purchase upfront. A buyer has the option of waiting to see where the price of a particular financial product will fall before deciding to buy and sell it at a profit. In options trading, you can either purchase a call or put option.  

A call option gives you the option of waiting to buy a stock, especially if the trader expects the price to go up. If the agreed price of a stock was $10 and the price goes up to $12, you buy the stock at $10 and sell it at $12 or hold it. If the price goes down you have no obligation to exercise your option, however, you will have incurred a small premium perceived as a cost for the transaction payable to the seller.  

A put option gives the option of buying a stock, especially if the trader anticipated that the stock price would go down. Using the same example if the stock price decreases to $8, you buy the stock at $8 and sell it at $10 thus making a profit. If it goes up, you are only liable for the premium.  

Trading Brokers, Platforms and Tools 

A person interested in trading options must open an account with a brokerage that offers options. The broker can offer one or several platforms for trading with a wealth of different tools. Each broker or platform has its pros and cons and it is therefore up to a person to choose which options broker works best of them depending on their expertise, preference, priorities, trading style, and risk appetite.  

Some of the best trading brokers, platforms and tools in the market include the following. 

1. TD Ameritrade popularly known for their think or swim platform is one of the best brokers for options trading. The broker has won several awards including the Best Overall Online Broker, Best for Day Trading, Best Web Trading Platforms and Best for Beginners. They have many educational videos and content about trading options and their platform has many useful tools among them risk management tools. The platform is also popular with professional and expert traders.  
2. Interactive Brokers is famous for its low costs. Its trading platform, Trader Workstation has been, for the longest time, the most challenging platform to use; however, they have made continuous efforts to make it simpler so that it can accommodate amateur traders. Their latest tool IBot lets you make inquiries by word of mouth rather than searching through the platform. Their lab also allows potential users to test out their services before making a purchase.  
3. As its name suggests, Lightspeed requires traders who are experts and very active. Their platform Livevol X offers expert tools including them, analytical tools not present in other platforms. If you are a beginner at options trading, Lightspeed is not the best broker for you, however, if you are a pro trader the broker has some features you would enjoy.  
4. E*TRADE has been in the market as an options trading broker for a long time and caters for both beginners and experts. Some consider this the best overall broker. Its options house platform and Power E*TRADE platform offers a wide variety of tools. One major con is that their commissions are a bit on the upper side.  
5. Charles Schwab is another good broker overall. They have a lot of educational material that makes it hard not to succeed in options trading. Their costs are also very competitive. The StreetSmartedge platform has a useful number of tools including those from optionsXpress, which Schwab purchased by back in 2011. 
6. TradeStation is one of the best trading brokers made for expert traders. This is thanks to the fact that the broker used to deal with software for trading. TradeStation has an array of tools including the Options Station tool, which is very useful in analysis. Many of these tools are also available for sale to people using other brokers.  
7. Ally Invest is another broker with low costs. They require no minimum account balance or fee meaning that you can trade with almost no money as you learn the game. The expert traders, of course, take advantage of this and continue to enjoy a variety of tools. 

How to Open an Options Account 

Once you have done your research and reviewed some brokerage firms, you can select one broker and open an account with them.  

Step 1 

The brokerage firm will give you two options; you open either a cash account or a margin account. Cash accounts make use of the money in your account to take care of your trading activities and costs. A margin account, on the other hand, allows you to trade with your financial securities as collateral including options you may have already purchased.  

Step 2 

After deciding on the account, you will need to deposit a minimum amount of money into your account depending on the broker and type of account you have selected. Most cash accounts do not require a deposit. However, margin accounts require you to put a lease $2,000 as per the federal regulations. Beware of fake trading sites that con people money especially at this stage. Also, make sure that the broker uses safe payment methods. 

Step 3 

Most brokerage firms will assess your experience and capital investment and give you a trading limit before you engage in trading. This is the case to protect traders from the potential risk associated with online trading. Therefore, a trader must obtain this approval before proceeding.  

Step 4 

Check out the educational and research content provided by the broker and do your best to understand it before you can begin trading. Even though you might be tempted to assume that the educational content is just necessary information that you can do without, please go over everything provided and look for more, because knowledge is power.