The Game of Stocks: What You Need to Know About Stock Option Software and Services

Business.com / Finances / Last Modified: February 22, 2017

Before you get involved with stock option software, familiarize yourself with the two types of options along with the benefits of each.

Are you interested in stock option trading?

If so, there are tools, software applications and services that can help you reach your goal of making better investments and earning more money.

Before you get involved with stock option software and before you decide which service is best for you, it is important to become familiar with the ins and outs of this type of trading.

To begin, there are two types of options:

  1. Calls
  2. Puts

Investopedia breaks down the basics of both types:

“When you buy a call option, you have the right but not the obligation to purchase a stock at the strike price any time before the option expires. When you buy a put option, you have the right but not the obligation to sell a stock at the strike price any time before the expiration date.”

It is a common misconception among beginning investors that stocks and options are one in the same. This is not true. With a stock, you are buying ownership in a particular company. With options, you are simply gaining the opportunity to buy or sell a stock at a specific price by a set date.

Related Article: Programmatic What? A Comparison of Programmatic Buying and the Stock Market

The Pros and Cons of Options

Here is a question that many people face: why does it make sense to get involved with options when it is much easier to simply buy and sell (or hold) stocks?

Here are three reasons why:

  • You can profit on changes in market price without actually buying the equity.
  • Potential to earn more per dollar when compared to buying the equity.
  • Limited risk.

Conversely, there are reasons why some investors continue to avoid options:

  • These options are time-sensitive in nature, meaning you need to be “on your game” and paying attention to your investments at all times.
  • They are more complicated than investing in stocks.
  • Some investors prefer a long-term, buy and hold strategy as opposed to the short lifespan of options.

Related Article: Q1 Reflections: Important Ways to Take Stock of the First Quarter

Top Stock Option Software

If you decide to get involved with options, it is imperative to obtain as much assistance as possible. This is particularly true if you are new to this type of investing. There are many stock option software applications and services to choose from. Below is a short list of some of the best:

1. OptionsHouse

The name says it all, right? With OptionsHouse, you are granted access to an advanced trading platform that allows you to make all the right moves from your computer or mobile device.

There are many features that allow this service to stand out in a crowded industry, including one-click trading that ensures fast and efficient order execution.

Added benefit: when you open a new account with OptionsHouse, you can trade free for 60 days. This gives you the opportunity to decide if this type of investment is best for you, and whether the service suits your needs.

2. Scottrade

As one of the top names in the investing space, Scottrade has a solid reputation for providing high-quality service and top of the line tools at an affordable price.

Access to a variety of options trading tools allow investors of all experience levels to get involved. Best yet, the service provides tools that allow you to calculate potential profit and loss.

Added benefit: Scottrade provides three distinct options strategies.

  1. Income strategies
  2. Growth strategies
  3. Speculative strategies

3. TD Ameritrade

Just the same as Scottrade, TD Ameritrade has great brand recognition. Combine this with low fees and tools for new and experienced options traders, and you have a platform that is used by many.

There is a lot to like about this service, including its hands-on training modules and the ability to use “paperMoney” to decide if investing real funds is a good move.

Added benefit: unlike some competitors, TD Ameritrade does not have trade minimums. This is perfect for beginners who are getting their feet wet.

4. TradeKing

There are services that have all the bells and whistles. And then there are those that take a “bare bones” approach. TradeKing skips the frills, focusing instead on functionality.

As a discount broker, TradeKing has a lot going for it. In addition to a competitive fee structure, it has a laser targeted focus on providing nothing more than the tools necessary to make sound investing decisions.

Added benefit: TradeKing provides a variety of educational material, from guides to tools to strategy tips.

5. E*TRADE

E*TRADE has been one of the top financial services companies since its founding in 1982.

From basic trading tools to those for more advanced users, E*TRADE never comes up short. With the company’s risk analysis tools, it is easy to measure the potential risk and reward of any option.

Added benefit: the E*TRADE mobile trading app is among the best in the industry, allowing you to invest and make key decisions while on the go.

Choosing the Right Stock Option Software

It is nice to have choices, as this allows you to get involved with the software that is right for your skill level, experience, and trading strategy. However, this can bring forth challenges when attempting to make a final decision.

As you compare stock option software and services, answer these questions:

  • Which software offers the technology that makes you feel most comfortable?
  • What are others saying about the service?
  • How much does it cost to get involved?
  • Are there tools that help you make the best investing decisions?
  • Which features set each service apart from the rest of the industry?

With so many choices, it won’t be long before you sign up for an account with your preferred service. If you need to make a change in the future, regardless of the reason, you can always revisit this list.  

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