The Bottom Line: EOption is ideal for active, cost-focused traders; its offerings may disappoint long-term investors.
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Pros & Cons
Deep discount commissions.
Low margin rates.
Can serve international investors.
Very basic trading platform.
Limited data and research.
Compare to Similar Brokers
Costs can add up quickly for active traders, so for those focused on costs above all else, eOption may be the perfect fit. As its name suggests, this online broker specializes in options trading, with low commissions and low margin rates that put it among the very best for options traders. Not into options? It's also cheap for active stock and for exchange-traded funds.
While eOption is laser-focused on costs, it doesn't provide some of the other features that beginning investors may seek. The company's trading platform is pretty basic, while research tools are limited. Those minuses may not be huge drawbacks, especially for investors who already receive their research and data from other sources, those who have more experience in the markets and those who care about trading costs more than anything else.
New features this year include pre- and post-market trading, at the same rates as the regular market session, along with contingent order types for stocks and options traders.
eOption is best for:
Low margin rates.
Where eOption shines
Commissions: It’s tough to beat $3 trading commissions for stocks and ETFs, especially if you’re not an active trader who can benefit from volume discounts that other brokers offer. Also of note are the broker-assisted trade costs: an additional $6 in most cases, which is cheap compared to other brokers' $20 surcharge. However, fund investors should note that the company doesn’t offer any no-transaction-fee mutual funds or commission-free exchange-traded funds.
Automated trading: Part of eOption’s target audience is investors who use automatic trading based on newsletter suggestions. How this works: Account holders subscribe to one of the roughly 60 participating newsletters, then authorize eOption to automatically execute recommended trades from that newsletter. Customers can choose the maximum amount per trade — based on dollar amount, number of contracts or percentage of account value — and change their auto-trading subscription at any time. The cost is $5 per trade for equities and $5 base plus 15 cents per contract for options.
Is this a good strategy? That’s debatable. When trades are triggered automatically by a newsletter trading alert, investors have no time to review the order before it's executed. Also note that customers are required to set their account investment objective as “speculation” to enroll in eOption's Auto Trade services. But if you frequently follow the directives of investing newsletters that participate in eOption’s service, putting things on autopilot might be appealing.
Paper trading: For investors new to trading (and especially options trading), eOption has an attractive feature: a free paper trading tool, which is available even to nonclients. This gives investors $50,000 in virtual cash to use as they research and evaluate trading ideas, test strategies, actively monitor a simulated portfolio's performance and create a watch list — all without putting any real money on the line.
Margin rates: Margin traders, take note: eOption has some of the lowest margin rates available. As of late 2018, the base rate for account balances of $49,999 and under was 7.0%. That drops to as low as 4.5% for balances of $1 million and above.
International investors: The broker allows non-U.S. residents from some countries to open an international account. (Those countries are Australia, Austria, China, Germany, Ireland, Luxembourg, Mexico, the Netherlands, New Zealand, Singapore, South Africa, Switzerland and the United Kingdom.) Accounts can be opened with a minimum of $25,000 in any combination of cash and securities.
Where eOption falls short
Trading platform: For a broker that appeals to active traders, eOption's trading platform is a bit underwhelming. The web-based platform has fairly standard features, including news, analyst reports, the ability to place multi-leg options trades, charting features, a suite of technical analysis features and trading directly from options charts. Compared to other brokers' apps, eOption's has more functionality, with real-time quotes, charting and the ability to execute multiple order types. But the app gets dinged by users for glitches or crashing.
For investors with a minimum balance of $25,000, eOption offers direct-access trading via Sterling Trader Pro, DAS|Web and DAS|Pro platforms. These platforms carry additional fees, however.
Fees: Those platform and data fees can quickly eat into returns for customers who choose those tools — and on top of that, eOption charges investors a series of other fees that aren’t common among its competitors. Individual retirement accounts are charged a $15 annual fee, and the broker charges a $50 inactivity fee on accounts that go 12 months without at least two executed trades or have less than $10,000 in credit or debit balances.
Educational resources: The offerings are definitely geared toward a more knowledgeable trader. Advanced traders will appreciate the breadth of analyst reports, corporate filings, calendars of earnings reports and economic reports and a service that aggregates news related to companies, industries or people for trade research purposes. Aside from a lackluster blog and a bit of guidance on options trading, provided primarily via links to the Options Industry Council, beginners will be left wanting for more. Again, eOption is positioned for advanced investors who may not miss this information, but other brokers provide much more support.
Is eOption right for you?
Focused on providing a low-cost experience for active traders, eOption fulfills its mandate. And that's great for investors who are making tons of trades annually and where commissions really drive overall costs. But for investors who are not glued to their trading screens, the base-level trading platform and lack of research and data could be deal-breakers. That's the price of deep discounts, though. Those willing to pay more in commissions at other brokers can find more robust platforms and more investment guidance. But for active and cost-conscious traders, eOption is one of your best options.