EOption Review: Low Margin Rates and Automated Trading Options

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Introduction

When it comes to low commissions for online brokers, eOption actually boasts one of the most reasonable rates out there at $3 per trade. However, this comes at a slight cost when it comes to research and trading tools, leaving them less equipped than more premium online brokers.

What are eOption’s Main Features?

As an online broker, eOption has one major priority — low fees. To that end, their primary claim to fame is their $3 trading cost for stocks and options (options trading also has similarly low rates of $0.15 per contract), which are some of the lowest rates we’ve ever seen. That’s a real boon to traders who want to get the most out of their investments, particularly if they’re changing them around frequently.

In addition to those, traders can take advantage of broker-assisted trade costs that are quite reasonable as well. Most other firms charge around $20 for a service like that, whereas eOption will give that to you for just an additional $6 for most instances.

This kind of financial advantage comes at a price, as eOption clearly has to cut corners elsewhere to make such low trade commissions and margin rates viable. Their trading platform, for instance, is extremely basic, and lacks the kind of robust features that you might find in a lot of other online brokers.

Instead of having a dedicated desktop platform, eOption simply offers a web-based interface that allows you to mostly just trade on options charts, perform technical analysis of stocks and place multi-leg options trades.

While their trading platform is unremarkable, eOption’s mobile app is at least notable for its slick interface and ease of use. On it, you can find real-time quotes, steaming news, order placement and charting, among other features. There are still better mobile apps out there, but eOption’s mobile platform is perhaps even better than its desktop-based platform.

Most traders attempt to provide some education and research tools for their traders so they can make the best investments. eOption does provide some research and data, but it is extremely limited, and a far cry from more features-heavy outfits like OptionsHouse. Just like their trading platform, this feature has undoubtedly been neutered to afford the aforementioned low fees.

Another big problem with eOption’s web-based trading is that they charge additional fees to even access the bare-bones material that they feature. In order to get live-streaming quotes, for instance, you have to pay either $35 a month if they make fewer than 50 trades or $15 if they make between 51 and 99 trades each month. The service is free for those who make more than 100 trades per month.

What they do have in the way of education is acceptable but not fantastic; education-wise, you only get a simple blog and some links to the Options Industry Council to guide you on the ins and outs of options trading. Again, eOption is probably best for advanced traders who don’t need to relearn the basics, so only offering lackluster education tools seems counterintuitive.

eOption’s customer service is adequate but not stellar by most metrics, offering the usual phone support during business hours and email support. No chat support or physical assistance is available, though, making it harder to get exact answers to your specific questions. That being said, the phone support element is admirably handled, and we found them speedy and helpful.

What are the Pros and Cons?

Pros

  • Extremely low margin rates
  • Automated trading options
  • Low commissions

Cons

  • Lack of high-quality research
  • Trading platform extremely limited
  • High learning curve
  • High non-commission fees
  • No commission-free ETF or transaction-fee-free mutual funds

How Do You Open a EOption Account and What are the Requirements?

Signing up for eOption is relatively simple, and just requires a quick trip to their website so you can fill out their online form. Once there, they ask you the usual information — driver’s license, SSN/Tax ID, federal tax rate, annual income, expenses, net worth, and debt. Contact information (such as your email address) is also required to set up your account.

Once that is set up, all you have to do is select what kind of account you’d like to start (traditional or Roth IRA, general brokerage account, retirement, etc.), as well as your investment goals. The site does the rest, and you’re set to go.

Keep in mind that, compared to a lot of other online brokers, eOptions’ account setup takes a bit longer (15–20 minutes or so), and may require a call or two to customer service to verify steps and confirm information.

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What Are the Rules for Trading on eOption?

As previously mentioned, trading on eOption costs $3 per trade for stocks and options, which is tremendously advantageous for high-activity traders. While there’s an account minimum (something of a rarity with low-cost traders like this), it’s only $500, so it’s not a large investment.

Another advantage to eOption for traders is the choice to perform automated trading. With this option (which costs $5 per trade), traders are given access to a participating newsletter, and then allow eOption to simply enter trades for them based on the recommendations listed in said newsletter. It’s a wonderfully automated way for more casual traders to simply trust the advice of their preferred experts.

As a trader, you can easily trade stocks, options, ETFs and mutual funds once you sign up with them. However, it must be noted that there are no commission-free ETFs or transaction-fee-free mutual funds, and it actually costs a whopping $15 per trade to deal with mutual funds. Compared to a lot of other firms that do offer those no-fee assets, eOption’s choices are lackluster.

While eOption’s primary appeal is in its low commissions, their other fees are a bit pricey and can add up quickly when you least expect it. For instance, the high fees for accessing their direct-access trading options can very much add up over time to cut into returns.

Furthermore, IRAs cost a $15 annual fee, and accounts that do not make more than two trades a year, or don’t have $10,000 or more in their balance, are charged a $50 inactivity fee.

However, eOption will find ways to reward investors with high minimum balances. If you have $25,000 or more in your account, you get access to direct-access trading through DAS|Pro, DAS|Web and Sterling Trader Pro. That said, you still have to pay for them; DAS, for example, costs as much as $130 per month to get access to their platform, in addition to data fees.

What Kind of Trader is eOption Best For?

EOption’s bare-bones, cost-cutting approach is probably most advantageous to active traders who have a bit of experience on the markets. Their trading platform gets the job done, but doesn’t do anything fancy, which advanced traders might be fine with.

If you’re a trader whose absolute first priority is to get the lowest margin and commission rates possible, eOption is a great way to go. Maximizing that particular feature of online trading may make them sacrifice other features, but traders who know how to work that system can yield tremendous returns from it.

On the other side of the coin, less active traders who simply want to work off preset recommendations can find a lot to like about eOption’s automated trading service. While active investors are usually hands-on, picking a trusted set of experts and automatically following their suggestions is a more directed way to casually invest that might make sense to some.

Other Good Products

Just2Trade offers a similar mission statement when it comes to online trading — you save on commissions and fees, but you don’t get the infrastructure of great research and trading tools. If this is the direction you want to take with your trading career, they’re a similar service.

Meanwhile, if you’d like to invest more in robust trading tools and extensive market research, as well as education tools to get you through your trading experience, TradeKing or Betterment offer much better platforms for just a little more money per trade.

A Few Final Thoughts

Overall, eOption provides a very specific set of features for certain kinds of traders — namely, advanced traders who know what they’re doing and want to save money on their active trading. While this is admirable, and everyone is always looking for cheaper fees, the tradeoff may well be too great for some.

Options traders may well flock to eOption for their supremely low fees, but may be alarmed to learn that complex options trading comes with options exercise fees of $9, which can be too rich for many people’s blood.

eOption’s research tools, education materials and online trading platform leave quite a bit to be desired, which certainly explains how they can fit $3 commissions into their structure. That’s a fantastic price compared to most others in the market, but be careful — you get what you pay for.


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