Online Brokers Are Beefing Up Their Options Trading Platforms for Active Traders

Amid the current market volatility, many active traders are diversifying into options and looking to their online brokers for help with hedging strategies. As a result, options have become a tremendous growth area for online brokers.

Back in 2003, about 5 percent of E*Trade's volume was options trades. By the end of 2007, however, options hit nearly 17 percent of E*Trade's daily average revenue trades (DARTS).

According to Christopher Larkin, VP of retail brokerage at E*Trade Securities, the company recently upgraded its options charts to help customers identify new trading opportunities, adding price volume, call/put, open interest and statistical and implied volatility charts. The firm also has a dedicated options service desk that handles high-end options traders.

"Options growth has been tremendous," says Rich Levine, VP of Charles Schwab Active Trading Services. "The compounded growth rate has been in the mid- to high-20 percent range."

Schwab recently increased its monitoring and simplified its chart displays to make it easier for traders to navigate them. "On the positions tab, [we] added the profit and loss per share, your cost basis, the options expiration data, the call/put ratios -- these are all features we added so you can better monitor and analyze your positions," Levine says.

In August, Schwab released enhancements to its Web-based platform that improve the position displays for options and enable traders to set customized alerts inside the charts. "If a price moves up or down a certain percentage, or if the volume increases or decreases, an alert is triggered," Levine explains.

Jay Pestrichelli, managing director of TD Ameritrade's trader group, says the firm's clients are trading options more and more. "Options are not only the big speculative, risky instrument that you always hear about," Pestrichelli notes. "Options can be used as a means of capital preservation."

TD Ameritrade offers Options 360, a platform that provides what the firm describes as a complete view of the options market, allowing users to do analysis on profit and loss, create positions, and view performance over time. "It is a premier platform if you want to do any options trading," Pestrichelli claims.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio