Interactive Brokers for Option Trading: An In-Depth Review

Interactive Brokers (IB) has become a prominent player in the world of option trading, known for its liquidity, competitive trading fees, and cutting-edge technology. However, the platform is not without its pros and cons. In this article, we will delve into the aspects of Interactive Brokers for option trading, highlighting both its strengths and areas for improvement.

Interactive Brokers: About the Platform

Interactive Brokers is a global online trading platform that is connected to nearly every major options exchange in the world. This connectivity ensures that traders can access a wide range of products and execute trades with minimal latency, which is crucial for those dealing in high-frequency trading and other market-sensitive activities. With IB, traders can execute orders at lightning-fast speeds with rock-bottom commissions, especially when they provide liquidity. For large orders, Interactive Brokers offers a staffed desk that can handle complex and high-volume trades. A large order is defined as one that involves 100 contracts or more. While the platform has its unique features and strengths, customer service can sometimes fall short. Nonetheless, Interactive Brokers continues to innovate and improve, building on its legacy as a pioneer in the industry.

Platform and User Experience

Traders often have polarized opinions about the Interactive Brokers platform. Some love the interface provided by IB, while others find it cumbersome or difficult to navigate. A fully-functional demo version is available for users to test the platform before committing, which is an excellent way to get a feel for its capabilities. When it comes to actual trading, the process is straightforward and efficient. Users can simply enter a price, specify the quantity, and hit the enter button. The trade is executed almost instantaneously, ensuring that traders can capitalize on market opportunities quickly. IB’s commission rates are also among the lowest in the industry, making it an attractive option for both short-term and long-term traders.

Option Analytics and Additional Features

While IB’s option analytics are decent, some users find that platforms like ThinkOrSwim offer better tools for option analysis. However, this is often a matter of personal preference, as many traders already have their own standalone analysis programs and tools. Nonetheless, Interactive Brokers provides a comprehensive suite of features that cater to various trading needs, including stock, options, and futures trading. The company’s technological advancements, including its roots with Timber Hill in the 80s, position it as a leader in the market.

Conclusion

Interactive Brokers remains a strong contender in the world of option trading, offering traders unique advantages in terms of liquidity, low trading fees, and technological prowess. Despite some shortcomings in customer service, the platform continues to innovate and refine its offerings to meet the demands of today's traders. If you're considering a platform for your option trading, it's worth giving Interactive Brokers a thorough test drive through its demo version to see if it meets your needs.

Frequently Asked Questions

What are the commission rates for trading with Interactive Brokers?

The commission rates for IB are among the lowest in the industry, making it an attractive option for traders looking to minimize costs.

How does Interactive Brokers handle large orders?

For large orders (100 contracts or more), Interactive Brokers offers a staffed desk to manage the trades, ensuring efficient execution and handling of complex trades.

Is Interactive Brokers a good option for option trading?

Yes, Interactive Brokers is a robust platform for option trading, with excellent liquidity, quick execution, and competitive fees. However, it may not be the best choice for traders who prioritize extensive option analytics tools.