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Trading options is not a game for the uninitiated. The often-arcane terminology and sometimes-complex trade constructions are capable of boggling the brain of even the sharpest traditional broker.
At OptionsZone, we know firsthand just how intricate some options trading strategies can be. We also know that most traditional brokerage firms leave us rather cold when trying to execute and/or get clarification on a complex trade.
Indeed, even simple strategies such as selling puts and calls can be a tricky proposition for a lot of brokers. Why? Well, the answer varies, depending on which broker we’re talking about, but the answer common to nearly every traditional brokerage is the fact that trading options is just not the bread-and-butter of most brokers.
You should consider a brokerage that specializes in options trading.
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Challenges with Traditional Online Brokerages
Because the typical investor usually only buys and sells on stocks, ETFs, mutual funds and bonds, traditional brokerage firms spend the vast majority of their time executing these simple transactions. What’s more, most brokerage firm representatives are only schooled in dealing with stock, ETF, mutual fund and bond transactions.
It’s just a fact that most brokerage firm registered representatives have only minimal training when it comes to options. The Series 7 license, which is a requirement for all brokerage firm registered representatives, requires those representatives to have some familiarity with options. However, familiarity with a subject and really knowing the ins and outs of the industry are two very different things.
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Use an Options Brokerage Specialist or Not?
If you want to test this hypothesis out, call your traditional online broker and ask him to explain to you how the following trading strategies work:
- Butterflies and Wingspreads
- Verticals
- Straddles and Strangles
- Time Spreads
Oh, and forget about learning “The Greeks” from most brokers. You know the term, “it’s all Greek to me”? Well, that’s certainly true of most traditional brokers. We’d be surprised if you could get a sufficient answer to questions like, what is delta, or what the terms gamma, theta, vega or rho mean.
In some respects, it’s not incumbent on most brokers to really have this kind of specialized knowledge. Expecting your average Wall Street Joe to understand complex options strategies and terminology is like expecting your general practitioner to be able to perform brain surgery.
That’s why it’s essential for any serious options trader to do business with a brokerage that specializes in options trading. The firms listed in our Broker Comparison chart are a good place to start because they have they have the trained personnel and the years of expertise to help you execute and/or to explain to you the strategy and details of virtually any type of options transaction.
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Put an Options Specialist on Your Side
The beauty of these firms is that they also can do the easy stuff, such as buy and sell stocks and ETFs. But they also can do a whole lot more.
If you’re ready to start trading options like a pro, or if you’ve been frustrated with the service you’re getting from your traditional broker, it might be time for you to put an options specialist on your side.
Read on to discover 7 reasons why it’s so important to put an options specialist on your side.
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Reason #1: Expertise and Knowledge
When you trade options, you need someone who speaks the language of options. You don’t want to have to explain to your broker what a bull call spread is or how to help you execute a bear put spread.
If you have someone on the other end of the telephone line who has to figure out what you are trying to do, you are already behind the curve. Think about how you would feel if you had to tell your doctor how to take your blood pressure.
We doubt that you would feel too comfortable about the prospect of visiting them again, let alone entrusting them with your medical care. With options, it’s all about expertise and knowledge, and that expertise and knowledge can only be delivered by a seasoned options broker.
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Reason #2: Better Execution
When it comes to real estate, we all know the three biggest elements are location, location, location. Well, when it comes to options, the three biggest elements to a successful trade are execution, execution, execution.
By using an options specialist, you are offered what’s known as the National Best Bid or Offer (NBBO) guarantee on market or marketable limit orders. An options specialist demands the NBBO from the marketplace for its customers on every executed trade.
The proper execution on an options trade can mean the difference between a small gain and a big gain. And if you are trying to buy or sell in a volatile market, it can mean the difference between a substantial gain and a substantial loss. Only an options specialist can provide you with access to the best possible order execution.
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Reason #3: Experienced Customer Service
How many times have you been left unsatisfied by a customer service representative? This is always frustrating, but it’s particularly frustrating when dealing with your money. At OptionsZone, we’ve heard the tales of woe from unsatisfied customers who used to use traditional brokers to execute their options trades.
The only way to avoid this predicament is to put an options specialist on your side. By using a specialist, any type of question you have about a trade has likely been asked before. Customer service representatives from options specialists are trained to deal with these questions on a daily basis. This is training that most traditional brokers simply do not provide.
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Reason #4: User Friendly Web and Software Tools
The tools of the trade are a vital part of putting you on the winning side of the options game. By using software and/or a Web-based interface specifically designed to buy and sell options — or to employ the various options strategies commonly used — you increase the ease of executing these trades.
There is nothing more frustrating than trying to hunt around for the options data you need to place a trade. Because most traditional brokerage Web trading platforms are not designed to handle options, you will likely have to search long and hard for the information you need. By using a broker who specializes in options you avoid this situation, as the tools of the trade are right there in front of you virtually at all times.
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Reason #5: Lower Cost
Cost is always a crucial component in the overall success, or failure, of your investments. It’s just a fact that the more you pay for a security, the more it eats into your profits. Sometimes, the high cost of doing business can actually turn a winning trade into a loser.
To avoid this very frustrating circumstance, you need to find an options specialist who doesn’t hit you with a slew of fees to execute various complex—or even simple— options trades.
All of the options brokers we feature here at OptionsZone are specialists in the trade. They execute options trades for a living, so you don’t have to worry about being hit with an extra charge for a complicated options trade.
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Reason #6: Education
There is no substitute for a solid education in life, and nowhere is that truer than with options. Let’s face it, sometimes options can be confusing. There are a lot of specialized terms and a lot of variables to account for when trading.
Keeping track of all these issues can be confusing, especially when you begin trading. Fortunately, most options specialists provide extensive educational tools that enable you to really understand the markets. This kind of specialized training is not available from your average brokerage firm — it’s only available from firms with a special expertise in the field.
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Reason #7: Peace of Mind
Perhaps the most important reason why you need a specialist on your team when trading options is the overriding peace of mind you’ll feel. When you know the party at the other end of the line has the expertise, knowledge and experience to deal with any situation or circumstance you might face, you’ll immediately have a sense of confidence about your trading that you wouldn’t otherwise possess.
The bottom line here is that if you just want to feel right about all aspects of your options trading, then you simply have to put a specialist on your side. It’s the only way you’ll have the requisite peace of mind needed to successfully navigate a volatile market.
