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Best Options Trading Platforms
Options have always been attractive to online brokers due to their profitability. However, they have come into much more prominence with the COVID-19 pandemic causing ripples across stock markets around the world.
Australia isn’t immune to these global trading trends, and the search for the best options trading platforms couldn’t come at a more crucial time.
Options are a type of derivative trading that allows people to transact on securities in the Australian market.
You can read more about this at the bottom of this page.
Table of Contents:
- Our TOP Options Trading Platform (CFD): Plus500
- Best Low Brokerage Fees: AvaTrade
- Best for Advanced Research Tools: CMC Markets
- Best for Share Trading: CommSec
- Best for Advanced Users: IG Markets
- Best for Professionals: Interactive Brokers
- Best for Educational Tools for Investors: Capital.com
- What Is Options Trading
- Options Trading Buying Guide
- Australian Options Laws Guide
1. Our TOP Options Trading Platform (CFD): Plus500
- Regulators: ASIC and FCA
- Minimum Deposits: AUD200
- No deposit fees
- Withdrawal fee: None
- Platforms: WebTrader
- Inactivity fee charged: Yes, $10 per month charged after three consecutive months of inactivity
CFDs are a leveraged product and can result in the loss of your entire balance. Trading CFDs may not be suitable for you. Please consider whether you fall within Plus500’s Target Market Determination available in their Terms and Agreements. Please ensure you fully understand the risks involved.
- Comes with low trading fees
- Listed on the London Stock Exchange
- Only limited product portfolio available
- Charges inactivity fee
Founded in 2008, Plus500 has its headquarters in Haifa, Israel.
It is regulated by several top-tier organizations, including the Australian Securities and Investments Commission (ASIC), and UK’s Financial Conduct Authority (FCA) along with CySec, MAS, and ISA authorities.
Plus500 has a lot of in-built flexibility, such as an intuitive, seamless platform that includes a well-designed mobile app that equally measures up to the standard. Opening a Plus500 account is a digital, coherent, and harmonious process without hassles, although it still requires knowledge and experience. Start trading with the demo account.
Platform and Trading Conditions
Plus500 is a market-maker, which means that it actively quotes two sides – both the buy and sell – in the anticipation of making a profit on the bid-ask spread. It seeks to make a profit from the difference in the buy and sell spreads.
(Please note these are illustrative prices only)
Therefore, an automated system is triggered as soon as a user places a trade on the Plus500 platform, setting a hedging trade to protect Plus500 from any potential loss by assuming the role of a counterparty.
It is a closed system where Plus500 is the counterparty; as a result, there are few requotes but there is fast trade execution.
Account Base Currencies
Compared to other platforms, Plus500 provides a number of base currencies; even the minor ones. However, the exact number isn’t transparent but from our research, it includes at least 10 compared to eToro’s one. Moreover, you need to contact support if you need to change your base currency.
Why does it matter the number of base currencies carried by a forex trading platform? Well, because it helps you to avoid conversion fees. If your trading account is funded in the same currency as your bank account, or you even trade assets in a similar currency as your trading account base currency, then you are able to avoid paying conversion fees.
Fees, Deposits, and Options
Along with charging no deposit fee, Plus500 also provides several options for investors to deposit money into their accounts such as bank transfers, using debit/credit cards, then via PayPal or Skrill.
Read more in our in-depth review of Plus500 here.
Full disclaimer: “77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
2. Best Low Brokerage Fees: AvaTrade
- Regulators: Australian Securities and Investment Commission (ASIC)
- Trading Platforms: MT4, MT5, Duplitrade, ZuluTrade, Guardian Angel
- Commission Fees: None
- Price of Entry: $100
AvaTrade is a platform based in Australia that is known for being secure, cheap, and reliable.
It is secure due to the advanced encryption of its app. It is cheap because it has no brokerage fees outside its $100 price of entry. And it is reliable as a result of being under the eye of the ASIC.
- No commission fees on trades or brokerage fees on earnings
- Trades in more than just options
- Enables tons of trading strategies
- Incredibly dense and hard to navigate
- Updates slower than some apps
In a world where brokers will regularly take 90% of your earnings, a platform with no brokerage fees seems almost impossible. But it becomes clear why AvaTrade lacks these fees when you use their app.
AvaTrade is a service for the most advanced trader. It brings with it more than just options, also including forex, crypto, CFDs, and more. As a business, AvaTrade does not want to disincentivize good traders using its app by taking away most of what they earn while actually using it to trade.
This focus on advanced traders results in a harder app to navigate.
The tools you have for trading options alone are dizzying, enabling all kinds of different strategies. You might not know half of them by looking at them, but all of them as a worthwhile place in the app.
Luckily, AvaTrade comes with a competent knowledgebase for helping those who are not advanced enough to use it. Once you get caught up with the app’s capabilities, you will find it is one of the best.
3. Best for Advanced Research Tools: CMC Markets
- Regulators: Financial Conduct Authority (FCA)
- Trading platform: MT4, Next Generation trading platform, Stockbroking Pro platform, CMCMarkets Mobile Trading App
- Options trading fee: $33 up to $10,000, 0.33% above $10,000
- Standard brokerage fee: for ASX shares, AUD 11 or 0.1% for first 10 trades up to AUD 10,000
As one of the best online trading platforms. CMC Markets expertise in options trading is boosted by a reputation dating back 30 years. CMC Markets thrives on fast trades and low brokerage fees. Its outstanding research tools and breadth of useful features provide it a strong competitive advantage in the online brokerage market.
- Blistering fast trades in less than a second
- Low brokerage fees
- Wide breadth of trading opportunities
- Convenient configuration, setup, and execution of orders
- High stock CFD and brokerage fees
- Charges inactivity fee (15 AUD) if your account remains inactive for 12 months
CMC Markets is a UK broker regulated through the Financial Conduct Authority (FCA), which means they must adhere to the FCA client assets regulation, known as CASS.
There are three membership options offered by CMC Markets, namely; Classic, Active Investor, and Premium Trader.
|Membership Tiers||Description||Qualification Criteria||Brokerage Fees|
|1. Classic||Classic is the CMC Markets’ standard platform containing a host of features and provides low brokerage fees||10 trades per month maximum||For the initial 10 trades: $11 or 0.10% per trade; between the 11th to 30th trade: $9.90 or 0.08% 31st trade +:$9.90 or 0.075%|
|2. Active Investor||Contains all of Classic’s features, including access to the Pro stockbroking platform, theScreener research reports, free daily technical analysis emails, free live data||A trader needs to make 11-30 trades per month; or alternatively makes at least 5 trades AND incurs at least $500 per month in brokerage fees||For the initial 10 trades: $9.90/0.10% ; between the 11th to 30th trade: same as Classic; 31st trade +: same as Classic|
|3. Premium Trader||Incorporates CMC Active Investor features, then includes free access to a plethora of other features such as exclusive access to CMC Premium events, education resources, and so on||At least 30 trades each month||$9.90 or 0.075% for all trades|
To trade options on the platform, you need to have a CMC Markets Stockbroking account, which are offered both on its Stockbroking Standard and Pro platforms.
Depending on your options trading level, CMC Markets enables you to do the following:
- The ability to execute multi-legged options
- The ability to build and execute complex strategies
- The opportunity to sell uncovered calls and puts
- Using interactive pay-off diagrams to comprehend your risk and exposures in real time
- The convenience of reporting on your entire portfolio with efficiently combined, yet simple watchlists, orders history, and Profit and Loss statements.
- Using the Theoretical Price estimate and display of Options Greeks to understand your book.
Technical-savvy clients who wish to upgrade from MetaTrader4 will be pleased with CMC Markets’ Next Generation trading platform. This proprietary platform comes in web, mobile, and tablet flavors.
It provides advanced charting with as many as 12 chart types, 35 drawing tools, and 80+ overlaps/indicators. On the desktop, charts can be popped out to create and optimize complex layouts.
The Next Generation platform’s customizability is a huge advantage. The design is simple, yet allows you to add stops and limits. CMC Markets possesses a single sign-in for trade options, international shares, and various stockbroking products.
Interested in studying price histories and long-term trends? Well, there is information on these going as far back as 20 years on covering major instruments.
4. Best for Share Trading: CommSec
- Regulations: They are a regulated by the Australian Securities and Investment Commission (ASIC), and is a member of the Australian Stock Exchange (ASX)
- Trading platform: The proprietary CommSecIRESS trading platform for ASX-listed securities and international shares
- Options trading fee: For the Internet, $34.95 up to $10,000 in premium; over the phone, $54.60 up to $10,000 in premium
- Standard brokerage fee: it varies, but with CommSec CDIA account, $10 for trades of Australian shares up to $1,000.
- Provides access to international stock and securities
- Entry requirements are minimal
- Reputable and trusted brand name in Australia
- Simply to use with no inactivity fee
- Inactivity charged on international account
- Devoid of live chat support
- If you are outside Australia, even if you happen to be a citizen, you can’t be able to use CommSec
CommSec (Commonwealth Securities Limited) is an Australian based brokerage company that is an entirely-owned subsidiary of Commonwealth Bank of Australia, though it is non-guaranteed. Its trust and brand recognition is high in Australia given that it is part of one of Australia’s four major banks.
CommSec has carved out a niche for itself as one of Australia’s leading online brokers. Its foray into the options market has equally been approached with the same type of efficiency, with real-time access to quotes, research, and state-of-the-art charting tools.
Unfortunately, CommSec doesn’t offer its services to international clients. If you don’t reside or live in Australia, even if you are a citizen, you most likely won’t be able to access their services.
Features and Services
The portfolio of assets you can trade in CommSec is impressive, providing its customers with a bounty of opportunities. CommSec provides robust support for options trading with its Exchange Traded Options Account allowing customers to both buy and sell Call or Put Options.
Clients can trade stocks domestically and internationally; whether separately or as a component of a fund, as well as ETFs (Exchange Traded Funds), and CFDs (Contract For Difference). In addition, clients can transact in fixed income securities and warrants as well.
With a CommSec CFD Account, you can invest in several markets such as global indexes, Australian and international share CFDs, forward indices (futures), foreign exchange (Forex), and commodities.
CommSec provides a single login for current clients for the Commonwealth Bank, allowing them to easily move between trading and banking accounts banking.
These are the account types offered by CommSec:
- ☑️ CommSec Share Trading Account
- ☑️ Commsec Margin Lending Account
- ☑️ Commsec Options Accounts
- ☑️ Commsec CFD Accounts
- ☑️ CommSec International Securities Trading Account
One of the standouts on how CommSec operates compared to other providers is that it has an account option for each type of trading. As its name implies, Commsec Options Accounts allows customers to trade options, and brokerage makes it as convenient as trading stocks. The Options Account was conceived to be used together with other CommSec accounts, thereby allowing clients to move funds between accounts seamlessly.
On the other hand, the CommSec Share Trading Accounts are for customers who want to buy and sell Australian shares. These trades can either be funded with good old-fashioned cash account, or with the Commonwealth Direct Investment Account.
Moreover, CommSec says a deposit isn’t required to place trade orders. Apart from the stock market, Share Trading Accounts can be utilized as a means to invest in options, Exchange Traded Funds, partially paid securities, MINI trading warrants, and warrants.
Meanwhile, access to borrowed funds is provided through the CommSec Margin Lending Account.
The CommSec Options Account allows its holders to trade options. They endeavor to make it as seamless as possible to trade options with the ease with which shares are trading by introducing several innovations and conveniences.
For instance, the Options feature is well-integrated with the CommSec trading platform. This is because CommSec conceptualized its Options Account to be used in conjunction with other accounts. This strategy is aimed at building a synergy of investment schemes across a customer’s portfolio, spanning the simple to the complex.
If you’re interested in dabbling in forex-based transactions, the Commsec CFD Accounts allows them to place trades on more than 7,000 different CFDs with as low $10.
Meanwhile, the CommSec International Securities Trading Account allows customers to gain access to 25 international stock markets.
CommSec offers its customers an Options Account which allows them to link to their CommSec Share Trading Account or Margin Trading Account. This integration creates lots of benefits for the customer, such as enabling them to be able to submit shares as collateral, and provide cash margin from their associated CommSec Margin Lending Account or CBA Account.
CommSec provides four levels of Options trading; each determining the type of strategies that can be used on them:
- ☑️ Level One: Buy to open
- ☑️ Level Two: Buy to open and sell fully covered calls
- ☑️ Level Three: Buy to open and sell fully covered calls or sell cash covered calls
- ☑️ Level Four: Advanced multi-leg strategies
CommSecIRESS is the proprietary trading platform provided by CommSec. It comes in web and mobile flavors, with a customizable desktop which you can set up to suit your personal preferences, trading style, and layout of screen real-estate.
It is fast and easy, with an intuitive interface that enables traders perform tasks in a straightforward fashion, whether it is placing orders or depth order highlighting . It provides a real-time data streaming platform for traders to purchase ASX-listed securities such as Australian shares, ETFs/ETOs, warrants; along with crucial quote information for derivatives and equities.
CommSecIRESS capabilities include fast trade placements, historical data, alerts, watchlist, and market maps. Its advanced charting tools come with a range of drawing tools, indicators, and historical data.
But unlike other trading platforms, neither CommSecIRESS nor the CommSec website provide any free educational content to anyone perusing the site. Nevertheless, CommSec offers both basic and advanced tutorials to enable customers to acquaint themselves with its features and maximize their experience on the site.
5. Best for Advanced Users: IG Markets
- Regulations: Regulated across the globe by at least six tier-1 jurisdictions, including ASIC and FCA
- Trading Platforms: MetaTrader 4, proprietary IG trading platform
- Options trading fee: On all option trades, commission is 0.1 unit of market currency for each contract, taken at open and close.
- Standard brokerage fee: 8 AUD or 0.1% per trade, whichever is higher.
- Competitive spreads across a wide range of markets
- Advance chart technology
- Low margin with high leverage
- Provides limited risk trades
- Ultra fast, yet reliable trading platform
- Charges quarterly inactivity fee
- Product portfolio is limited
- Slightly higher fees and spreads on standard instruments like ASX share CFDs and indices than other competitors
IG Markets was established in 1974 and boasts over 178,000 clients globally. It had built a lot of brand equity worldwide and had become a trusted name because of its long-standing business operations.
An assortment of regulatory bodies across the globe oversee IG Markets; not limited to, but including the Financial Conduct Authority (FCA), Australian Securities Investment Commission (ASIC), and the Federal Financial Supervisory Authority (BaFin). Moreover, being listed on the London Stock Exchange offers another degree of transparency for its customers as this compels it to disclose its financials.
In all, it is regulated by at least six tier-1 jurisdictions, making it one of the safest, low-risk brokers around. Its list of tradable products is extensive, featuring over a 100 forex currency pairs (making it one of the best Forex brokers in Australia), options, CFDs, indices, commodities, gold, bitcoin, and other cryptocurrencies.
Online Trading Platform and Features
The IG Markets trading platform is distributed across its Web platform, Trading apps, MetaTrader 4, ProRealTime. The trading platform includes these range of features:
- ☑️ A simple, cleanly designed interface which offers comprehensive overview of the market
- ☑️ Evaluate performance across time frames stretching from tick-by-tick to monthly
- ☑️ Experience cutting-edge technology in any browser supported by HTML5
- ☑️ Execute in-depth analysis with 28 indicators and 19 drawings
- ☑️ Ability to highlight key trends, patterns and levels
- ☑️ Allows traders to set alerts that trigger when it meets a given condition
- ☑️ Ability to trade automatically by stipulating orders at your chosen level by, selecting the expiry date, and closing manually
The Options Advantage
Their Options feature provides flexible and comprehensive options – no pun intended – to enable you to trade on the volatility of the market. This volatility enables you to trade whether the market is rising, falling, or moving sideways.
Most IG Markets Options features are facilitated in conjunction with CFDs (Contract For Difference). IG Markets provides a broad range of Options, together with the necessary support and service you can anticipate from arguably the world’s largest provider of CFDs.
Other benefits include the opportunity to trade on a wide range of instruments such as major indices, shares, forex, and a lot more. Plus, it provides convenient time frames to suit you such as daily, weekly, quarterly, and even future positions.
6. Best for Professionals: Interactive Brokers
- Regulations: Australian Securities and Investments Commission (ASIC), participant of ASX, ASX 24 and Chi-X Australia.
- Trading Platforms: Traders Workstation (TWS), Client Portal, IBKR Mobile, IBKR WebTrader
- Options trading fee: Index options (ASX): AUD 2.00 per contract, Stock Options: AUD 0.30 per contract
- Standard brokerage fee: (Fixed-tier) 0.08% of trade value or 6 AUD (whichever is higher)
- Low, transparent commission and financing rates
- Ideal for experienced and professional traders
- Broad range of investment selections
- A single integrated account allows you access to forex, options, stocks, and futures
- Not tailored towards beginners
- Charges monthly inactivity fee
Founded in 1997 in the United States,Interactive Brokers (IBKR) is one of the oldest trading platforms in the market. It has offices in Australia in addition to operating in 125 global markets.
It is regulated and fully licensed by Australian Securities and Investments Commission (ASIC). Interactive Brokers is also a participant of ASX, ASX 24 and Chi-X Australia.
Interactive Brokers has the advantage of one of the lowest brokerage and commission fees in the industry. According to the Barron’s 2019 online broker review, Interactive Brokers provides the lowest margin loan interest rates of any broker in the market.
Customers can earn an extra income through Interactive Brokers on fully-paid shares of stock held in their account. This is because Interactive Brokers borrows from these shares to lend to those traders who are eager to short and are prepared to pay interest on these borrowed shares.
Everyday these stocks are on loan, Interactive Brokers ensures that the customer is paid interest while still keeping the ability to trade the loaned stock without any restrictions.
Interactive Brokers Platform
Traders Workstation (TWS) is Interactive Brokers flagship trading platform. It has both web, desktop and mobile capabilities.
Traders Workstation (TWS) is customizable to suit your personal preferences, although new traders and beginners might find the platform overwhelming. It provides both an impressive array of tools for both professional and active traders.
With clients in over 200 countries, TWS allows them to invest in products as diverse as options, stocks, futures, forex, bonds, and futures; with all these being accomplished from a single, integrated account.
IB’s can be tailor-made whether you are dealing with options, shares, futures, forex or a combination of the above. What makes TWS effective is that it has features that make it powerful enough for professional traders to use but also broad enough for everyone to use.
This product is designed for those traders who require power and flexibility because they trade multiple products at the same time.
Users can monitor their portfolio and easily perform trades on-the-go with the IBKR mobile app.
This web-based platform offers the same fea to the desktop. It operates behind a firewall, and possesses a simple interface.
TWS OptionTrader is the proprietary and robust trading tool used by Interactive Brokers to enable clients create, view, and trade options. It is equipped for executing speculative trades and yields a comprehensive view of available option chains.
TWS OptionTrader provides clients with the following benefits:
- ☑️ Fast click order entry
- ☑️ Provides a customizable, configurable format
- ☑️ Ability to manage your orders on a single screen
- ☑️ Greek risk dimensions are viewable
- ☑️ Access TWS other integration options such as Options Analytics, and IB Risk Navigator, with only a single click.
- ☑️ View implied volatility by contract
7. Best for Educational Tools for Investors: Capital.com
- Regulators: ASIC, CySEC, and FCA
- Minimum Deposits: $20
- Withdrawal fee: $0
- Platforms: MT4
- Inactivity fee charged: No
- AI-powered insights
- Tons of educational tools
- Zero commission or withdrawal fees
- Available 24/7
- Easy-to-use interface
- Complex brokerage services that take some getting used to
- No two-factor authentications
Capital.com excels when it comes to educational tools for investors. They have state-of-the-art analysis tools and optional integrations with some of today’s hottest analytical software. Apart from helping investors learn, Capital.com also went out of its way to create a user experience like no other, whether on the web or using the mobile app.
Traders have the option to log in to their account on their PC or their mobile phone or tablet. Both offer a seamless experience where traders can access everything from market tools to processing withdrawals. Apps are compatible with iOS and Android, both adapting perfectly to the screen and creating an interactive trading experience that you won’t find with many other platforms.
Educational resources are Capital.com’s forte. From webinars to AI-powered analytical tools, and more, traders will find all they need to build their knowledge and spot profitable trends. They have an economic calendar that traders can access, getting a glimpse of real-time volatility and trends. New investors can use demo accounts to learn how trades work from start to finish without risking their own money.
Additionally, investors have the option to integrate MT4 along with Capital.com, for a better, more in-depth analysis of the market. It offers carting options and automated trading through expert advisors, something that you won’t find in many other trading platforms on the market. Together, all of these tools provide the most fundamental data around, making for better more profitable trades.
Low to No Fees
You won’t find many fees when you sign up with Capital.com. They do not charge for commissions, withdrawals, or inactivity, allowing traders to keep more of their investments in their pockets. When traders are ready to get in on a market, they can do so for as little as $20 for most markets. Payment methods range from debit and credit cards to e-wallets, and more, catering to investors of all levels with all kinds of preferences. A platform where investors can keep more of their investments is what you’ll find when you sign up with Capital.com.
What Is Options Trading?
Options can be of immense benefit to Australian investors because their transactions offer much higher profit margins than traditional stock trades. As a result, option traders are perhaps second only to active traders in the online brokers’ pecking order as most brokers see them as their most valuable clients.
Therefore, attracting options traders is viewed as a priority among online brokers and the competition for their services tends to be fierce. But the good thing about competition is that it is great for the market as it unleashes innovation along with competitive pricing.
The best options trading platforms we have listed exemplifies this spirit of innovation with their comprehensive slew of features, services, and broad range of securities.
Nevertheless, many investors have neglected options on the erroneous belief that they are too complex or sophisticated to understand. However, options strategies can be as simple or complex as you want them to be.
While the whole concept of options may seem initially overwhelming, once you have a few key pertinents points to anchor your options knowledge on, you can then proceed from there.
CFD trading is dangerous for those with no experience in the stock market. Honestly, we would not recommend it to anyone except intermediate traders and experts. Our list will help you pick the perfect online stock trading platform for your needs. However, using a quality CFD platform doesn’t guarantee your trading will retain the same quality nor it will make you a millionaire. If anyone promises that to you, they are a fraud and you should stay away.
Part of our objective in providing a list of the best option trading platforms in Australia is to enable our readers become better educated through understanding the services, practices and features employed by the top-notch options brokerages in the market.
Our Criteria for selection
It is no secret that Australian’s are big fans of gambling since they spend more on gambling than anywhere else in the world. Even though instruments such as binary options are considered to be a type of investment, the fact is that their nature isn’t too far from gambling.
Unfortunately, this has attracted all kinds of unwholesome operators who want a piece of the pie: social media is rife with apps holding out the prospect of easy trading along with overblown promises of success and large profits.
Trading in options is a high risk proposition in and of itself, but the risk of customers losing their money to unscrupulous operators was therefore paramount in our minds. We believe the best way to protect traders from questionable operators is to guide them to well-established and reputable brokers.
This is in tandem with our emphasis on the importance of browsing web anonymously.
As a result, this thinking informed our selection process. We elevated the reputation of the options brokerage companies along with the security, privacy, and trust of their trading platforms as top criteria in evaluating them for inclusion in our list.
Along with expertise, quality of service delivery, and years of operation in the options market, we also took into consideration the rigorousness – or lack therefore – of the regulatory authorities that provide oversight for these option brokerages.
The priority was therefore accorded to the reputation of the organization or countries that issued the license under which the brokers are operating. Consequently, we made sure that the brokers that made our list are licensed by Australian Securities and Investments Commission (ASIC), or other renowned regulatory bodies in the case of foreign operators.
Options Trading Buying Guide
Options, Shares, and Stock – the Differences
It is important to be able to make a distinction between these three in order to avoid confusion. The two that share the most similarity are shares and stock.
Both involve ownership of equity; however, while stock can encompass ownership in more than one company, shares gives you ownership in a specific company.
Unlike the other two, options doesn’t involve ownership.
In the finance sector, options are derivatives, and as the name implies, they have no intrinsic value but rather derive their value from their underlying stock. More specifically, they are contracts, which mean you are exchanging contracts when trading options rather than purchasing tangible, physical assets.
Simply stated, stocks let you have ownership stakes in individual companies while options enable you to bet on the direction you think the stock price is headed.
Stocks tend to be better suited for beginners and long-term investorer, while options are generally utilized by active investors who want a more tactical approach to investing that provides flexibility.
Options are derivative financial instruments, which means that they depend on the value of other assets.
Options provide investors with the right, but not an obligation, to transact (buy or sell) an underlying asset before a certain expiration date. This is the major difference between options and other derivatives like futures.
Options thereby allows the investor to speculate on the future price of the financial market. More importantly, they can form a crucial part of a larger investment strategy.
The world of options encompassed different types of trading, ranging from commodities, indices, stocks, currencies, and so on. You just have to predict the price of the asset and then wait for the outcome.
Strategies for Using Options
Options (also called Exchange Traded Options) are flexible tools which help traders be more versatile in their trading strategies; even using them to refine existing trade strategies. Apart from complementing trade strategies, options can also be used to take advantage of investment opportunities besides owning shares directly.
Options can also be used to limit your risk exposure and/or protect the value of existing share portfolio’s against a fall in value. In a scenario where the market is flat and bearish, options can be written over your existing portfolio to generate income during periods of low capital growth.
Types of Options
Two types of options exist: Call and Put options. They can be bought or sold individually; or used in conjunction with each other to generate strategies tailored to the trader’s risk tolerance level.
Call options gives a trader the right – not an obligation – to purchase stock at a certain set price called the strike price at any time before the option expiration date.
Option positions can be seen from both the perspective of the BUYER (taker) or the SELLER (writer).
When you sell an option, you are effectively creating a security that up till that point didn’t exist. This activity is known as writing an option.
The Benefits of Options
- Protecting your portfolio: buy a Put Option to protect your shares against a fall, which effectively locks in the shares’ sale price for the duration of the Option. Assuming the share price rises, your profit is only reduced by the premium paid.
- As a means of generating income: if you are anticipating that a particular share price will remain flat or fall slightly, then you can generate extra income by writing Call Options, subsequently receiving the premium upfront.
- Requires a small initial outlay: options provide the opportunity for you to potentially make higher returns from a smaller initial outlay than directly investing. This is because you can benefit from changes in a share price without having to pay the price of the share.
- The opportunity to diversify your portfolio: one of the advantages of a smaller initial outlay is that it enables you to have a more diversified portfolio than if you purchased shares directly.
- Provides the ability to trade your perspective: the flexibility that options provide enables you to implement a range of strategies in various market conditions (rising, falling, or flat). Consequently, you can then utilize them over a time horizon that suits your purposes.
- Buys you time to decide: a Call Options grants you time to decide on buying shares. Once you pay a fraction of the shares or premium, you effectively lock in the buying price, you are allowed to buy shares anytime as long as it is before the option expires.
Australian Options Laws Guide
The information on Australian options laws was sparse, but we were able to find information on Australian binary option laws. Australia happens to be a large market for binary investing, and therefore attracts a lot of Australian binary options brokers.
The Australian Securities and Investments Commission (ASIC) is the body responsible for regulating both options and binary options. ASIC got the responsibility in 2010 to supervise the binary options market.
But ASIC doesn’t have the regulatory monopoly in Australia. They are also aided by the Council of Financial Regulators and the Australian Prudential Regulation Authority in the task of improving regulatory efficiency.
However, there are no truly indigeneous binary Australian operators; a substantial number of binary operator companies are foreign-based. The majority of European binary platforms are registered with Cyprus Security and Exchange Commission (CySEC), and it is important that they abide by the standards set by the commission.
Are Binary Options Laws Permitted in Australia?
Though they are legal, binary options aren’t regulated in Australia. In this sense, lack of regulation means that there are currently no rules or guidelines that companies have to adhere to with regard to binary options trading.
The average, run-of-the-mill trader isn’t usually aware of the benefits of options. However, with the upheaval disrupting global stock markets due to the COVID-19 pandemic, the time is ripe for investors to take advantage of the flexibility and the potential for higher returns that options trading affords.
But options don’t generally have the same oversight as stocks; therefore, investors must ensure that the options brokerage platform they decide to trade on isn’t unscrupulous but is rather, a reputable organization.
It is in this light that we produced the list of the best options trading platforms in Australia, in order to guide our readers in making the best-informed decision.
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