Software and Brokers for Options Trading

People frequently ask which software, data providers, and brokers we use for trading options. The answer changes frequently as providers add new features and new contenders emerge, but here’s what is working for me right now:

For trade execution, I route just about everything through Interactive Brokers. The last time I checked, their options commissions were among the lowest in the industry. They also have excellent market access, for when you need to sell strangles on Japanese government bond futures. I’m not an algo type so I can’t attest to the quality of the API, but the few times I’ve used their Excel DDE feature it has not disappointed. There’s not much hand-holding in terms of customer support, but then most IB customers aren’t there because they’re looking to make new friends. We run the managed accounts through IB as well.

For analysis and charts, I use thinkorswim, Livevol Pro, and Excel. thinkorswim I use for trade risk profiles, which readers and clients like, and for casual market-watching. Livevol Pro has really become an essential tool for me and a lot of other traders I know, and I should really write a whole post about the features I like. For now: the order flow and trade breakdown data (the Stats tab) is really useful, the implied vol and skew charts are excellent, and the scanner is one of those great ideas that many platforms have tried but only Livevol has gotten right. Long-time readers know that I’m pretty stingy when it comes to praising commercial products, so believe me when I say that you should at least try Livevol out. They are offering a free, no-obligation trial right now – enter the code ‘condor’ when you check out.

Some things you still just have to do yourself, which means pulling in data and massaging it into something useful via Excel. (Someday when I have the time I still want to learn to do things in R.) I still kind of hate the ‘ribbon’ UI in Office products, but it’s not like Apple’s Pages or any of the other competitors is any better.

For historical data: thinkorswim’s data is free if you don’t mind manually grabbing it. I think iVolatility is one of the less expensive vendors of historical options data.

There are a lot of brokers and software packages out there that I haven’t mentioned. I’m not going to single out any company for criticism here, but some of them are not very good, or offer poor value. If you want an opinion about some service provider in particular, hit me up and I’ll tell you the truth – jared at this domain name.

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4 Comments For This Post

  1. John Hall Says:

    It would be interesting to have a guest post from someone who takes a more algorithmic approach to options trading. In particular, it would be interesting to hear about where they get historical options data and how they set up things like historical option chains, implied volatility, etc.

  2. Tommy Sikes Says:

    Jared, When you say that TOS historical data feed is free, how do you go about manually pulling that?

  3. Jared Says:

    Tommy: go to thinkback on the Analyze tab on the desktop platform.

  4. Reformed Trader Says:

    Tommy, if you create a list of trading signals, you can manually input them using ThinkBack. The software platform only allows 50 “backtrades,” but you can save the profit/loss number each time you create a new series of backtrades and string the numbers back together.

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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