What is options trading? How does options trading work? What are the best options trading platforms in the UK?
Vanilla options are financial instruments that allow their owners to exercise the option of buying or selling an underlying asset at a set price within a set timeframe. Such options do not carry any obligation, so the option owner can choose to exercise his/her right or not. The option owner will only exercise his/her right when the price of the underlying asset has moved in the right direction. One advantage of options trading is that you can earn a profit with much less risk.
There are scores of brokers offering platforms for options trading. In October 2020, we at FXExplained reviewed multiple of platforms for options trading suitable for traders from the UK. Based on these reviews we found that AvaTrade’s platform is the best options trading platform for UK traders. Then CMC Markets and Plus500 also got their platforms in the top three options trading platforms for the UK market.
The six best options trading platforms in the UK are:
- AvaTrade Options Trading
- CMC Markets Options Trading
- Plus500 CFD Options Trading
- easyMarkets Options Trading
- City Index Options Trading
- IQ Option Options Trading
1. AvaTrade Options Trading
AvaTrade offers a separate options trading platform from its regular spot trading platform. The strength consists of the tools offered making it the best options trading experience for the trader. Visit AvaTrade
2. CMC Markets Options Trading
CMC Markets offers one single sign-on account for spot trading as well as for options trading, where you can trade exchange-traded options. Options trading with CMC Markets is easy on the eyes with easy navigation. Visit CMC Markets
3. Plus500 CFD Options Trading
Plus500 offers options CFDs with leverage. The maximum leverage the broker allows on this trading instrument is 1:5 and Plus500 does not charge any commission on these options CFDs. Visit Plus500
4. easyMarkets Options Trading
EasyMarkets offers its options trading platform with its main trading platform that also covers day trading, forward deals, pending orders, and easyTrades and thus the platform does not match dedicated options trading platforms in complexity. Visit easyMarkets
5. City Index Options Trading
The windows platform is impressive with high complexity offering a wide range of tools and functionalities. The Android and iOS versions are toned-down versions of the windows platform. Visit City Index
6. IQ Option Options Trading
IQ Option has been around for a while as the champion of binary options. On its proprietary options trading platform, it still offers binary options in addition to digital options and FX options. Visit IQ Option
AvaTrade Options Trading
Regulated brokers offering vanilla options, such as AVATrade, give traders scores of opportunities compared to regular spot trading. Such options allow traders to:
- Hedge their exposure to any given asset.
- Earn a profit with less risk involved.
- Manage risk effectively.
- Express any view they may have of the market.
- Use a bevy of creative trading strategies to achieve their goals.
At first glance, vanilla options seem intimidating on account of their perceived complexity, but they are a boon for traders, and those who take the time to figure them out usually get hooked on them.
What are Vanilla Options?
Vanilla options are financial instruments that allow their owners to exercise the option of buying or selling an underlying asset at a set price within a set timeframe. Such options do not carry any obligation, so the option owner can choose to exercise his/her right or not.
Vanilla options are called “vanilla” because they are the simplest, most barebones approach to options trading. They do not have much in common with binary options.
There are only two types of vanilla options traders can buy or sell.
- Traders who think the price will go up will deal in CALL options, either buying or selling them.
- Those who think it will go down will deal in PUT options, either buying or selling those.
AVATrade’s Options Trading Platform
AVATrade’s options trading platform is available for download at the broker’s official site. This platform is a separate entity from the spot trading platform of the broker, although it too features spot trading tiles.
Available in iOS, Android, and desktop versions, the platform takes less than a minute to download and install.
The AVATrade options platform is available in a Demo version, which is great for getting a taste of what it has to offer.
When you load the platform, you can choose to create a new workspace, or you can pick from two preset modes: simple and advanced.
In default mode, the spot trading tiles are on the left, and the options quotes are in the middle. The trading space is fully customizable.
The options quick quotes section features the expiry times, the puts, the calls, and the strike price highlighted in bold.
Options highlighted in yellow are out of the money. Traders can track their open positions and pending orders on the bottom left.
To trade a vanilla option, double-click in the cell that best represents your view of the market/risk tolerance. For example, you can buy a Call option if you are cautiously optimistic about future price action.
Once you click the cell corresponding to a Call buy at your desired strike price, a ticket window opens where you can set the variables of your trade. Click Buy or Sell in the ticket window, and your option trade goes live.
The AVATRade options platform is fully customizable and offers some powerful risk-management tools.
Tools seem to be among the strengths of the AVATrade options platform. The platform features:
- A symbol finder.
- An option calculator to allow traders to visualize the variables pertaining to their trade, such as the bid, the ask, the delta, gamma, theta, vega, etc.
- A margin calculator.
- A risk manager.
- A strategy optimizer.
The AVATrade options platform is a one-stop trading destination, even for advanced options traders.
CMC Markets Options Trading
Unlike some of its competitors, CMC Markets has integrated options trading in a single sign-on account. Traders can use this account for spot trading as well as options trading.
Options are available on CMC Markets’ Stockbroking Standard platform as well as its Stockbroking Pro platform.
Options are derivatives that give traders the right to buy or sell an underlying asset for a set price within a set timeframe.
As such, options allow traders to use an astounding array of trading strategies. CMC Markets has made the available trading strategies dependent on a level system. Traders need to reach level four to be able to implement custom strategies.
Why Would You Trade Options at CMC Markets?
The options CMC Markets offers its traders are regulated trading instruments. They are listed on the Australian Securities Exchange and are therefore known as Exchange Traded Options.
ETOs cover an impressive range of underlying assets, such as stocks, indices, ETFs, and currency pairs.
- As mentioned, CMC Markets offers options under a single sign-in account, thus simplifying registration and account management for its traders.
- Options trading strategies may be intimidating for beginners on account of their apparent complexity. CMC Markets’ Pro platform features tools that allow traders to set up and execute strategies quickly and easily.
- The broker also offers options strategy analysis and diagrams illustrating real-time payoffs. Through such analysis, traders can simulate various hypothetical scenarios in real-time.
- Finding options and estimating pricing/margin requirements is easy with CMC Markets’ tools.
- The broker uses STP (Straight Through Processing) for the placing of options trades.
- The CMC Markets platform hands traders full control over their orders. It even allows for the placement of options/equity combination orders, adding a new dimension to hedging.
- CMC Markets features attractive brokerage rates. For trades worth less than $10,000, the fixed rate is $33. For values over $10,000, the rate is 0.33 percent.
Signing up and getting approved for a CMC Markets stockbroking account requires traders to complete, sign, and send in an application form. Those interested can download this form from the official CMC Markets website.
CMC Markets Stockbroking/Options Trading Platforms
The Stockbroking Standard Platform offers advanced charting packages, trading tools, and access to unlimited conditional orders. The standard platform also assists with tax reporting, and it supports live chat.
The Stockbroking Pro Platform features professional charting packages and trading tools. Both platforms are available in desktop, iOs, and Android variants.
If you opt for the Standard Platform, tools-wise you get a stock-filter, an economic calendar, a market depth analysis tool, and a dividend tool for ASX companies. This latter tool offers you a superb overview of ex-dividend dates, franking percentages, cents per share, etc.
The Pro Platform offers enhanced customization options such as multiple layouts. It even allows traders to group and link different platform modules, such as news, charts, the quote module, etc.
Despite its complexity and advanced capabilities, the CMC Markets Stockbroking platforms are easy on the eyes and easy to navigate.
Plus500 CFD Options Trading
More and more online brokers offer their clients options trading. UK-regulated Plus500 has an options product on offer as well, with a bit of a twist.
Instead of plain vanilla options, Plus500 features options CFDs with leverage. The maximum leverage the broker allows on this trading instrument is 1:5. Traders should be extra cautious with leveraged instruments. Leverage can amplify profits, but it can also increase losses.
What makes Plus500’s options CFDs special and different from traditional options?
A traditional vanilla option gives its purchaser the right to buy or sell an underlying instrument for a set price within a set time-frame. The owner of the option can exercise this right but is never compelled to do so.
An options CFD considers the price of the underlying asset at the time of its expiry and then credits or debits the account of the trader, based on the difference in the opening and closing price.
If you trade such CFDs at Plus500, you can never expose yourself to unlimited losses, as you cannot lose more than your account balance.
Plus500 does not charge a commission on these options CFDs.
How Can You Trade Plus500’s Options CFDs?
Log into your Plus500 account and open the Web Trader or download the broker’s trading platform. Select options from the tradable asset section. The format you will see is Microsoft/Put 195/Nov.
This describes a Put contract on Microsoft stock that expires in November. If you click this option, a trading ticket window will pop up that will give you the exact expiry date in the info section. The strike price is 195.
If you sell such an option, you expect the price of the asset to be below 195 when it expires.
The Plus500 Options CFD Trading Platform
As options trading platforms go, the Plus500 platform is a simplistic one. It lacks many of the advanced tools and calculators some of the other brokers offer.
The essential tools are, however, present. Traders can use Stop Losses and Trailing Stops to manage their risk. There is also a Guaranteed Stop feature that allows traders to avoid slippage altogether.
When you click on the Buy or Sell option of an options CFD, a ticket pops up where you can set your stop losses and refine the variables of your trade. In this window, the broker has also included a trading sentiment indicator. The tool provides a graphical illustration of how your peers have recently traded that same asset.
The info section contains all the detailed information you need to know about the trade you are about to launch.
The simplistic nature of the trading interface means that you can manage your orders and your account through a few clicks.
The charting section of the trading interface includes an impressive selection of drawing tools, technical indicators, and time frames.
76.4% of retail CFD accounts lose money.
easyMarkets Options Trading Review
EasyMarkets has incorporated its vanilla options trading platform into its main trading platform that also covers day trading, forward deals, pending orders, and easyTrades.
As such, the platform does not match dedicated options trading platforms in complexity. The Demo account of the broker does not offer access to the Vanilla Options section.
The broker sees its vanilla options as another way for its clients to trade their favorite instruments.
The selection of underlying assets tradable through vanilla options is, however, rather impressive. Unlike some of its competitors, the broker has focused its vanilla options on currencies. In addition to various majors and minors, these options also cover precious metals.
Why should you trade vanilla options with EasyMarkets?
- Currencies are among the most popular underlying assets in online trading, and EasyMarkets’ options cover them well.
- Through options, traders get to profit from asset price movements, whether these movements are positive or negative. You can make money on an asset even if its price goes down.
- Options are financial derivatives. What this means is that you do not have to contend with the physical transfer and reception of traded goods. You merely speculate on the price.
- Vanilla options support countless creative trading strategies. You can trade them as they are, or you can use them to hedge your other positions.
What do you need to know about the EasyMarkets vanilla options?
Like all vanilla options, EasyMarkets’ offering features two options: Call trades and Put trades. You can buy or sell both types of options. Traders use Call options when they believe that the market will go up in the future and Put options when they expect it to fall.
The Strike Price defines the target price level for your option. You need the real-world price of the underlying asset to surpass this level up or down, depending on the type of option you purchase.
Options give their owners the right but not the obligation to buy or sell an asset for a predetermined price (the Strike Price) within a certain time-frame.
Thus, traders know many of the variables that define their options trades, including the risk level.
Trading Vanilla Options through the EasyMarkets Platform
To purchase a vanilla option through EasyMarkets, go to their Vanilla Options section in the trading interface. Make sure you understand the strike price and the expiry. Set your trading amount and then hit Down or Up, depending on the desired direction of your trade.
The EasyMarkets platform supports a powerful TradingView-like charting feature, coupled with a trader sentiment indicator.
Put your technical analysis skills to use through the drawing tools and technical indicators available to determine the likely direction of the price. Also, consider the way other traders have recently traded the underlying asset of our choice.
Other trading tools available through the Easymarkets platform are a financial calendar, a market news feature, and a trading signals service.
City Index Options Trading
City Index has adopted a unique approach to options trading. The brokerage has made options available to its clients through spread betting and CFDs.
What is the difference between spread betting and vanilla options?
- Options give their owners the right but not the obligation to buy or sell the underlying asset for a set price, within a set timeframe.
- The favorite of UK traders, spread betting is illegal in many parts of the world. In the UK, spread betting constitutes a form of tax-free trading. Those who trade through spread betting can profit not only from the direction of the price movement but also its extent.
Spread Betting Example
The broker quotes stock X, currently worth $ 375, with a spread of $350-$400. For every point with which the price exceeds $400 or falls below $350, bettors profit, depending on the direction of their trade. How much they stake on each point is their decision. Thus, if their trade is successful, bettors profit the amount they staked multiplied by the price change.
Spread betting brokers usually offer options/tools that allow the limiting of potential losses.
The spreads City Index offers start from four points. City Index’s spread betting and CFD deals cover an impressive selection of underlying assets. This selection currently comprises:
- More than 20 indices, currency pairs, and commodity prices.
- Thousands of shares-based options.
City Index clients who want to trade options can choose between spread betting and CFDs. The two options require different account types.
City Index Options Trading Platforms
Clients looking to trading CFDs have to download the award-winning Windows platform of the broker.
The complexity of the platform is impressive, as is the range of tools and functionalities it offers.
The AT Pro platform can list several charts at once. Its charting supports scores of time frames, drawing tools, and technical indicators. The way the trading interface lists its tradable assets lets traders visualize charts, obtain an overview of relevant news headlines, and view key market information at a click. Volatility- and delta-related information is also available.
The Windows platform is more than 300 MB big, so it might take a few minutes to download over slower connections.
It also allows automated trading and offers a strategy back-tester.
Traders interested in spread betting can use the web platform of the broker or its Android/iOS mobile apps.
The web trader looks like a toned-down version of the Windows platform. Its interface is, however, customizable. Traders can add and remove sections depending on their needs. The default workspace lists popular spread betting markets. It features a Tradingview-type chart with all its bells and whistles and a section with one’s open positions.
Trades launched through either platform are visible on both platforms. Traders can close such positions through either of the two platforms.
The web trader features an economic calendar, access to Trading Central, and price alerts, among other tools.
City Index’s trading platforms are both highly functional and are great for technical- as well as fundamental analysis.
IQ Option Options Trading
IQ Option has been around for a while as the champion of binary options. When this form of trading fell out of favor a few years ago, the broker diversified its options offer, although it still features binary options as a special deal for its professional clients.
IQ Option is a regulated online brokerage offering a decent range of trading instruments. The trading platform of the broker is a proprietary one. Options trading takes place on this proprietary platform as well.
The options trading instruments the broker offers are proprietary, just like its platform. These instruments do not cover classic vanilla options.
The regulatory authority behind IQ Option and its quirky trading instruments is CySEC. The broker is the proud possessor of CySEC license #247/14. Being CySEC-regulated, IQ Option is MiFID-compliant.
IQ Option Features Three Option Types
- FX Options are custom, proprietary instruments that use currency pairs are underlying assets. Based on European Options, these instruments add a proprietary spin to trading through an option to close the deal before it reaches maturity. Opening and closing options is as simple as clicking a button in the trading interface.
- To trade FX options, clients need to invest at least $30. The minimum expiration time on these options is 1 hour. IQ Option does not charge any brokerage fees on this instrument.
- The unique selling point of these FX options is that they offer unlimited potential for profits while limiting losses to the initial investment.
- Unlike binary options, digital options allow traders to speculate on the extent of the price change of the underlying asset, in addition to the direction of the price change. To trade such options at IQ option, traders need to invest only $1, but they also need to have attained Professional Client status. This trading instrument carries no brokerage fees, and its minimum expiry is 60 seconds.
- Binary options allow traders to wager on the direction of the price movement of an underlying asset within a set time-frame. Binary options are completely transparent in the sense that traders know what they can profit and lose before they place the trade. The maximum profit potential on this trading instrument is, therefore, capped at 95 percent.
How Do You Trade IQ Option’s FX Options?
Placing an FX option trade at IQ Option is as easy as clicking a button. All the important variables of the trade are displayed above the Buy/Sell buttons on the right-hand side of the trading interface.
If you hover your cursor over the Buy or Sell button, the trading platform offers additional information such as your opening price, multiplier, volume, and pip value. As soon as you click the option of your choice, your trade goes live.
You can track your open trades, close them manually, or set up automatic closing parameters in the form of Stop Losses and Take Profits.
The IQ Option Trading Platform
IQ Option offers a browser-based, proprietary trading platform that is very user-friendly and easy on the eyes. Its technical- and fundamental analysis features are surprisingly decent as is its charting.
The platform is available in mobile versions for Android- and iOS devices.
If you want to compare options trading to spot trading you can read our reviews of the overall best trading platforms in the UK here.
Please share all the comments you might have on options trading in the comment field below. Which is the best options trading platform in the UK according to you?