Please remember that when you trade, your capital is at risk. Options trading is a particularly complex and risky trading strategy. A recent study using data from the Chicago Mercantile Exchange (CME) showed that 83% of all options on stock indices expired worthless.

Best Options Trading Platforms

Updated On: Jan 22, 2023
Best Options Trading Platform UK

Contents:

Best Options Trading Platforms in the UK

We’ve compiled a list of some of the best options trading platforms in the UK. These are the best investment websites, brokerages and apps that allow you to trade complex financial instruments such as options, futures, and contracts for differences (CFDs).

Please remember that when you trade, your capital is at risk. Options trading is a particularly complex and risky trading strategy. A recent study using data from the largest options exchange in the world, the Chicago Mercantile Exchange (CME), showed that 83% of all options on stock indices expired worthless.

The platforms listed below are all authorised and regulated by the UK’s financial watchdog, the Financial Conduct Authority (FCA).

Compare some of the best options trading platforms in the UK:

FinecoBank - Options trading commissions from $3.95 per lot

FinecoBank Logo
Minimum Deposit
£0
Annual Platform Fee
£0
Commission
$3.95 per lot
(reduces as the size of your trades increases)

FinecoBank is one of Europe’s largest banks, with 20+ years of leadership history in brokerage and over 30 million orders processed every year. Its core mission is to make online trading simple by providing direct access to the markets in just one click. With Fineco, you can access 26 global markets and trade over 20,000 financial instruments worldwide on a single account, including UK and overseas shares, ETFs, funds, bonds, forex, CFDs and options. Users can also invest and trade directly in GBP, EUR, USD, CHF and 20+ currencies. For options trading, FinecoBank gives you access to the CBOE market, Volatility Index (VIX) and options on the S&P, Dow Jones, Nasdaq and Russell indices, as well as US stocks. When you open a trading account with FinecoBank, you will have the option to navigate the market through PowerDesk, an advanced trading platform accessible on the web that offers intuitive chart trading, personalised dashboards, personalised listings and technical analyses, all on one screen.

FinecoBank charges commissions on options trading from $3.95 per lot on the S&P, Nasdaq, Dow Jones, Russell, and VIX indices, as well as on US stock options. This fee reduces as the size of your trades increases. Fees are expressed in USD and EUR but are converted to GBP at the official exchange rate at the time of the relevant transaction. FinecoBank’s products include a Trading Account and Stocks and Shares ISA.

Please note: When you trade, your capital is at risk. 71.97% of retail investors lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and can afford to take the high risk of losing your money.

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IG - CFD Options trading commissions from 0.10% per side

IG Smart Portfolios
Minimum Deposit
£0
Annual Platform Fee
£0
Commission
0.10% (UK & EU Stock CFDs)
From 0.6 pips (Forex)

IG is a large trading platform that allows you to invest in 13,000+ global shares and ETFs and trade over 18,000 markets, including options, forex, futures, indices and commodities. When you trade options with IG, you will trade using CFDs and spread bets. For options trading in the UK, IG gives you access to major indices, shares and FX with daily, weekly, monthly and quarterly options. With IG, you can buy and sell options with no closing spread when you hold them until their fixed expiry date, develop options trading strategies using a variety of options, and take positions on rising, falling and even flat markets in the UK and worldwide. IG offers the choice of trading with its own platform or connecting to a range of third-party platforms. IG’s own platform is accessible via web, iOS or Android devices. The platform gives you an instant overview of market prices, spreads, and margins in a simple and clean design. You can also access risk management tools such as stops and limits and trade in your preferred currency to keep conversion charges down. Third-party trading platforms available via IG include MetaTrader 4 (for algorithmic trading), ProRealTime (for charting and trading automation) and L2 Dealer (for direct interaction with the order books of major exchanges). The online IG Academy is also a great place for both beginners and advanced investors to brush up on relevant trading skills.

It is entirely free to open an account with IG, and all registered users gain access to a free demo account which you can use to practise CFD trading until you become confident. On IG, the spreads, which function as trading fees for CFD brokers, start at 0.6 pips for forex CFDs, 0.1 for index CFDs, 0.3 for commodity CFDs, and 0.10% per side for UK and EU share CFDs. IG also charges an overnight funding fee for holding CFD positions overnight and guaranteed stop premiums for using the guaranteed stop loss feature. Spread bets have separate fees. Visit IG to learn more. IG’s suite of products includes a Trading Account, Stocks and Shares ISA and SIPP.

Please note: When you trade, your capital is at risk. 76% of retail investor accounts lose money when trading CFDs and spread bets with this provider. You should consider whether you understand how CFDs and spread bets work and can afford to take the high risk of losing your money.

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Saxo Markets - Options trading commissions from $3.00 per lot

Saxo logo
Minimum Deposit
£500
Annual Platform Fee
£0
Commission
$3.00 per lot
(reduces as the size of your trades increases)

Saxo Markets is the UK division of Saxo Bank, a large European bank that allows you to invest in 60,000+ financial products from stock markets worldwide. With Saxo Markets, you can invest in UK and overseas stocks and shares, bonds, ETFs, forex, CFDs, futures, commodities and options. For options trading, specifically, Saxo gives you access to over 3,000 listed options across stocks, indices, interest rates, futures, and commodities from 23 exchanges worldwide and 40 FX vanilla options with maturities from one day to 12 months. With Saxo Markets, you can take advantage of advanced options trading tools via the SaxoTraderGO, a powerful trading and analytics tool for both beginners and advanced investors. Customers can benefit from extensive charting with 50+ technical indicators, integrated trade signals and innovative risk management tools. Saxo also offers a free demo account for customers to practise trading with virtual money before committing real cash.

Saxo Markets offers three pricing tiers depending on the size of your trades - Classic, Platinum and VIP. Commissions on listed options start from $3.00 per lot across equities, energy, metals and more, while spreads on FX options could go as low as 3 pips. Saxo Markets’ suite of products includes a Trading Account, Stocks and Shares ISA and SIPP.

Please note: When you trade, your capital is at risk. 74% 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.

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DEGIRO - Options trading commissions at €0.75 per contract

DEGIRO logo
Minimum Deposit
£0
Annual Platform Fee
£0
Commission
€0.75 per contract

DEGIRO is an award-winning investment broker that allows you to trade in stocks, bonds, ETFs, options, futures, warrants, certificates and more across 50 international exchanges. It offers tens of thousands of regulated financial instruments that enable investors to diversify their portfolios worldwide. With DEGIRO, you can invest in up to 200 commission-free ETFs. This means you may not have to pay a dealing charge when you invest in just ETFs (terms apply). Dealing in UK stocks costs £1.75 + 0.014% per deal, US stocks cost €0.5 + $0.004 per share, and Irish stocks are €4 + 0.05% per deal. To make sense of the charges, visit DEGIRO. Options trading with DEGIRO cost €0.75 per contract.

DEGIRO currently has over two million customers across 18 countries. It is suitable for both beginners and advanced investors, and you can access the platform on any device via the web portal or mobile app. To trade options, you need an Active or Trader account with DEGIRO.

Please note: Your capital is at risk.

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What Is Options Trading?

Options trading is the process of buying and selling various types of options to generate a profit.

An option is a contract that gives the holder the right but not the obligation to buy or sell an asset in the future.

There are many different types of options, and investors will buy them for a wide variety of reasons. Some use them as an insurance policy to protect against price movement on assets they already hold, and others use them as an investment in and of themselves.

One of the defining characteristics of trading options is that it creates the opportunity for a trader to profit when an asset goes down in value as well as up. When you hear of someone ‘shorting’ an asset or a stock, in many cases, they’ll be using options to make this happen.

If you’re looking into trading options in the UK, it can seem pretty complicated to begin with, so we’re going to start with the basics and build into more technical details as we go.

Options Trading Example

We will start with a straightforward example so you can begin to see the fundamentals of how options work. Say you believe that Apple stock is going to go up, and you want to trade options to make this investment rather than buying the stock directly (we will explain why you might want to do this later).

At the time of writing, Apple stock was trading at around $150 per share. You decide you want to buy an option that will allow you to purchase Apple stock in the future at its current price. The stock price you buy the options at is what is known as the strike price.

An option that gives the holder the right to buy an asset in the future is called a call option. So, you are going to buy call options on Apple stock.

Options contracts are generally sold in lots of 100. For this example, we will say that the options are trading at $5 each. So to make this investment, you purchase $500 worth of call options on Apple, which will allow you to purchase 100 units of Apple stock in the future for a price of $150 each.

This $500 is known as your premium.

Fast forward one month and say that your prediction was correct, and Apple stock is now trading at $175. Your option is what’s known as ‘in the money’ because you could exercise them for a profit.

The effective profit on your options is the difference between the strike price of your options and the current price, so in this case, it is:

$175 (current price) - $150 (strike price) = $25 per share

100 options x $25 = $2,500 

After taking into account the $500 premium you paid for the options, you’ve made a net profit of $2,000.

An illustration of buying a call option on Koody
Buying a call option

Now, we mentioned that you could make money on options if the price of an asset goes down as well.

Sticking with our Apple example, let’s say that you think the price is instead going to go down. In that case, you want the option to sell Apple stock at the current strike price of $150, which means you would buy a put option.

This will allow you to sell Apple stock in the future at a price of $150. Assuming the same premium of $500 for the put options, look ahead three months, and we will assume you made the correct prediction again.

Now Apple is trading at $100 per share, and you have the right to sell 100 Apple shares at $150 each. That means a profit of $50 on each of the options you hold.

$150 (strike price) - $100 (current price) = $50 per share

100 options x $50 = $5,000

After taking into account the $500 premium you paid for the options, you’ve made a net profit of $4,500. So even though the stock has gone down in price, you’ve been able to generate a profit from it.

An illustration of buying a put option on Koody
Buying a put option

Options Expiry

It’s important to keep in mind that options have an expiry date, after which they are worthless. This is one of the key risks of trading options, as it can mean you lose your premium if your options aren’t exercised ‘in the money’.

Options that are not in a position to generate a profit for the holder are what’s known as ‘out of the money’.

Just because an option is in the money does not necessarily mean it will generate a profit for the holder. The reason for this is that you need to take into account the premium that has been paid for those options.

If an investor holds 100 options with a £3 profit per option (£300 total), they are in the money. This could still be a losing trade if the premium to purchase those options was £500.

Buying vs Selling Options

So far, we’ve talked about buying options, which give you the right to buy or sell an asset at the strike price. These can be risky, but that risk is limited. Whatever you pay for the premium is the capital you have at risk.

You can also sell put and call options. This is also known as ‘writing’ options, and you are instead selling other options traders the right to buy or sell an asset from you. 

The benefits are that you get paid the premiums, which you get to keep if the option is never exercised. The downside is that when you sell an option, you are obligated to fulfil it. 

If you don’t already own the underlying asset (known as an uncovered call), this can be a very risky strategy. It means you might have to buy it on the open market at a much higher market price than the strike price.

What Can you Buy Options on?

An option is what is known as a derivative because its value is derived from an underlying asset. In addition to stocks, the most common assets to purchase options on include stock indices, commodities and foreign exchange. 

These work in the same way, with the only difference being the asset on which the option's value is derived. So, for example, you could purchase options based on the FTSE 100, which would allow you to profit from the movement of the overall UK stock market index. 

Commodity options allow all traders to invest based on the movement of assets such as crude oil, gold and silver, as well as less common goods such as soybeans, wheat, corn and sugar.

Types of Options

When it comes to the types of options available in the UK, there is some more terminology for us to cover. If you’re going to consider trading options in the UK, you need to have a solid understanding of the different types of options there are so that you can decide which ones work best for your chosen options trading strategy.

1. Put vs Call Options

We have touched on some of these already. To recap, a put option allows the holder to sell an asset in the future, and a call option allows the holder to buy an asset in the future.

It sounds simple, but it can be confusing to remember which is which. A simple way to keep them straight is that you “put the stock up for sale” and you “call the stock in” to buy it.

2. European vs American Options

Despite the misleading names, European and American Options have nothing to do with the location of the company or asset the options are based on. Instead, they are terms used to describe two different styles of options exercise. 

As we mentioned before, options do not stay open indefinitely. All options have an expiry date, after which they will either be exercised for a profit or expire worthless.

European options can only be exercised at the expiration date. That means they have to be in the money on the day of expiry to have any value.

American options, on the other hand, can be exercised any time up until they expire.

While American options appear a lot more flexible, European options tend to be much more common. This might seem restrictive for investors, but it is important to remember that trading options prior to expiry is common practice.

A European option may not expire until 22nd August 2023, but if it is in the money on, say, 4th January 2023, then there will likely be a secondary market available to sell this to another options trader at a profit.

3. Covered vs Uncovered Options

One of the ways traders can sell calls or puts is via covered or uncovered options.

A covered call option is a type of option where a trader sells someone the right to purchase an asset they already own. Because they own the asset itself, they hold a ‘long’ position. Should the buyer of the option wish to exercise the call option, the trader will simply hand over their stock. This will be at below market value, but nevertheless, it limits the overall loss that can be incurred.

An uncovered or naked call option, on the other hand, is a type of option where the trader does not own the asset they are selling the option on. Theoretically, this means that the potential downside is unlimited because the trader will need to purchase the stock on the open market at whatever price in order to fulfil the obligation to the buyer of the call option.

A covered put is the same thing, with the difference being that the seller of the covered put already owns a ‘short’ position in the stock or asset.

What Is Leverage in Options Trading?

Leverage in options trading refers to the way in which options can be used to multiply the power of your capital. Because options have a leverage factor, investors gain a much greater exposure to an asset than they would have by investing directly into it.

In the first example of using Apple stock, we explained that a trader might want to use options for the position rather than investing directly. The most likely reason to do that is to gain access to leverage in order to increase returns.

As we covered, a trader who made a call that Apple stock was going to increase from $150 to $175 would potentially profit $2,000 after the $500 options premium was deducted.

Say that same investor instead had decided to simply purchase Apple stock. For the same $500 investment, they would have been able to purchase 3.33 shares. When the price went up to $175, their total profit would have been just $83.25.

That is significantly less than when trading options instead.

An illustration showing how leverage in options trading works on Koody
How leverage works in options trading

However, as is always the case with leverage, the potential losses are higher too. If you got the prediction wrong and Apple stock went down to $140 at the expiry date, your options would expire worthless, and you would lose your entire $500.

If you had purchased the stock directly, your initial $500 investment would still be worth $466.20, and you would be able to hold it indefinitely and wait for the price to recover.

Even if the price did go up, but only to say $153, the overall options trade would have lost money once the premium is taken into account. Buying directly avoids this issue as there is no premium.

How Can You Hedge With Options?

Here are some of the ways you can hedge with options:

1. Manage Risk Within an Investment Portfolio

A common options trading strategy is to use them to manage risk within a portfolio. It is one of the key ways in which hedge funds manage their portfolios to allow them to potentially generate returns in both bull and bear markets.

The way it works is pretty simple in theory but can get very complicated in practice.

If you think of the risk involved with any investment, you can use options to, at least partially, offset that risk. Going back to our Apple example, say you have a long position in the stock, and you believe it is going to go up over the long term.

You want to hold your position but are also concerned about short-term volatility. You could buy a put option at the current strike price of $150. Remember that means you have the option to sell the stock at $150.

If the price does go down in the short term, you have essentially locked in the floor price for your Apple stock at $150. Now, you might not want to actually sell your stock, but you could sell the options for a profit which would then offset the short-term loss you’ve incurred on your stock holdings.

If the share price does not go down, the options will expire worthless, meaning they have effectively acted like an insurance policy.

An illustration showing how hedging with options works on Koody
How hedging works in options trading

2. Hedge Out Currency Risk

Another common use for options is to hedge out currency risk. Trading options in the UK can be a good way to manage currency risk for assets denominated in other currencies, such as the US dollar.

Buying US-listed stocks while also buying put options on the US dollar would mean the currency risk is removed from the trade while still enabling profit on the shares themselves.

There are many different combinations of options that can be used to manage risk within a portfolio, and it is a common tactic, particularly among professional investment managers.

How to Trade Options in the UK

You can trade options in the UK with platforms such as FinecoBank, Saxo Markets and Degiro. Trading options is an advanced type of investing strategy, so it is important that you understand how it works, including the potential risks and rewards, before venturing into it.

Follow the steps below to learn how to trade options in the UK:

1. Learn the Terminologies Used in Options Trading

Options trading requires specialised knowledge of terminologies and an understanding of how the markets work. To succeed as an options trader, one must understand options trading terminologies such as calls, puts, premium, strike price, open interest, intrinsic value, in the money, out of the money, at the money, holder, writer, spread, Delta, Gamma, Theta, Vega, Rho, among others. Scroll down to see our short definitions of some of these terms.

2. Understand how an Option’s Price Is Determined

Option prices can swing dramatically. As a result of their in-built leverage, these swings can be wider than the fluctuations in the underlying stock or asset that they are based on. With that in mind, it is important to understand which factors influence the options price so that you can gauge whether the fluctuations are simply regular volatility or whether the option is likely to expire worthless. 

Three fundamental factors impact the price of an option:

  1. Moneyness: Moneyness in options trading refers to the level of intrinsic value of an option. That is, the strike price of the option relative to the underlying market price of the asset it is based on. For example, a call option with a strike of £10 against an asset currently worth £20 has greater moneyness than an option with a strike of £15. Both options are in the money, but the stock has to fall further in order to move the first option out of the money. Therefore, it has a higher intrinsic value.
  2. Expiry Date: Put simply, an out-of-the-money option will lose value the closer it gets to expiry. This is because there is less time, and therefore a lower probability, for it to become in the money. This is measured through the use of one of the Greeks, specifically Theta.
  3. Underlying Asset Volatility: Linked to both of the above factors is the volatility of the underlying market. The more volatile the options underlying asset is, the more likely it is to spike or crash and move in the money quickly. Because of this, premiums on options in more volatile markets and assets tend to be higher.

3. Open an Options Trading Account

You have to be careful here. If you’re looking at trading options in the UK, many of the online brokers purporting to offer options trading will actually be offering options exposure through spread betting or contracts for differences (CFDs). 

These might be something some investors will want to consider, but they are not trading options by using this method.

There are not a large number of options trading platforms available in the UK. Many of the major, well-known companies, such as eToro, do not offer options trading. A couple of examples of trading platforms that do offer direct options trading are FinecoBank and Saxo Markets.

In order to sign up, you will need to complete the usual anti-money laundering processes, which include providing your personal details, ID and information on your income and savings. You will also need to sign a few declarations and confirm your trading status.

4. Decide on Your Trading Strategy

As we have discussed, there are many different ways to trade options in the UK and many different types of options you can buy. You need to decide the types best suited to your overall portfolio and the ones you are most comfortable with.

Remember that some options have large but limited potential for loss and gain, while others have unlimited potential for both gains and losses. You need to be sure that you understand how much risk you are taking and the total amount of money you could lose.

When deciding on the best trading strategy for you, a good place to start is deciding on your market thesis and the reason you are implementing options trading into your plan. There are a few main types to consider:

  1. Buy Calls: If you believe the underlying market is going to go up, you can implement an options trading strategy that takes advantage of this. The simplest way to do this is to buy call options, which allow you to purchase assets at below market price if your prediction is correct.
  2. Buy Puts: If you think the underlying market is going to go down, you can buy put options. This allows you to sell the asset at the current market price, which will net you a tidy profit if the asset in question goes down in value.
  3. Hedging Strategy: If the options are there to protect your main investment rather than to generate profit for themselves, hedging strategies are likely your best option. These allow you to set a floor price for the assets you hold, protecting you on the downside for the cost of the premium. The most common way to do this is to buy a put option, allowing you to sell at the current market price even if the spot market price falls.
  4. Sell Covered Calls: If you want to earn some additional profit on assets you already hold, you can sell covered calls. This sees you on the other side of the trade as the writer of the option, meaning if the call you sell is in the money on expiry, you have to hand over the underlying asset. As long as you believe the option is likely to expire worthless, you can pick up the premium without needing to sell your asset at a reduced price.
  5. Strangles, Spreads and Straddles: More sophisticated options trading strategies can be implemented once you have a handle on the basics. These can be especially powerful, as doing it correctly can allow you to manage risk well while still seeing high potential returns. Generally, these strategies see you purchase both puts and calls, allowing you to control both the upside and downside of the price movement. Some, like the Long Strangle, require large movements to be profitable, while others, such as the Bull Call Spread and Bear Call Spread, can be used if the price movement is expected to be limited.

5. Choose Your Underlying Market

There is a wide range of markets available to trade options. The main asset classes for options trading are:

  1. Foreign Exchange (Forex or FX): You can trade options on a wide range of FX pairings. There are options markets available on the biggest currency pairs, such as USD/GBP, EUR/USD and JPY/USD, as well as more exotic pairs, such as EUR/MXN or TRY/JPY.
  2. Stock Indices: It’s possible to buy or sell options based on the movement of an index as a whole. Examples are the FTSE 100 in the UK, the S&P 500 in the US or the DAX in Germany.
  3. Individual Stocks: One of the most common ways to trade options is on individual stocks. Options are available on many of the biggest UK and US companies. Trading options on individual stocks can be worthwhile if you have conducted detailed research on a specific company and feel that you understand its future prospects better than the wider market.
  4. Commodities: These are probably the most unusual in the list because they are not based on an underlying financial product. Instead, they are based on wholesale goods which we use in our day-to-day lives. Examples include hard commodities like oil and iron ore and soft commodities like wheat and soybeans.

6. Identify Your Entry and Exit Points

Before buying an option, you need to identify the strike price you want to enter the position at, your preferred expiry date and your target profit price. Having these set before you enter a position means you have hard rules to follow once the trade is live.

If you do not do this, it is far too easy to let emotions get the better of you and to just “let it ride”. This is a poor options trading strategy as it will inevitably lead to holding a position for too long and eventually losing out.

It may mean that you look back and kick yourself for not holding longer for higher profits, but taking regular, conservative profits is the key to a successful long-term strategy.

Many trading platforms will allow you to set these directly within the app. Stop losses are a common feature which allows the system to automatically execute a trade if the position moves against you by a certain amount.

On the flip side, a take profits order (TPO) does the same thing on the upside, automatically closing out a position once a profit threshold has been hit.

Ways to Trade Options in the UK

There are many strategies for trading options in the UK. Below is a sample of some of the strategies options traders employ:

1. Write Covered Calls

One we mentioned earlier, this is a strategy that helps generate income from assets you already own if you expect the stock to rise or remain flat.

By selling the option, you receive the premium, and if the option is exercised, then you simply have to hand over the asset which you already own. That is still not a great result, but the downside is at least limited to the value of the asset.

2. Married Put

This strategy acts as a classic hedge against a falling market. It involves an investor buying a put at the same time as they take a long position in a stock or asset. The put allows the investor to sell their long position at the purchase (strike) price, providing them with downside protection for the cost of the premium. 

3. Long Strangle

This strategy sees the options trader purchasing both a put and a call option at different out-of-the-money strike prices. This is done when there is a big move anticipated, either up or down. The upside on this trade is hypothetically unlimited, with the downside limited to the cost of buying two options. It means that the move in either direction needs to be large to make this a profitable trade.

This is most commonly used when there is a binary event upcoming, such as the regulatory approval or denial of a new medical treatment or device.

4. Bull Call Spread and Bear Call Spread

For investors who expect a stock to rise, but only fairly modestly, a Bull Call Spread can be a way to generate a profit via options while also capping the downside risk. It involves buying one call option and, at the same time, selling another.

Both have the same expiry date, but the one being sold has a higher strike price. Selling the call offsets the premium of buying the other and also limits the loss that can be incurred. It limits the gain as well, which is why this trade is not generally used if you expect a stock to rise significantly.

A Bear Call Spread is the same strategy but reversed. This is used when you think a stock is going to fall in price modestly rather than rise.

Options Trading Terminologies

To succeed in options trading, you need to understand the terminology. Here are some popular terms used in options trading to get you started:

  1. Call Option: The right, but not the obligation, to buy an asset at a fixed price with a set expiration date.
  2. Put Option: The right, but not the obligation, to sell an asset at a fixed price with a set expiration date.
  3. Premium: The price paid to buy an option or the price received when you sell one.
  4. Strike Price: The fixed price the option can be exercised at.
  5. Open Interest: The total number of outstanding option contracts not yet settled.
  6. Intrinsic Value: The inherent value of an option based on the difference between the strike price and the current market price.
  7. In The Money (ITM): An option that has intrinsic value.
  8. Out of The Money (OTM): An option that does not have intrinsic value and is currently worthless.
  9. At The Money (ATM): An option roughly at break-even point.
  10. Holder: An investor who owns and is able to exercise an options contract.
  11. Writer/Seller: The investor who has sold the options contract for a premium.
  12. Spread: When executing a strategy that requires purchasing two or more options, the spread is the difference between the premiums paid and the premiums received.

The Options Greeks

There are a number of terms used in investing, and particularly in options trading, which are represented by Greek letters. Collectively, these are known as ‘The Greeks’, and there are some that are used almost exclusively in the world of options trading.

  1. Delta: The amount an investor can expect an option's price to change relative to a $1 change in the price of the underlying asset on which it is based.
  2. Gamma: This represents how quickly Delta will change. It essentially measures how sensitive the price of the options contract is relative to the price of the stock. Think of Delta as the end destination, and Gamma as how fast it gets there.
  3. Theta: This is often referred to as Time Value or Time Decay. The further away the expiration date of an option is, the greater the chance of it becoming ITM. As the expiration day draws closer, an OTM or ATM option will lose value, as there’s less chance of it becoming ITM. This decay is measured by Theta.
  4. Vega: Represents the amount an option price will change relative to a change in volatility. Generally, the more volatile the underlying asset is, the more valuable the option.
  5. Rho: The amount an option's price is expected to change based on changes in interest rates.

Options Trading Fees

Different platforms will charge different fees when it comes to trading options in the UK. Some charge a fixed commission across different bands, while others charge a spread on the total amount traded.

For example, FinecoBank charges a fixed commission of $3.95 per option lot traded, with this reducing as the size of trades increases.

Saxo Markets, on the other hand, charges both a fixed commission and a spread depending on whether you are trading listed options or FX vanilla options. Listed options start at $3.00 per lot (reducing as the size of your trades increases), while FX vanilla options attract spreads as low as 3 pips. The spread is priced in what is known as a ‘pip’ which is equal to 1/100th of 1%, otherwise expressed as 0.0001. These spreads are higher on smaller markets.

Some providers will also offer discounted trading fees if you sign up for a monthly premium membership of their site.


Frequently Asked Questions

1. Is binary options trading legal in the UK?

It is illegal to sell or market binary options in the UK, and it has been since 2019. With that said, it is not illegal to trade them. This means that, technically, UK traders can use offshore brokers to trade binary options, though the FCA recommends against it.

A binary option is an exotic option type that either pays the investor nothing or a fixed return. It is not possible to sell a binary option for a partial profit. It is simply a win or a loss. In essence, it is a type of fixed odds betting.

2. How do you buy options?

To buy options in the UK, you first need to open an account with an options broker such as FinecoBank, Saxo Markets or Degiro. Once you have opened the account, you will be able to buy options on a wide range of markets. Many UK options platforms allow you to purchase options in markets across the world, such as the US, Swiss, European and Hong Kong markets.

Buying options is more complex than buying a stock or an ETF, so you need to understand the different types of options available to buy (and sell). Read through this article to learn the differences and how to buy options in the UK.


3. Can you get rich with options trading?

As with any investment, it is possible to make large gains through options trading. However, all investments come with risks, and it is possible to suffer large losses. Because of the use of leverage and the ability to make trades with unlimited loss potential, the risks are higher than with other investments, such as buying direct shares or ETFs.

4. What are the 4 types of options?

There are four fundamental types of options to trade: buying a call option, selling a call option, buying a put option, and selling a put option. These all have various upsides and downsides, and they can also be bought in conjunction with each other to create a more sophisticated trading strategy.

5. Is options trading gambling?

No, options trading is not gambling. When done correctly, options trading is just another form of investment strategy. Many professional investors use options as part of their overall strategy, and this is not considered gambling.

Binary options are different and are considered a type of gambling.


6. When should you buy options?

You should buy options when you are looking to add protection to a portfolio of assets you already hold, when you are looking to profit off the movement of a stock price through the use of leverage, or when you want to employ more complex trading strategies that pay off based on a specific sequence of events.


7. How do you stop losing money on options?

As with any investment, the way to generate profits is to use knowledge and skill to read the markets and make winning trades. If you find you are regularly losing money by trading options, it is probably time to reassess your strategy. This could mean increasing your education on the investment, looking at a different way to use options to generate a profit or perhaps even moving to a different asset such as stocks or ETFs.


8. Is options trading worth it?

Options trading can be profitable if you are prepared to do the required research and have a strategy in place.

9. What percentage of option traders are successful?

It’s impossible to know how many individual traders are successful. However, a recent study using data from the largest options exchange in the world, the Chicago Mercantile Exchange (CME), showed that 83% of all options on stock indices expired worthless.

10. Where can I buy stock options in the UK?

You can buy stock options in the UK from the following options brokers:

  1. FinecoBank - Options trading commissions from $3.95 per lot
  2. IG - CFD Options trading commissions from 0.10% per side
  3. Saxo Markets - Options trading commissions from $3.00 per lot
  4. Degiro - Options trading commissions at €0.75 per contract

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