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How to Trade Options on E-Trade

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Written by Timothy Sykes
Updated 3/31/2023 8 min read

Learning how to trade options on E-Trade consists of a few simple steps. There’s a reason it’s one of the most popular brokers in the world.

E-Trade from Morgan Stanley is one of the brokers I use most for trading stocks. It’s not the only broker I use, but I’ve used it enough to know it works for me. That’s what’s important in trading, no matter your strategy — finding a brokerage firm that works for you.

I’ve used dozens of trading platforms over the years. There’s no rule that says you have to marry your broker. This is especially true in this age of no account minimums.

The one thing that hasn’t changed about choosing a broker is the fact that you have to educate yourself before you make your decision.

I think E-Trade from Morgan Stanley is a good online broker for trading options, but you have the final say. Read on for a deep dive into E-Trade’s features and decide whether it’s right for you!

Trading on E-Trade

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E-Trade has two main trading platforms. Each caters to different kinds of traders. Both platforms are free for E-Trade users.

E-Trade Web is its basic platform. It’s less comprehensive but still boasts robust technical analysis tools and dynamic charting. There’s also a mobile version of E-Trade Web for traders on the go. You can even use it with your Apple Watch!

More experienced traders should look into Power E-Trade. It features more trading tools, versatile charts, and customizable options chain views. Power E-Trade also has a mobile version that lets you check watchlists while out and about.

What else can you find on E-Trade? Here are some of its features:

  • No commissions
  • No inactivity fees
  • A big selection of tradable assets
  • 24/7 phone, email, and chat customer support
  • No account deposit minimum

Looking for other online brokers? Read my reviews of Questrade, Charles Schwab, and Interactive Brokers.

Benefits of Trading Options Using E-Trade

E-Trade is one of the brokers I use most. It isn’t perfect, but it hasn’t given me any reason to abandon it. Here are some of its strengths:

Fast Options Trade Execution Speed

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I want my trades executed quickly. E-Trade measures its executions as fast as 0.07 seconds. This isn’t the best speed out there, but it won’t screw up your trades either.

Option Contract Fee Discounts

E-Trade has zero commission fees on options trading, like most brokers these days. There’s a $0.65 per contract fee on options trades, which is also an industry standard.

Here’s the unusual thing about E-Trade: active options traders only need to pay $0.50 per contract. You can get this discount by making at least 30 trades per quarter.

Wide Range of Tradable Securities

We’re here for options trading, but knowing what other assets a broker offers is still a good idea. E-Trade offers the following:

  • Stocks
  • Fractional shares
  • Mutual funds
  • Options contracts
  • Futures contracts
  • Exchange-traded funds
  • Bonds

Numerous Research Providers and Educational Material

E-Trade offers research material from multiple financial services firms. You can even access research from 10 firms for free. Some of its research providers are Morgan Stanley, Thomson Reuters, and MarketEdge.

E-Trade is also known for its educational content for traders of all experience levels. A beginner trader or someone who’s new to E-Trade might appreciate its videos on options basics. Its webinars on advanced options strategies can help if you’re more experienced.

Strong Customer Support

Solid customer service means your brokerage service is always available to help. E-Trade has 24/7 customer service via phone, email, and chat. It also offers in-person assistance at its 31 branch locations.

E-Trade can also help aspiring options traders through its team of licensed options specialists.

Robust Security Measures

E-Trade offers two-factor authentication on its desktop, web, and mobile apps. Mobile users can also use biometrics to get into their online brokerage accounts.

Like other U.S. brokers, E-Trade accounts are SIPC protected up to $500,000.

Steps to Start Trading Options on E-Trade

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How do you start trading options on E-Trade? Here’s a four-step guide:

1. Open an E-Trade Account

You’ll have three account options to choose from — get the brokerage account to start trading.

2. Log in to the E-Trade App

Once you have an account, log into your chosen E-Trade platform. Both E-Trade Web and Power E-Trade offer options trading. They’re both fairly versatile, though not to the degree you’ll find on StocksToTrade, my favorite trading platform (and the one I helped design).

E-Trade is integrated into StocksToTrade, allowing you to trade directly from this powerful platform!

Give StocksToTrade a try today — a 14-day trial is only $7.

3. Select Options on the App

You need approval before you can trade options on E-Trade. The broker will review your trading experience to assign your level. There are four levels of options trading.

Level 1 traders can only access basic options strategies like covered positions. Higher-level traders have more access to advanced options strategies.

It might take a few business days for your application to get approved.

4. Start Trading Options

Once you’re approved, you’re ready to trade options on E-Trade! My usual trading principles still apply here:

  • Make your own options trades. Other people’s options trades may not match your goals and risk. They definitely won’t match your timing.
  • Learn options strategies from successful traders. Find a program, a community, a favorite YouTube channel.
  • Create your own stock watchlists and options trading plans. Don’t take someone else’s stock picks. Do your own research.
  • Record every trade and review your trading journal regularly. This helps you identify what went right and what can be improved.

If you’re searching for a mentorship program, check out my former student Mark Croock’s Evolved Trader. He’s taken my penny stock strategies and applied them to options trading — making $3.9 million in career earnings in the process!

Here’s a sneak peek of Mark’s curriculum:

Sign up for the Evolved Trader program today and start your journey to becoming a self-sufficient options trader!

How to Trade Options on E-Trade FAQs

Trading options on E-Trade can be tricky. Here’s a run-down on the most common questions.

How much money do I need to trade options on E-Trade?

There is no minimum account balance required to apply for options trading. You can buy and write covered options contracts with a cash account. To create spreads or open uncovered positions, you must be trading in a margin account with a $2,000 minimum deposit.

Is options trading on E-Trade free?

Options trading on E-Trade is commission-free. But you still have to pay the $0.65 contract fee. Active traders get a discount and only pay $0.50.

How do I get Level 3 options on E-Trade?

You need to have a margin account to get approved for Level 3 options.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”