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How to Trade Options on Interactive Brokers

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Written by Timothy Sykes
Updated 4/20/2023 8 min read

Learning how to trade options on Interactive Brokers (IBKR) is something many serious options traders should consider.

Most online brokers nowadays are geared toward beginner traders. There’s nothing wrong with being a beginner-focused platform. But experienced traders will want a trading platform with more meat on its bones.

Interactive Brokers is one of the top online brokers due to its advanced technology. It’s packed with features that benefit active traders.

Does that mean Interactive Brokers is a good online broker? That depends on whether it caters to your needs.

The best broker for YOU is one that will help you reach your goals. You can get a sense for whether it will be able to by exploring its features — that’s what we’re here to do.

Read on for a deep dive into Interactive Brokers’ features and see if it’s the right broker for you!

Trading on Interactive Brokers

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Interactive Brokers built its reputation as a great trading platform for experienced traders. This might deter some beginner traders because they think the platform is complicated. But that’s not entirely true.

IBKR offers multiple accounts and trading platforms for traders of various experience levels and strategies. This includes all of the following:

  • IBKR Lite: This is Interactive Broker’s account for part-time traders. It offers commission-free trading and access to IBKR’s flagship platform, Trader Workstation. It’s a highly-customizable desktop trading app with best-in-class screeners, analysis tools, and more. It even has an options strategy lab that compares multiple options chains simultaneously.
  • IBKR Pro: This is Interactive Broker’s account for advanced and full-time traders. It gives traders everything included with IBKR Lite, but lets you route your own trades so you’re not subject to payment for order flow (PFOF) routing. Pro also gives you lower margin rates.
  • IBKR IMPACT: This is a trading app for responsible investing and trading. The IMPACT app lets you choose stocks based on a company’s values and political spending. The IMPACT dashboard also lets you exclude companies with dubious business practices. This means you can avoid companies that do animal testing or other things you oppose.
  • IBKR GlobalTrader: This is an app for international traders. IBKR GlobalTrader provides access to over 80 exchanges on multiple continents. This is especially useful for trading European stocks or other foreign securities.

IBKR provides these features for all accounts:

  • Wide asset selection
  • Commission-free trading on IBKR Lite
  • Low commission fees on IBKR Pro
  • Access to its powerful suite of platforms
  • Top-notch research from numerous sources
  • Paper trading simulator
  • Phone, email, and chat-based customer service

Looking for alternatives to Interactive Brokers? Check out my articles on Schwab, Fidelity, and Questrade.

Benefits of Trading Options Using Interactive Brokers

Interactive Brokers is one of the most popular broker choices for options traders. Here are several reasons why:

Multiple Account Choices

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Interactive Brokers caters to customers of all experience levels. You can choose IBKR Lite if you’re a casual trader and IBKR Pro if you’re a professional trader. Both accounts have access to the same powerful tools.

Low-Cost Trading

Like most brokers, IBKR Lite doesn’t charge commission fees on stocks, exchange-traded funds, and options. You only need to pay the standard $0.65 contract fee on options.

If you’re like me and think it’s worth paying for better executions, check out IBKR Pro. There’s a commission of up to $0.005 per share for stocks and some ETFs, and no added base commission on options. The biggest difference between the two account types is Pro’s improved order routing, which can provide more control and better executions.

Wide Trading and Investment Selection

If you like trading multiple asset types, IBKR has you covered. It offers the usual stocks, mutual funds, bonds, hedge funds, and options. It also deals in fractional shares, precious metals, and select cryptocurrencies.

It’s always a good thing to have a broker that offers more than you need, and gives you the space to grow and change strategies.

Large Research Repository and Extensive Educational Resources

IBKR has a massive selection of research materials. It offers paid and free subscriptions to reports on thousands of companies.

IBKR has educational resources for new and advanced traders alike. There are bite-sized videos on different investment products, webinars on trading strategies, and more. It also has multi-language tutorials for international traders.

Solid Account Insurance and Security

Although IBKR is an international broker, it provides industry-standard SIPC protection for its U.S. users. That ensures your account for up to $500,000.

Mobile device users can implement biometric recognition to log into their accounts. Advanced traders with large accounts can get extra protection with a security card.

Steps to Start Trading Options on Interactive Brokers

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Here’s a four-step guide to starting your options trading journey on Interactive Brokers:

1. Open an Interactive Brokers Account

Set up your brokerage account and choose between IBKR Lite and Pro. Make sure you’ve done your research first — these accounts have different fees, which will affect your trading strategy.

2. Log in to the Interactive Brokers App

You can use the more powerful desktop platform, Trader Workstation (TWS), or the web or mobile apps. They will all let you trade options, but TWS has the most specialized tools.

3. Get Approved for Options Trading

You need approval before you can trade options on Interactive Brokers. Open your Account Settings and choose Trading Permission. Check the box for options trading, answer the questions, and sign on the dotted line. Trading permissions are usually approved within two business days.

4. Start Trading Options

Just remember to follow these rules…

  • Don’t copy trades or picks. Trading isn’t about discovering some secret super stock — it’s about recognizing opportunity and having the skills to make it work for you.
  • Learn options strategies from advanced traders. A good way to do this is by joining online communities and sharing your trading experiences.
  • Make your own watchlists. This is the bedrock of becoming a self-sufficient trader. Watchlists let you shrink the massive offerings of the market down to a manageable, high-potential set.
  • Record every trade for future review. This helps identify what went right and what needs improvement.

Learning from experienced traders is the best way to avoid some of the dumb mistakes most traders make. Their knowledge will also help you develop your strategies faster.

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 towards becoming a self-sufficient options trader!

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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

* 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”