If you’ve been in the investing game for a little while now you may have overheard at least one person mention the term “options trading” at one point or another. That’s because many savvy investors understand the lucrative potential they possess.
Before diving into the exciting and complex world of options, you might be wondering what exactly they are.
The short answer is that they’re a type of security, a contract that allows the owner to sell an asset at a certain price within a certain time-frame. They have great versatility but come with strict terms and conditions. There are many strategies for buying, selling, and trading options; even those with working knowledge of the market are at risk of losing serious amounts of money.
Free Option Trading?
That’s why serious investors practice trading options with a trading simulators to sharpen their skills. By giving users an exact simulation of current market conditions, along with real-time analytics, users can practice through a form of paper trading, where, upon receiving makeshift currency, they participate in virtual options trading and set up their up very own trading account. But, while many options brokers create these with their very own options trading software, many can be sub-optimal and downright inaccurate in terms of emulating genuine market conditions.
With so many choices out there, it can be difficult finding the a well-rounded simulator. That’s why we’ve compiled a list of the most useful ones for you to try out:
The Best Free Paper and Virtual Options Trading in 2018
We’ll start off our list with one of the best stock market simulators out there. Investopedia is a great company that can immediately get you started on options trading. The tool allows you to instantly create your own options simulator game, albeit not the most expedited process, customize your contest, and invite whomever you like to participate. Their simulator is a great learning aid and has an intuitive user experience with a good trading feature to boot. In addition, they offer many guides to familiarize yourself with the process if you’re a beginner. To get your feet wet today, be sure to give Investopedia’s simulator a look.
Another well-known institution in the world of trading is OptionsXpress. Their simulator is called Virtual Trade offers great insights that allow you to learn the basics of options trading in an all-encompassing environment. With Virtual Trader, you can put your strategies to the test under real market conditions. They offer many features such as an initial $25,000 of practice money in your paper trading account, real-time quotes and charts, over forty innovative trading tools, advanced ordering tools, and an in-depth Education Center that offers free training and how-to guides for traders of all experience levels.
Advisory: OptionsXpress requires a large amount of personal information when signing up.
Wall Street Survivor separates itself from the competition by giving you the choice of utilizing your option spreads within your trade strategy. They also offer a free setup and a mobile app so you can trade on the go. The company puts a lot of emphasis on the educational aspect of options trading, granting its users access to free articles, guides, and real instructors to expand your knowledge.
In addition they provide educational tools on a variety of other topics and provide you with quizzes to put your skills to the test. Their trading simulator starts you off at $100,000 in virtual currency, and once you’re ready to take the next step, you can enter competitions through the simulator itself. One example is that one month, the top three investors who earned the most with the practice money given to them will receive prize payouts in real money.
Market Watch’s Virtual Stock Exchange’s trading simulator might not look the most glamorous, but their bareboned interface offers great ways to elevate your skills in options trading. It’s also surprising that with such a modest layout, Virtual Stock Exchange allows its users to connect to their personal Facebook accounts and begin the trading process immediately. The program allows you to trade in real-time with your virtual portfolio, discuss strategies with other users within your game, and provide the option to customize and create either public or private games. One thing to note is that Virtual Stock Exchange does not allow trades under $2.00, so keep that information in mind before entering.
Pro-tip: If you are looking for a advanced level day trader simulator check out this one out from MarketWatch
The OIC is a group whose sole purpose is dedicating itself to bettering the education of individuals, including investors, advisors, and managers. In addition to their core program, they provide many learning tools such as a multi-part overview of how options work, detailing the benefits and risks of trading, and courses on options pricing. Additionally, their comprehensive website offers seminars, on-demand videos, and even events you can attend.
Their trading simulator differs in that users do not use virtual currency but rather the OIC uses a Position Simulator that explains what affects the price of options and uses a mathematical formula with specific inputs to calculate the new price. Because of this, the OIC does not provide a traditional simulator but offers a sophisticated online calculator that can price American stock options given the specified data. A great, proactive learning environment and extremely user-friendly.
Similar to the Options Industry Council, How The Market Works is another educational company that teaches aspiring investors about their namesake. Their sophisticated options trading software has put their simulator on the map, where it’s currently used by over 350,000 individuals worldwide along with 10,000 high school and middle schools every year. And like with all simulators, How The Market Works teaches you how to invest in the market through trading games online, creating a virtual portfolio using real-time market conditions.
The company’s simulator differs from others on this list due to its in-depth environment and numerous features. The program allows users to access Forex portfolios, penny stocks, and mutual funds in both the US and Canadian markets. With their simulator, you can have up to three stock and Forex portfolios and start between $100 to $500,000, They also offer contests each month within different formats, such as penny stocks or short sells, and offers prize payouts.
OptionsHouse is a broker that offers the unique feature of using their platform before starting a paper trading account with them. They have what it takes to compete with the industry’s finest due to their efficiency, product quality, and fantastic user-experience interface. Their intuitive platform and functionality provide investors of all levels the tools they need to succeed. Their virtual trading feature is a great way for amateur investors to woodshed their skills and compete with the pros. It’s easy to find quotes and their filing system allows the user to create notes after each trade.
Back in 2015, OptionsHouse also expanded their chart trading feature which conveniently allows you to adjust trades onto the actual chart. You can also see and review an order ticket that’s already filled out before submitting your trade. Their charts also contain all of your past buys and sells, something many other brokers don’t offer.
Thinkorswim is arguably the best options paper trading simulator online, and for good reason. In the game, you’re given $100,000 worth of virtual money, which you can choose to invest in options, stocks, and forex, among others. Thinkorswim also provides a blanket of educational webcasts. A bit of a warning: Thinkorswim PaperMoney is only available for download. If you’re an experienced user looking for a more exciting platform and are looking for more its advanced features, you will find value using Thinkorswim.
Pro-tip: Thinkorswim also has a fantasy stock market game, which can be found here.
What Else To Look For
Now that you’re better informed of the various brokers that offer options trading simulators, there’s just a few more things we need to review before you begin your exciting new paper trading career:
When choosing an options trading simulator, be aware that you’re looking for a multi-level platform that give you things beyond just the numbers; one that gives you reports analyzing and detailing the ‘how’ and ‘why’ a price changed. Another aspect to consider are the overlying factors affecting an option’s price.
It’s very important you find a simulator that is not only fast and efficient but also analytical enough to improve your trading strategy. Analytical reports are a great way to track your own progress as you make your way through the learning process. Graphs and charts, along with growth and loss indicators, are crucial as they should reflect actual reports and explanations explaining why certain options prices rose or fell.
Also consider their software and its features. Probably even more important for beginners, finding software that’s sophisticated, yet user-friendly, is a great combination for when you finally practice options trading yourself. Tutorials are always a good feature to have and help buttons can offer immediate assistance when you can’t figure out something yourself.
If it’s the thrill of the market and your competitive nature that drives you to becoming a better investor, find a broker that offers games and competitions. That way not only are you furthering your own growth in this field but you’re enjoying yourself as well. The gaming aspect of options trading is a great way of gauging how you fair with the rest of the competition while earning real prizes and money along the way.
Be sure to direct your attention to the educational materials a broker offers in addition to their simulators. Theory is just as important as practice and if you feel you need to expand your knowledge some more before getting your feet wet then be sure to find a broker that offers extensive articles, guides, and even videos that teach you about the subject matter.
Real-Time Trading Support
For even further assistance, look for a platform that not only gives you tutorials but will interact with you in real-time. Many of these will not only give you the literature to learn more about options trading but they will also offer suggestions for trading based on current market conditions and trends. The flipside to this is that these recommendations tend to be a little bit “by-the-book” so if you are testing out a new strategy you should take these with a grain of salt.
With all this information, you are now more fully-equipped to choose a simulator that suits your needs and style of investment. The key is to take small steps toward your goals and not to get frustrated if you aren’t seeing positive returns right away. These simulators are a safe place to make mistakes, so the decisions you make in these versus real world conditions may vary. Just make decisions as if you were actually spending money. With that said, I wish you luck on your newest venture in options trading.
There’s really no use in learning about options unless you take action. I recommend you first go ahead and sign up for an account with one of the many options trading brokerages available. Then you’ll actually get to make some money from reading this article.