Tastytrade Review: An Options-focused Broker With Some Unique Features

Tastytrade might be for you if: You're an active trader, especially if you trade options or futures contracts. Its trading technology and options pricing schedule are among the best in the business. Additionally, Tastytrade offers stock trading capabilities and a mobile app. In this Tastytrade review, we'll explore the features, pros, and cons to help you decide if it might be the right stock broker for you.

Top perks

Tastytrade is one of our favorite brokerages. It ranks among the best brokers we've seen in these categories:

Keep reading for the perks that make Tastytrade one of our top picks.

Pricing

For options traders, it's difficult to find a better pricing structure than Tastytrade. The brokerage only charges options commissions when opening a position. Plus, commissions are capped at a certain per-trade maximum. While there are options trading platforms with commission-free options trading, they don't have nearly as much functionality for serious traders.

Trading technology

Tastytrade's trading platform was developed and designed by the team that pioneered retail options trading years ago. It's tough to find a better place to actively trade options. While it isn't necessarily one of the best brokers for beginners, Tastytrade offers some of the best technology for experienced traders.

Lots of options

From the trading platform to the content offered on the site, Tastytrade is all about options. There is no other major brokerage that's nearly as options focused as Tastytrade.

Account types

Tastytrade offers individual and joint brokerage accounts, as well as traditional, Roth, and SEP IRAs, beneficiary IRAs, margin accounts, corporate accounts, and trusts.

No minimums

If you're wondering about Tastytrade's minimum balance requirement -- there is none. That's right, Tastytrade has no minimum initial deposit when opening a brokerage account. You can make a stock or options trade as long as there's enough in your account to cover a single share or contract. However, it's worth noting that you'll need at least $2,000 to qualify for margin privileges.

What could be improved

Mutual fund availability

To be fair, long-term buy-and-hold investors aren't the customers Tastytrade is targeting. But the availability of mutual funds could open up the platform to a wider group of investors.

Some account types not available

While Tastytrade's account types will be fine for most investors, it doesn't offer SIMPLE IRAs or Solo 401(k)s.

Margin interest

Tastytrade is in the middle of the pack when it comes to margin interest rates. Other platforms geared toward active traders have far more competitive margin rate structures.

Commissions

Tastytrade's pricing is one of its more unique features, especially when it comes to options trading. First off, like most brokers, Tastytrade offers $0 commissions on stock and ETF trades.

When it comes to options, however, that's where it gets interesting. At first glance, Tastytrade's standard $1.00 per contract options commission might actually sound a little bit on the high end. After all, many rivals have per-contract prices in the $0.50-$0.75 range. However, there are two big differentiators:

• Tastytrade only charges commissions on opening trades. All closing options trades (when you exit a position) are free. This effectively cuts the commission structure in half when compared to most brokers, which charge commissions on both sides of a trade.
• Tastytrade caps its commissions at $10 per leg. In other words, if you buy 100 contracts of a certain call option, your commission will only be $10. If you do a two-legged trade (a vertical spread, for example), the maximum commission you'll pay is $20, no matter how many contracts are involved.

The takeaway is that Tastytrade's pricing is especially advantageous for options traders who frequently deal in large quantities of contracts.

It's also worth mentioning that Tastytrade's platform is only set up for stock, options, crypto, and futures trading. (Note that futures have their own commission schedule, which is lower than most rivals.) So, there is no pricing for mutual fund trades.

Tastytrade lets users trade Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. The fees charged are significantly higher than those on other cryptocurrency exchanges, the best of which charge you less than 1% per trade. However, crypto commissions are capped at $10 per order ticket, so the pricing structure may benefit traders who frequently buy and sell large amounts of Bitcoin.

Buying mutual funds

If you're a mutual fund investor, Tastytrade isn't the broker for you. The company is strictly focused on stocks, options, crypto, and futures, at least for the time being.

Fees

In addition to the trading commission structure discussed earlier, users might face other fees. While there's an extensive fee schedule listed on the broker's website, here are some of the most common:

• Outgoing wire transfers (domestic/foreign): $25/$45
• Returned check fee: $30
• Paper statements: $5 per statement
• Paper trade confirmations: $2 each
• IRA closing fee: $60

Trading platform

Tastytrade was founded and is currently managed by an executive team that formerly held leadership roles at thinkorswim, which is now TD Ameritrade's active trading platform. CEO Scott Sheridan co-founded thinkorswim. The rest of the Tastytrade team all held executive roles when thinkorswim was still independent.

So, it should come as no surprise that the focus of Tastytrade is its high-tech trading platform. The platform offers some very high-tech options trading tools. These aim to make complex options trading as user friendly as possible. Tastytrade offers a desktop trading platform (the most powerful and full-featured choice), as well as trading in a web browser and the company's mobile app.

Margin rates

We're generally not fans of margin trading, but many investors are. And this is especially true for active traders, which is Tastytrade's core customer base. If you use margin (borrowed money), it's important to be aware that doing so isn't free -- brokers charge interest, just like you'd expect on any other type of loan. So, a broker with relatively low margin rates can be attractive.

Tastytrade's margin rates are in the middle of the pack -- they aren't particularly cheap or expensive. Like most of its competitors, the rate you pay depends on how much you've borrowed:

Research offerings

Tastytrade is primarily designed as a trading platform (as opposed to a long-term buy-and-hold investment platform). Therefore, you won't find much of the traditional stock research that many other brokers offer.

However, Tastytrade does have features such as in-platform video content. There are also ways to watch professional options traders in real time. Investors can even copy their investment strategies with a click of a button.

This brokerage is right for you if:

Tastytrade was developed by some of the most experienced retail options trading pros, and the product reflects this fact. This is a good brokerage for active traders, especially those who want the best tools and pricing structure to trade options and/or futures. But long-term investors who want to buy and hold stocks, ETFs, and mutual funds -- and beginning investors -- should probably look elsewhere.

Compare Tastytrade to other brokerages

Wondering how Tastytrade stacks up to the competition? Check out our reviews:

At The Motley Fool Ascent, brokerages are rated on a scale of one to five stars. We primarily focus on fees, available assets, and account types; however, we also take into account features like research, education, tax-loss harvesting, and highly rated mobile apps. Our highest-rated brokerages generally include low fees, a diverse range of assets and account types, and useful platform features.

See our full methodology here: Ratings Methodology