Online Broker Review: Fidelity Options Trading

Updated Monday, January 4, 2010

Options Trading Grade: D

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Overview:

Trading options at Fidelity is best described as underwhelming. Creating new orders from the trade ticket is simple enough. Users cannot modify open orders and canceling open orders could be handled better. Closing out existing holdings from the positions menu is not as convenient as it should be. There are a limited number of order types available so those who utilize advanced options trading strategies have no choice but to look elsewhere. There is also a limited amount of option contract pricing information and no option price charts. Trade confirmations contain the date of execution but do not show the hour or the minute. Taken as a whole, Fidelity is not a competitive choice for serious or even casual option traders.

Option Order Types:

Options (one option leg) - Buy/sell a single put/cal
Buy Write (stock + one option leg) - Buy/short stock and buy/sell a single put/call
Straddle (two option legs) - Buy/sell a put and call with matching strikes and expiration
Roll (two option legs) - Cover one option position and initiate a new position with a later expiration

Details:

From the main Fidelity menu, select Accounts & Trade, click on the Trade tab and then select Trade Options. The trade ticket contains a link to an options chain menu. Since we did not know the option symbol we wanted to trade, we clicked on this link. In the options chain menu, we entered the underlying symbol for Research in Motion, RIMM, and selected to search for put options that expire within the next three months. We then clicked on the name of a specific option for a detailed quote (click on images for larger views):

The detailed quote does not contain an option price chart, which is provided by many other brokers. We closed this window and went back to the options chain menu. From here, we clicked on the ask price to buy the December 45 PUT for RIMM:

This brought us back to the trade ticket with the option contract symbol populated. To finish our order, we typed to purchase 1 contract with a limit order at $0.40 and then clicked on the preview order button:

This brought up a verification screen. We selected to place the order:

Our order was confirmed and we were provided with an order confirmation number:

From the order confirmation screen, we clicked on the orders link to go to the trade status menu. From here, trades can be canceled but they cannot be modified. Canceled orders appear with a status of "pending canceled." It would be a lot more reassuring if the status immediately updated to canceled, as it does with other brokers.

We let our trade go through so when it executed it was populated in the Positions menu. We decided to close out our position so from this menu we clicked on the Action button next to our position and selected trade:

This loaded the options trade ticket with the symbol populated, but we still had to select the action, the number of contracts, an order type and then an appropriate limit price. Other brokers handle this action much better.