Options Commission Elimination
Following the 2019 equity commission elimination, most major brokers also eliminated commissions on options. Historically, options trading had charged both a per-trade commission and a per-contract fee. The elimination of the per-trade commission, with some reduction in per-contract fees, made retail options trading dramatically more accessible.
Higher PFOF in Options
The PFOF paid to brokers for options order flow is typically higher per contract than per share in equities, reflecting the wider bid-ask spreads in options markets. For a broker routing options order flow, PFOF can be a very significant revenue line — even more so than equity PFOF.
Retail Options Trading Risks
Options carry significantly more risk than equity investing for most retail investors. Options can expire worthless, and complex strategies require sophisticated understanding of volatility, time decay, and price sensitivity (the 'Greeks'). FINRA and SEC have expressed concern that zero-commission platforms making options easily accessible may expose inexperienced investors to risks they don't fully understand.
PFOF and Options Market Quality
As in equities, options PFOF creates a conflict between broker routing incentives and best execution for clients. Options bid-ask spreads in retail-size quantities can be wide relative to fair value. Whether PFOF-funded routing in options actually delivers best execution for retail options traders is a question that the same empirical and policy debates surround as equity PFOF.