Unless you have an MBA in Finance from an excellent school, or a large portfolio of underlying assets that you need to hedge, restrict your experimentation to pencil and paper or a spreadsheet, taking all the spreads and fees into account.

It is standard Wall Street wisdom that the only people who consistantly make money in options are those who sell “covered calls”. Everything else is stacked against you.

Most brokerages will trade options for you. As I said, you might as well set your money on fire if you’re not already rich and just protecting your portfolio, or a math whiz with an advanced finance degree.

You can trade options with almost any brokerage, so if you already have a broker you like you might want to check with them first.

The three brokerages I see recommended most often on options message boards are

(1) Interactive Brokers (IB)

There are a lot of people who believe IB has the best rates for trading option, but there is also a fair amount of agreement that they do not supply you with a lot of support in your trading.

(2) Options Xpress (OX)

This brokerage, as you might guess from its name, reportedly has some of the best tools to help option traders.

(3) Think or Swim (ToS)

This strangely named brokerage was created by professional option traders and has a reputation for being willing to spend more time talking with you and helping you with your option trades.

Every brokerage is required to get an agreement from you that you understand the risks of trading options. Most brokerages have different option trading levels which allow you different types of option trades. The higher the level, the more types of option trades you are allowed to do. Each brokerage has criteria for determining what level you can get. the criteria may include experience, account size, and in some cases even your annual income.

You can do stock options trading at Merrill Lynch.