kralcd - I pay $2-3/contract at Preferred ($2 if premium is up to $10 and $3 for premiums over $10), there is a $20 minimum commission but since I'm usually trading 10+ contract lots it's irrelavent.
ArchAngel-that's okay if you trade 10+ contracts, if I trade 3 contracts per trade, 50 times a day. I would pay 3x50x$1.95 = $292.5 through InteractBrokers. Through Preferred with their minimums I would pay $20x50=$1000. That's a big difference for me. For me the significant thing is that there is no minimum commission, this way I can ease into and out of a trade. Similarly I can now buy 100 shares of Yahoo for only $1 which is almost negligible. Until Preferred and co. scrap their minimums, I find it hard to even consider them.
Are you scalping options? 50 small lot trades a day is a lot for an off floor option trader. I haven't found it worthwhile to trade less than 10 contract lots (not because of a minimum commission, just because 1-2 points on only 3 contracts isn't enough to risk the occassional screwing around by the option floors). In that case, it's a lot easier to just trade a 300 share lot of the stock (with a much smaller bid/ask spread, a delta of 1.0, no risk of implied volatility deflation, and greater speed and uniformity of entry and exit). As far as buying 100 shares of YHOO for $1 - pardon my skepticism, but there's got to be something not mentioned in that equation. Nobody can make enough revenue over the long term only charging a $1 commission unless they're getting paid for order flow or scalping your trade. Good luck.
I like QQQ and OEX where liquidity is good. I also like some of the larger more liquid stock options, but I always use best execution. My executions are usually instant (i.e just as fast as a stock trade), and where the option is quoted on all 4 exchanges I often find that there is no spread. True, when there is no spread the exchanges screw with their systems (and me) but thats why I stick more with the indices where I like to scalp in and out. As for the stocks, if I buy 100 Yahoo then $1 commission is all that comes off my balance, (no ecn fees). I can choose to send my order to Archipelago, Island, Inca, Selectnet, Brass or Redi. so don't think that they are selling the order flow.
I can understand the fast execution for autoexecutable options (under $10 premium) - at least when the floor traders don't get the exchange to declare fast market conditions and turn off autoexecute. And when the option is multiply listed the spreads definitely shrink and it's easier to get in and out at good prices. But OEX options are only traded on CBOE and the QQQ options are only traded on the AMEX, so you don't get the spread reduction or flexibility inherent with multi-exchange listing. And last week I noticed that the floor even had the spread on the OEX pushed up as high as 2 points. That makes it pretty tough to make any money regardless of what you pay in commissions. Scalping of any kind is usually ultimately a long term losing enterprise, so if you're successful at it congratulations. Good luck.
AA I agree but you should clarify - it's a losing prop unless you are in the TBond pit or a specialist of NYSE. Blanket statements like this can be confusing to the uninitiated. Plenty of traders make money scalping but why do it if one can make 1/2's or more. I agree. At home with paying ticket charges the COST will kill your business not the volume. It's not that hard anyway if you have no cost !!!! The 'wig' will get you ultimately. I scalped and learned from an ex-specialist - even a penny a share may be too much to scalp - it's only good for the broker - however I was down at the CBOT and there it's in theory doable and done if you can do volume. Problem the floor brokers will only deal with you if you do volume and the small guy will not execute his 5-10 lot. There is no transaction cost per se to speak of (relative to the tick value). I would like to look into the mini-sp execution via computer.... But of course you pay for the membership etc etc. so in reality you are right for most *mortals*. ------------------ Buy low - sell high LEGALIZE POT !!!!
IB offers e-minis for $4.95 (all in) a contract which allows a profit on 1 tick. However, easier said than done and you'll need more than 1 tick to make a living. Regarding previous comments by AA, IB does not sell order flow and does not take a look at an order before routing to an exchange. There are no hidden costs. If institutions pay a penny a share, it shouldn't be so incredulous to offer the same rates to retail.
Instituitons (hedge funds etc) pay much less i.e. with decent volume 1/4 c - 1/2c NO TICKET cost of course. What most object is the lack of longevity of the software and backup (i.e. desk support) I.e. would YOU trade futures with no phone backup and it's heading against you almost locked limit and the IP goes slow or down ???
If institutions are paying only that much per share for cash transactions(w/ or w/o clearing and exchange fees), it makes the point of a penny a share for retail even more reasonable relative to what most brokers charge. I'm not sure what you mean about longevity. IB or it's affiliates have been trading electronically since the early 80's and have often been the first to electronically route orders to a given exchange. The front end software is important but the backend routing mechanisms are even more so. Regarding phone backup, IB does have phone backup but probably will not be able to execute your order at the speed you seem to desire. If you require a full time broker who execute an order the instant you call him (good luck on that account during a fast market), you will end up paying higher fees. I trade electronically on a number of markets around the world and if the connection goes down, I take the risk of being screwed. However, you have to weigh the long term savings on commissions and slippage, due to better executions, when making the decision to forego a human broker.
def - I think the concern about longevity (and still my concerns about account safety) are driven by the fact that IB is NOT those affiliates or the Timber Hill group that you always talk about. It's an LLC insulated from the others (thus my belief that mentioning Timber Hill is irrelavent since they're not protecting my account if something goes badly at IB and without insurance all I have is your word that your systems will prevent a meltdown - which is probably true, I'm just not willing to risk my money on it). Probably much the same with people's thoughts on longevity. It's not to say that IB isn't a great place (it might be, it's just not possible to tell) - the combination of elements gives some of us an uncomfortable feeling and saving a couple bucks on commissions isn't worth enough for me to experiment. Personally, I'd switch to CyberX before IB (looks like better software, account protection, and now backed by Schwab). Might look at IB in a couple of years after they've ironed out things.