It really depends on many other factors as well than that when choosing a brokerage firm. For an example. Investor A with Firm A will receive a .50% interest on his cash balance for potential assignment, Investor A has 200K,sitting there, 500K AUM total. Only does one or two trades every other month. Investor A is a basic Put and/or covered call writer and does not borrow. Interest income if cash is never used for taking delivery of an equity position would be 1000 (83.33 monthly) Investor B with Firm B is an Iron condor writer, has 30K cash, 800K AUM total does several trades per month. sometimes borrow's on margin. Firm A has high margin loan rates, and of course 9.95 trade + .75 cent per contract. Firm B has very low margin loan rates, but pays only .05% on cash balance and 0.25 to $1.00 per contract trade But they charge 10 dollar monthly for the account if trade commissions are less than 10 Investor A makes sense with A and B with B You need to look at more than just one aspect of the Brokerage firm before making a decision. It is never a no brainer
Yes, there a a number of factors that should be considered when choosing a brokerage firm. However, since this was a specific question about TD Ameritrade versus IB, you should consider accurate details: TDA charges 5-7% more on margin borrowing than IB (depends on amount borrowed), IB achieves better execution rates and both pay kaka on cash balances. TDA pays .03% on cash balances. That's point oh-three! Even if IB pays zero, it's a mute (sic) topic. So while your hypothetical scenario is a lovely on paper example of possibilities, reality is, regarding TDA vs IB, this one really is a no brainer.
C'mon man! You need to consider all aspects of these numbers before making a brokerage choice. Don't belittle the opportunities at TDAmeritrade. If you're a big shot with a million AUM, you can make $25 a month in yield at .03% APY using their cash sweep into FDIC insured accounts. How can you turn that down when all you have to pay is $19.99 for assignment/exercise and $9.99 +.75 per contract per option trade? What a deal!
Hey spindr, I'm not endorsing any brokers here but you can negotiate rates with all of them. They are pretty much all the same if you have a large account. It's amazing what you can get if you just ask for it.
Point well taken but I think it's more than just account size. IMHO, shares/contracts traded is more imp't to them - unlike the Fool Service brokers who often get an annual account fee and get a monthly bump for AUM. I've transacted with far more brokers than I care to admit but only 3 in my 10+ years of internet trading. While my account size is decent, at times, my trade frequency has been very high due to PDT-ing. Despite that, TD Ameritrade couldn't, errrr wouldn't even get close to IB's rates. (And yes, I asked nicely ). So I don't think they're all the same for the larger account and definitely not for the smaller or less active guy. I have no axe to grind with TDA. The best rates they offered me would have taken a lot more out of my pocket (5 figures per) so they're not for me.
I know a customer that got rates at TOS (not TD) that were actually less then IB's. Yes, he did a lot of volume. Honestly man, it just comes down to negotiating.
I wonder if that customer extensively used margin when trading? Given TOS's exorbitantly high margin rates relative to IB, I believe if you use margin quite a bit then you're better suited to choosing IB as a broker. That being said, I loaded the demo of IB's TWS and nearly tore my hair out. Their platform is extremely slow and complex as all hell. I tried to load an option montage displaying all strikes on the SPX and it took forever to do so whereas in TOS it loaded in a matter of seconds. Due to TOS's superior trading platform I don't mind paying their rates, but if IB could actually make a feature laden and faster trading platform I would switch in a heartbeat.