I asked chatgpt and he says Robinhood promotes commission-free options trading, which has attracted many cost-sensitive traders. However, studies have indicated that Robinhood's customers may incur higher implicit trading costs due to factors like payment for order flow, potentially leading to less favorable trade executions. Therefore, while explicit fees are low, the overall cost of trading on Robinhood might be higher compared to other brokers. what is payment for order flow? Payment for Order Flow (PFOF) is a practice where brokerages route customer orders to market makers or high-frequency trading firms in exchange for compensation. Instead of sending your trade directly to a stock exchange, the broker sells the order flow to third parties, who then execute the trade. Which Brokers Use PFOF? Robinhood, Webull, TD Ameritrade, and E*TRADE heavily rely on PFOF. Fidelity and Interactive Brokers claim they do not use PFOF for stock trades but might for options. which brokerages offer direct routing options? 1. Interactive Brokers (IBKR) Interactive Brokers provides direct access through its Trader WorkStation (TWS) platform, enabling traders to route orders directly to various exchanges. This setup offers enhanced control over order execution and access to Level II market data. warriortrading.com 2. Lightspeed Trading Lightspeed offers direct market access via its proprietary Lightspeed Trader platform, which supports over 100 order routing options. This platform caters to active traders seeking rapid executions and diverse routing choices. warriortrading.com 3. TD Ameritrade's thinkorswim Platform TD Ameritrade's thinkorswim platform provides direct market access, allowing traders to route orders directly to specific exchanges or electronic communication networks (ECNs). This feature is particularly beneficial for active traders requiring precise control over their trades. warriortrading.com 4. SpeedTrader SpeedTrader's PRO platform offers direct market access with approximately 25 order routing options. It provides Level II quotes and advanced charting tools, appealing to traders who prioritize speed and flexibility in order execution. warriortrading.com+1en.wikipedia.org+1 5. Cobra Trading Cobra Trading delivers direct market access, featuring advanced tools tailored for active traders. The platform emphasizes swift executions and customizable routing strategies. warriortrading.com 6. Capital Markets Elite Group (CMEG) CMEG offers direct access routing on select platforms, providing traders with the ability to send orders directly to exchanges. Notably, CMEG does not enforce the Pattern Day Trading (PDT) rule, which can be advantageous for traders with smaller accounts ---------------------------- What are your experiences and which one do you recommend?
For non professional accounts it's ibkr. schwab might be the same for options, more expensive for futures (but that's out of topic here) and it offers free market data (IB doesn't) but for retail data subscription is cheap. Also IB offers some tiered fees, where quantity reduces your fees. But I heard here that you can approach schwab and try to negotiate if your volume is high. Things might be different for professional accounts.
IB and only IB and it is only for active traders. My commission is about 40k per year. If a broker charges you less, try to find the catch. I am happy that I did not see Merril Edge in the list
tell me why I should choose IB over schwab? I am looking at options trading probably once a day so I am not a heavy trader but is there any technical advantage of IB over schwab?
Schwab does not offer nearly 24hrs index options yet, IB does. I also read somewhere that IB margin loans are cheaper and I think they pay more interest on idle cash. I use both...
Why do you want to go with schwab? If I were you I would open an account with schwab that you prefer and if you are happy, stay with it. Dont listen to anyone. I opened an account witj Merrill because they offered $600 bonus and I was trading only S&P options. When I was assigned or options got excecised, I would go ahead and sell the opsite side to clear my short or long position. Lets say I was short 5000 shares of S&P and sold 50 puts. When those puts were assigned I wad seeing I am 5000 share long and 5000 share short and because of that I wad charged like $700 margin interest a day. After calling them they would agree and fix it but the next day it was the same story. Definitely If i was only buying 13 share of S&P and keep it tor 6 months, I would not face this issue.
Also because of your low trading volume, for normal IB account, IB might charge you $10 real time data feed.
You are right I should not use Schwab they use Payment for Order Flow (PFOF) and Merill does not. I just learned about it today