This week has been a profitable week i think for options traders with amazon, baidu, aapl, etc...so if a good amount of options traders altogether had made more than billion dollars and lets assume they were all trading at a cheaper brokerage like optionshouse. Could they hurt optionshouse since they can't charge any extra fees for large amounts of options contracts. i guess what i want to know is how much money can we traders make before we start to hurt brokerages' profits and make them uneasy. And if it does happen, what can they do to stop us?
Assuming your brokerage isn't trading against your positions, then as long as you continue to enter and exit positions they make money. The moment you stop trading, they stop making money off you (not including the money you have sitting in your account). They want you to trade larger size and more actively. IE, you make money, you trade more, your broker makes more.
thanx for the reply, but i know a brokerage makes my from our trading....but i was just wondering what if a few option traders started to make a lot of money, and since a brokerage like optionshouse can't charge extra for large contracts, will our profits be able to hurt their business... i remember reading in reminiscences of a stock operator that bucket shops refused Jesse Livermore to trade because he was taking away all their profits. So i am just curious is that still possible today?
If you were doing that type of business as you ponder in your post, then odds are you would be trading as a member thru a clearing account rather than a retail. MOST retail are not designed to do large volumes of trades. They have a specific business model an attempt to deviate from it will probably cost them money. Also, if you look at the footnotes on optionshouse page they are MM for over 2000 securities, so odds are they would be trading against you.
Brokerage houses make money on EVERY TRADE a retail client makes even if they're in a flat fee deal. Pure retail order flow is subject to payment for order flow deal on where and who they send your orders to. So they make both hard and sof dollars on every single trade you make through whats basically a cash kickback for sending your order to a specific market.
I wouldn't even post the question, they may find out who you are and close your account before you can wipe them out. Us traders should just keep raking in the millions quietly.
Direct access firms make money strictly through commissions and supposedly do not take payment for order flow. Also you control order routing again supposedly.
If this is your question, ajna answered it in the reply above. Livermore was referring to bucket shops which take the other side of your trade. They can be hurt if all their clients are winning,. Some forex bucket shops will put you on 'manual execution' if you start to win too much because they are losing money.
Hey folks - This is Danny Rosenthal, CEO of OptionsHouse. For the record, we like it when our customers make money. We assume that this puts a smile on their faces and they trade more which generates more revenue for us. I hope that the following pieces of information are helpful: - OptionsHouse does not trade against customer positions and in fact does no proprietary trading or market making. - PEAK6, the parent company of OptionsHouse, is a proprietary trading and market making firm, but OH does not send any flow to PEAK6 except a very small number of RFQ orders (which clearly state that they are being sent to the PEAK6 Inst desk) desiged to provide liquidity beyond what exists in the market. - We charge a flat rate of $9.95 per trade with no per contract commissions. We can make money at these rates and hope to continue to attract active traders. Hope this helps. Cheers, Danny