I currently use Interactive Brokers. Every Friday I place a trade which currently consists of buying 75 combos. Each combo has 3 legs, 2 buys and 1 sell. The order is placed as a combo order. The commission on these 75 combos came out to $221 today. Basically there are 3 options traded for each combo. Therefore, it appears each option cost me about $1 The order is placed as a limit order splitting the bid of the combo and the underlining is SPY. Does this commission seem right? Is there anything I can do to lower my commission at IB? Does switching to the tiered stock commission do anything for options trades? While $221 is not a lot, some Fridays I will pay double as I have to close out the combo from the previous week, some weeks its less depending if any options will expire out of the money.
You can lower your commission by doing a similar trade in SPX with 1/10 the volume and you get better tax treatment because it's a 1256 contract.
Multi-leg options kill on commissions. If you're confident, nothing wrong with directional. Options on SPX and other indexes are great but beware the bid/ask spread. Much wider than what you see on their counterpart ETF options.
SPX options almost always trade one increment past the mid on a limit order, as long as you're not super far OTM and as long as the mid is a true mid, not one impacted by another limit order above/below it. So while the bid/ask appear wide, they're effectively not any wider than the ETFs.
I'll give it a shot. I would love the tax benefit of trading options on an index rather than an equity.
To enter that trade with my broker it costs me .15 x 225 = 33.75 plus 5.00 commission = 38.75 plus exchange fees and tax. This is too expensive for me, so I use SPX where 8 three legged spreads that are equivalent to 80 of your spreads would cost me .95 x 24 =22.8 plus 5.00 commission = 27.80 and maybe another 2.00 for fees and taxes. My cost of ~ 30.00 vs. yours of ~ 240.00 is just ridiculous. I'd say that you could save a bundle if you use SPX and find a more reasonable brokerage.
ES options actually seem to quote tighter than SPX, at least ATM. The only rub for me is that ES options deliver into the future where SPX is cash settled, but if you don't plan on holding into expiration it's a non-issue.
SPX may not quote as tight, but in practice they fill near the middle and, more importantly, I've found they cost less than the expected 10x SPY options. You do get back part of that premium on SPY options when you sell though, but with a higher price, they will decay faster and if they result in a loss, the loss will be proportionately greater or if they go into the money, the profit will be proportionately smaller. For the same reasons, SPY is should be preferable for selling premium. BTW: How well do the ES options stack up against SPY and SPX options in terms of proportional cost?