Hi all, Just wondering if anyone else out there is getting charged commissions for options that expire worthless? I can understand why a fee might be charged for auto-exercise, but Cunningham Commodities charge full commissions to "close" expired option positions, even though no actual transaction is taking place. Can anyone recommend a good futures/options broker that doesn't do this?
Until I read OP's post I didn't know *any* broker did this. My limited knowledge includes IB, TOS and OX. Are these special options you're talking about? Maybe options on corn futures or the like?
Ok by them meaning "closing" expired option positions, is there an actual transaction that actually "closes" the option position? If not, that is ridiculous! An option that expires worthless does not require a broker or anybody to do anything. How can they charge a commission for having done nothing in return? That's against the the essence of contract law which states that a compensation is only to be paid for specific performance of the other party. If there is no specific performance in any form by the other party, there should be no compensation. As far as I know, NO brokers charge commissions or any fees for any options expiring worthless as long as you don't actually execute a transaction to actually close the position. So if you are looking for another broker, all the choices are available for you.
Sorry, but not true. There are many FCMs that price their customers based on Round turns. For Futures, they know they will get 2 commissions but for options they priced you for two transactions. If they were going to price your for one side, they would have priced you higher. I don't do that, but many FCMs do. This is from a typical new account set up sheet. Half in Half out charges for one side. Up front gets you up front.
Is this options on futures? For stock options, when options expire worthless, there is no resulting transactions, no trades, no round turns, no nothing. And there is no auto-exercise from OCC when the option is OTM at expiration. Like I said as far as I know, no brokers charge a commission for options for stocks expiring worthless when there is no trades. Options on Futures might be different. That I don't know.
Yes. The brokerage fee comes from the broker or FCM, not the exchange, as long as the option was OTM. It is just part of the commission's setting process. How much revenues do they want from each trade. I have clients that trade a fair amount of OTM options on futures and I 'm an X-trader, so I don't like charging for options that expire or Round Turn/Up Front pricing. I would consider it if the client had a very low rate and only traded OTM options.
Bob, what's the point of the half-in, half-out thing anyway? Why not just charge the standard fee on opening the position? What's the incentive for the FCM to utilize half-in/half-out?
Half-in/half-out is what you prefer. You get charged half the round trip commission on each trade. The industry standard for many years was to price futures clients round turn. I want to point out that not one of my Wedbush Futures clients pay for expiring options. What you have to understand is that when you go direct to a FCM, based on the description of your account: AUM, DT or overnight, risk of your strategy, %SPAN margin used overnight, OTC trades, CTA give up trades etc, they provide you a price per contract or a price round turn. If you are priced round turn, you have to ask if that is half in/half out or up front. If you are being charged per side executed, they might have used a higher rate to generate the roper revenues for your risk, capital charge and time that is required by them. Only retail brokers have set advertised commissions. Go to the web portal of every FCM on this list and see which ones have set prices and which ones negotiate with each new client. Negotiation is more common.