I've recently begun using options to hedge and my current broker charges me a flat rate + $1 per contract. So I can incur $32 in commissions just to buy and sell one contract. I've just looked at IB for options prices and they state $1 per contract and I've looked all over the place for a minimum of some sort. Is it true that I can buy and sell 1 contract for $2 round trip? Seems to good to be true so I've got to be missing something.
That is true... for now. but they may change it very soon... in the next business hour. You never know.
Well they can double it for all I care ... heh ... no other broker has ever come close to that price from what I can find. They all like to charge their standard commission PLUS more for each contract. I'll open the account and see how I like them. Thanks for the response.
It's true it's $2 round trip. You might want to make sure you open a cash account not margin. Options in margin accounts are subject to the daytrading limitations. In cash accounts I think you can trade options without the three trade limit. You can always upgrade to a margin account in the future, but you can't change a margin account back to a cash account. What you need a margin account for in trading options is if you're writing the options rather than purchasing them. And also from a cash account you can't buy the options selling for less than $1.00
Well, I'm not concerned about the PDT rule and it is possible that I will be purchasing contracts that are under $1 (this would be exception rather than the rule). I do appreciate the tips though. I'm going to keep my other broker for the time being until I figure out whether or not I like IB. So far I've had no probs w/ the other broker except for the high commissions on options. If IB don't give me any problems, I'll probably switch over everything to them eventually. Thanks again.
I don't know why you can't buy options under $1 from a cash account, or if it's mentioned anywhere on the site. But before I changed my account to margin it wouldn't allow me to buy an option under $1. I would get a message saying something about my account capabilities restricting me from buying the option. When I changed to margin I was able to buy options at any price.
Just to make sure I get this correctly, so I if wanna be able to buy options today before close and sell them after the open tomorrow and if some of them have to be priced below $1, then I'm pretty much screwed? Is there any way it can be done? Or will I have to stick with those above $1 and a cash account? Is this only IB specific (below $1 rule), does anyone know? Thanks.
If your account is a margin account you should have no problem. If it's a cash account, unless their policy has recently changed, you won't be able to buy an option priced under $1.00. But if you own an option that has fallen below $1.00 and want to sell it, you can sell it. The disadvantage of the margin account is options are counted as daytrades if you sell the same day you bought. Of the two, I think having the number of options you are allowed to sell the same day you buy them limited to 3 in any five day period is a harsher restriction than not being able to buy the under $1.00 priced contracts.