multileg option costs kill profits

Discussion in 'Options' started by garfangle, May 24, 2010.

  1. I use ThinkorSwim (ToS) to do most of my option trading. However, their pricing, similar to other firms, for multi-leg options (esp. butterflies/condors/etc.) kills any profit potential because of the high commissions relative to the amount you risk.

    For example if you buy one Condor option for $1 or $100 with a potential maximum profit of $200 and a likely profit a bit below that (to account for the sloping sides at the strike points) and the commission is $11.80 then the commission is 11.8% of your debit and 5.9% of the total potential profit.

    When the option cost is lower than a dollar (many range from $.25 to $.75) then it is all but impossible to have a positive outcome when the commissions become a large percentage of your debits and potential profits.

    How can you trade something like the SPY if a condor option debit is $.55 and a potential profit of $.45, yet the commission is $11.80 or 21.45% of the debit and 26.22% of the profit?
     
  2. how else you expect them to make a living?

    trading?

    lol.

    they make a big show of how great they are as traders, just to suck you in.
     
  3. Shhhhh

    Shhhhh