See this thread http://www.elitetrader.com/vb/showthread.php?threadid=216158 fir a discussion of low option commission brokers.
haji, Some good and valid points. First off I want to say of course, any broker would be better for the user with lower prices for the same features. 1. I second what the other poster said - OX does this just like Fidelity has active trader rates and many others do. Not just an OX thing. My point was if nothing else, the OP should contact them and get the lower rate anyway. 2. I can't speak for IB or any other, but I have always been happy with the execution and order entry, etc. for OX. On a similar topic, we have all read horror stories related to brokers for various reasons (i.e. liquidating an account because some margin % hits for one second) on Elite Trader - some might have even been the fault of the poster admittedly, but I don't remember any horror stories about OX - usually just comments about their commissions being high. In any event, if the OP changes broker, whereever he goes, he should test the execution on some smaller trades before jumping in to larger ones. 3. If a broker doesn't make any money, how do they upgrade, pay for training, etc. If a broker isn't making money through commissions, how are they doing it? At some point it will show up in their tools, service, execution, somewhere. You mention you do alot of trades, but how often do you cancel trades? Some people might cancel alot of trades and those fees can add up. 4. It probably is better - I am not saying OX is great, but in some cases they are much better then portrayed. For example, today I just happened to do a 4 lot of basically a Long Iron Condor on AAPL (selling 345 Calls and Puts/buying 340 puts, 350 calls). I closed the trade 40 minutes later for a $55 profit after commission. The commissions totaled $40. This seems high at first, but realize that that is 32 contracts total traded (16 bought/16 sold) so even at a buck a piece it would have been $32. To put into perspective the OP did 1 trade both ways so 2 total contracts and paid $30. He paid $15 per contract total. I did 16 trades both ways so 32 total contracts and paid $40. Both on OX. I paid $1.33 per contract total. Again, not the lowest commission possible in the free world or anything, but much better when doing some realistic lot trades. As a side note, I really do like OX's tools and the way they display stuff - personally I can't stand those charts from one broker that are black background with light red and green lines and it's beyond difficult to read - I would pay $1,000/year just to not see those horrible charts! Yuck! But the OX charts and other tools are all done very nicely IMO. JJacksET4
Thanks for the response. I believe if you are happy with OX, you should never change your broker. As I said I had account with about 9 brokers but after I switched to IB, I am a happy camper. A few notes: 1- Fidelity now has the same rate for everyone. The old commission is gone. Active trader does not get special rate. Let me tell you one example of what is wrong with Fidelity. You cannot trade between 4PM to 4:15PM ET. AH starts at 4:15. You cannot put one order good for the whole day. 2- Liquidating when you don't meet the margin requirement is a blessing for me. It gives me a confidence that if I don't take care of my problem, they will. It has saved my ass many times. I know that has irritated many people but I prefer liquidation to a polite letter from my broker 3 days after I am out of margin that I owe them an arm an a leg. 3- About cancellation fee, I agree that at first it was unacceptable for me but after a short while I got used to it. As I said that fee is about $10 a year for me. There are ways to avoid the fee. For example if I put an order to sell naked call for 2 and then the stock drops and I want to change my order to 1.8, I don;t cancel my first order. I just put a new order for 1.8 and sometimes because I don't have enough money for two orders, IB automatically cancels the $2 order without fee or I cancel myself after my 1.8 goes though and I have credit to cancelthe first order. Final note: The fact that all these brokers exist, mean that not every ones taste are the same.
This is why MARKET orders should be considered. If your LIMIT order doesn't get filled it's because the stock is moving in YOUR direction, if it moves against you the order gets filled. Is trying to save a few pennies really worth it? In your example maybe a MARKET order would have got filled at 1.9, which is better than chasing it down to 1.8 with LIMIT orders. IB's MARKET orders are filled at very good prices, I have never been disappointed. Another big plus is that you get the trade over with and can do something else.
In confirmation of what you said, I should add that there has been many cases that I have got better results in market order than limit order. In a case the bid/ ask was 0.1/15 and I put an order to sell at 0.12 so the bid/ask becamse 0.1/.12 but my order did not go through. I changed my order to market and my order was filled at 0.13 !!. The underlying had not moved. All things said, 90% of my orders are limit orders
I find it interesting that many traders here believe their execution quality is based on the broker dealer. All your electronic orders are either directed to an exchange or smart routed. Almost all the smart route orders are sent to an exchange or market maker that pays for order flow. Either way, that trader has a "best execution" responsibility. They must match the best price or route the order to another exchange. Not all exchanges reroute orders. My firm allows ever client to decide what exchange to route their order to. We don't receive payment for order flow. If you route your order to an exchange that offers rebates for adding liquidity, we pass that on to our clients. Either way, the broker, on most orders, has very little to to with the execution price. It is up to the trader entering the order and the market makers offering depth and liquidity to find a common price. For larger orders, we do offer option and stock algos that help find liquidity at the best price. But, we can't take credit for good executions, or be faulted for thin markets.
Thanks for the replies. After looking into it deeper after I got home this evening it says that 10 contracts or lower is going to be 14.95 a side. After that it is 1.50 a contract ( I believe ). The thing is I don't have anywhere near close to IB money ( which I would have used in the first place ) and I just got interested in options while I currently trade microfx. I wouldn't have done the same thing if I knew this before executing the 1 contract. Obviously my mistake, can't say it wasn't in writing in the first place. But seriously, $14.95 a side for 1 contract just has to make them laugh when they see dumbasses like me open a new account. To the other poster with the link to the other thread - thanks. BTW - I used limit orders so execution I am guessing wasn't a factor? Or perhaps it is depending on where you get stuck in the queue?
You may find it interesting but it is a fact. All so called Smart routing is not equal. Don't kid yourself. The firm paying for order flow is doing so for a reason and may not have your best interest at heart. IB stats are audited via an independent group and were 21 cents better than the industry last quarter for options per contract. That is a fact and a very large savings. For more details you can review here: http://www.interactivebrokers.com/en/p.php?f=smartRouting A recent antidote from an active and professional trader who was offered a lower commission than IB and was claiming their routing was as good as IB's. They ran the exact same strategies over a week and with firm X had lower commissions by about $500 than IB. However, taking into account the better fills, they ended up saving $300 in overall cost with IB. Annualized that's a $15K savings using better routing technology. Guess who was able to retain the client
If you are not selling options does the higher initial account value still apply? It is just like Fx, the spread and commissions make all the difference in the long run. Sounds like IB options are most ideal.