Don't know why this is happening but even if I make a profit on an option it barely exceeds the premium. Its as if the broker has priced in all possible trades into their premiums.... How do I solve this problem?
Options are priced according to the expected move of the underlying. All things being equal both the sellers and buyers will end up breaking even - minus the bid/ask spread and commissions. You must pick underlyings that you think will under-perform or over-perform what the bid/ask of the options indicate. EDIT: I'm referring to the ATM strangles/straddles.
Strangely I lose money on options like this that target high or low volatility. Always seem to be a couple of points off...
IMO: If the commissions consume 10% or more of the profits, you may need a different strategy. Assuming you have already reduced your commissions cost to an acceptable level. (For small sized trades, you may want to insure you do not have Ticket Charges, and only per option charges of $1 or less.)
Moot point. Brokers, MM's, Santa Clause - make no difference who prices options for the discussion of this thread.
In fact that's exactly how supply and demand works. Statistically you should expect your options trades to average at just below break even when taking into account trading costs and bid/ask spreads. That's efficient markets for you.