thinkorswim for condors?

Has anyone acheived favorable bottom-line returns trading condors, butterflies, double-diagonals or other high commission strategies through ToS? I love their platform, customer service, etc, but the commissions seem like they would basically kill my "conservative" IC strategy.

What I define as conservative is PROFITING by ~20% of the margin requirement...IOW collect $0.30 on a front-month 1 point SPY spread and exit when you can get out for $0.10. You could also use later months and still collect the 20% profit, the timeframe is irrelevant for my question.

Considering that I would pay $140 in (round-trip) commissions on 10 IC lots, the MAX profit on my spread would be only $160!! The max risk is $700 + $140 = $840, so the max return / max risk is 19%. My conservative return is closer to 7% per trade. Granted, that's not terrible for what I call conservative trading...but obviously it could be far better at IB with lower commissions.

I'm really just curious how others feel about this, whether anyone would agree that condors are just too f*%#ing expensive to put on with $2.95 per contract fees?!

Thanks

 

First of all, if you do 40 contracts (10 ICs) then the cost is 1.50 per contract plus 9.95 and not 2.95 per contract.

Second, you can choose one of their other commission structures, which may make more sense than their base one, if you trade 40 contracts per trade.

Third, you can try negotiating a lower rate.

Finally, you can trade the SPX and do only 4 contracts - i.e. one 10-point condor.

 

You're correct, and I didn't fully elaborate about the tiered commission schedule...I used the 1.50 rate in my example though. Round trip for 40 contracts should be:
((40 x 1.5) + 9.95) x 2 = $139.90

Good point, that would come out better, but I don't have $25K committed to options at this point.

I suck at negotiating! Couldn't sell water to a dying man in the Sahara.

In my case, this is probably the best option of the 4.

Thanks for the ideas!

 

You should consider a broker such as Peak6's OptionsHouse.

There you can get flat charge, no per contract fees.

 

FIrst comment: Don't worry about sucking at negotiating! Just send them an email with a rate you would find favorable and see what happens. Probably they will give you a counter offer, and you will be fine. It helps to have a track record of a certain trading volume.
I did this with no serious issues and cut the rates substantially. These guys are excellent to deal with!

Second comment: I recommend SPX and NDX options for IC's because then you can get 3.00 instead of 0.30. It helps your commission % a lot! SPX and NDXoptions have very wide bid-ask spreads, but you can come close to splitting the difference if you are patient.

 

Thanks for the comments. Maybe I will give it a shot with the negotiations...it's just against my nature really. I always think, "If this was my business, I would post a flat rate, tiered rate, or whatever and that would be the end of it." Therefore, I probably wouldn't be a good salesman or broker. I just don't enjoy the haggling process.

Also, I was looking at RUT options. I've heard the spread is more favorable and fills are generally better than SPX since it is listed at multiple exchanges. From what I understand, the SPX market makers are no fun to trade with. There are already several threads about SPX vs RUT, NDX, etc...but if anyone else has specific arguments for or against using any of them with complex spreads I'm always open to new ideas.

 

I would (and actually I do) trade all 3 of them SPX, NDX and RUT. Unless you specifically wanna trade only one index.

You may think: "Well, the 3 are highly correlated so what's the point of trading all 3?". While they are correlated, the correlation is not prefect so you do receive a benefit of diversification.

 

Good point. For a long term investor, that low level of diversification is not very useful, but over about a month (my target holding period for ICs) there should be some slight, but noticable differences. Occasionally I'm sure it could make the difference between losing on one large position vs losing two small trades and winning one small trade. Definitely something to consider.

 

Exactly. This has happened with my positions numerous times.

 

Obviously you would say that the diversification benefit outweighs the cost of having to fight for a good fill on SPX. I'd have to try it out to see if it would be worth the hassle for me.

A more objective question might be: Does the diversification benefit outweigh the losses on SPX over the long term if the trades were made at or just inside the bid/ask? IOW, if I could see even a minor gain over time by diversifying without having to fight the MMs too hard, it would be an obvious choice for me.