I'm a rookie slowly learning how to trade. I've been with ameritrade for about 3 years now and I'm looking to switch to IB. Here's my n00b question: Am I getting ripped off like I think I am by paying $10 / trade $11/option transaction ? I looked at IB's fee schedule, and the best I can tell, unless I'm missing something obvious, is that it's only a couple dollars per contract/trade. I checked to see if there were any other gotchas like monthly fees, but it seems like a much better deal since my trades are small enough that commissions can eat into my potential profits. Is there some hidden fee I'm not seeing ? Thanks
thanks for the reply. I did see the requirement of 10,000 on there to open the account. If I open up a lemonade stand and mow a few lawns in the neighborhood and put my next paycheck on the superbowl, I think I can make it in a couple months. Other than that, I really like the idea of $2-$3 trades. But "If it sounds too good to be true"..
you could go with ameritrade IZone account, only 5 dollars a trade. Its all internet based so no phone support, but worth it. Only requirement is one year of brokerage experience I believe (could be 2) but seems as though you have that, check that out.
There are a few guys here whose sole purpose seems to be posting in this type of thread saying how great IB is, and how anyone who complains about IB is a moron. They will probably be along in a minute. I have my accounts at IB since there is no other firm that provides me with the ability to trade all instruments from one account. I also like the fact that your money is perhaps safer at IB than at any other broker which is not an arm of a huge bank. How many shares do you move on each trade? If it's a few hundred, IB is definitely for you. For futures it will also be cheaper. IB phone support sucks, their tech support is even worse. If something goes wrong with their software and you lose money, you're out of luck. They'll tell you to fuck off, or at the very best you will have weeks of haggling to get what should rightfully be yours. If you need to have your hand held by your broker, IB is not for you. If you get pissed off if the phone isn't picked up in a few rings, IB isn't for you (unless you have a huge account, in which case the phone will be picked up). IB has so many customers because they are filling a niche that most can't seem to fill. If you do a search here, you'll find literally hundreds of threads bashing IB. In 98% of these, the problems were caused by the account holder and not IB. I have never had any significant problems with them. Search this site, all the information you need is here. You just have to spend some time looking for it.
For normal trading, the only fee IB will charge you is a $10 data fee if you don't pay at least $30 in commissions each month. For options IB does charge exchange fees and exchange cancel/modify fees. Read the IB fees schedule for more details.
@traderNik I recently decided to bump up my quantity of shares for each order. When I can afford it, I go for 100 (so I can write a covered call if I want to). My acct right now is $6k, which is a good size for me being a n00b. I'm ready to grow and undertake a little more responsibility, however, (plus I feel that stocks are cheap now and I'd like to get more involved). I'm ready to bump it up to 10k and switch brokerages. I'm also looking at the percentage savings. I know this probably sounds paltry to you guys, but I like to set up profit targets of $100. But when I'm paying $10 each side of the deal, I have to work 20% harder (or get 20% luckier) to show the same percentage of profit. I never use tech support, only to email ameritrade with n00b questions that I should lookup myself. Thanks so much for the replies.
I don't trade options but I have read a lot about covered calls on here. You are aware that a covered call position is essentially a short put position, right? Maybe an options guy can chime in here, but I always see newer options traders talking about this position, only to hear the veterans straighten them out in terms of the risk in the position. In terms of your profit targets, they are only meaningful in terms of your overall Risk/Reward plan, so no, the number does not sound paltry to me. Good luck. As you know, IB has at least a 10K minimum.
I'm aware that covered calls aren't some guaranteed way to make money, but I think when you "own" the underlying and write a call on it, it is possible to control the delta to be close to "delta neutral". Whereas if you just bought a single put, you'd be carrying a negative delta. But I could be wrong, maybe you have to buy additional underlying plus the 100 to write the covered call, because it will obviously be called away if its in the money at expiration. I'm reading "option volatility and pricing" at the moment and learning basic strategies to capitalize on all the different metrics. Its fascinating but I'm not ready to put my money where my mouth is yet with some of the techniques. I have traded options for a while now just buying purely speculative puts and calls in single quantities just to get my feet wet.
Clearly you're not trading options totally blind. Just to clarify, my understanding is that a covered call is the equivalent of a short put position, that is, the naked sale of a put. In the above, you said 'if you just bought (i.e. went long) a single put'. Perhaps you meant 'sold'. Perhaps some of the options guys on here will comment on whether a covered call strat can be constructed so as to approach delta neutrality. I didn't think it was possible, but I may well be wrong. At any rate, best of luck. You can definitely do a better deal than the one you're getting from your present broker. My last post on this since you have not asked for a debate about CC strats.