What is the Best On-Line Discount Broker for Options?

Discussion in 'Retail Brokers' started by Joe_Member, Jun 29, 2003.

  1. I picked this question (and copied Email) up off an Email list I follow. I figure I'd post it here to see if anyone has any comments.

    Question from list: I know that many here have recommended Interactive Brokers for trading stocks and futures. I received this email, this morning, recommending two other brokerages for options. I would be interested in hearing how their platforms compare with Interactive Brokers', in that regard. I know from personal experience that Ameritrade/Datek offers nothing comparable. Thanks.

    OptionsXpress and thinkorswim are new names to me, so I'd love to hear your comments...

    ----- Original Message -----
    From: Terrys Tips
    Sent: Sunday, June 29, 2003 12:30 AM
    Subject: What is the Best On-Line Discount Broker for Options?

    Dear Options Student:

    What is the best discount broker for option trading?

    That is the question I have been asking myself for the past several weeks while I scanned the Internet and kicked the tires of a dozen or so brokers’ websites.

    And the answer is,…………, actually, there are two winners, and they are both great choices. They share similar features – some of the best commission rates around, excellent option-friendly websites, option spreads allowed in an IRA, no minimum balance to open an option account (margin accounts require a minimum $2,000), and excellent testimonials from Terry’s Tips subscribers.

    Both brokers offer wonderful features for anyone who trades options. With a single click, you can see your net delta position for every stock you own, for example. Or you can instantly see a chart which shows the value of all your option positions for each stock at higher, lower, or the same prices for the stock.

    Let me know if you get set up with either one of these brokers (after Sunday, June 29 2003), and I will give you two free months of my Ongoing QQQ Trading Program free for being so smart.

    First, there’s OptionsXpress. They are probably the fastest-growing broker in the country. According to Barron’s, they gained over 22,000 accounts in 2002, an increase of 424% over the previous year. Barron’s rates them with 4 stars, one of the “Best Online Brokers”.

    OptionsXpress has the some of the lowest option commission rates of any firm I could find – $1.50 per contract with a $14.95 minimum per trade. Stock trades cost a minimum of $14.95 as well, (for up to 1001 shares). You can apply on-line at http://www.optionsxpress.com/new account.asp.

    Second, there is another Chicago brokerage firm with the unlikely name thinkorswim. This company caters to the more sophisticated option investor, and has slightly higher option commission rates than OptionsXpress - $2.95 per contract, or $10 per order plus $1.50, whichever is less. If your order is for 4 contracts or less, thinkorswim is actually cheaper. For 5 or more contracts, thinkorswim’s commissions are $10 higher per order.

    Stock orders (up to 600 shares) cost less at thinkorswim ($.025 per share, $5 minimum), and a little more above 600 shares ($.015 per share plus $10).

    There are two reasons why thinkorswim might be a better choice. They have an intelligent order routing system that automatically sends your order to the market with the best bid or offer price (7 ECNS, 5 Option Exchanges). If you save $.05 on an option order of 10 contracts because you were sent to a better exchange, you would save $50, or five times as much as the higher commission cost.

    The second reason you might consider thinkorswim is that they have a superior software platform. One particularly neat software package allows you to enter several option positions for a stock, and see a chart which shows you the value of that set of positions at any time in the future, and at a variety of prices for the stock. You can apply on-line at https://www.thinkorswim.com.

    I have opened accounts with both firms, and will place identical orders in both OptionsXpress and thinkorswim accounts to see if I get better executions at one broker compared to the other (and let you know, of course).

    It is a major psychological move for me to leave Brown & Co. after more than 20 years of having an account with them. The company founder, George Brown, was a personal friend. I traded with him before discount brokers were even invented. But things change, option trading is a different animal than stock trading, and newer and better alternatives have come along.

    Let me know if you get set up with either OptionsXpress or thinkorswim (after Sunday, June 29 2003), and I will give you two free months of my Ongoing QQQ Trading Program free for being so smart.

    Happy trading. Terry

    Options involve risk, and are not for everyone.
  2. I like Interactive Broker's commission structure on options. $1/contract....this is the best rate I've seen so far.

    -FastTrader :cool:
  3. white17


    IMHO IB would be hard to beat
  4. http://www.terrystips.com/

    this is sad for an option guru(?) to not to know about IB's commission structure ...
  5. I would highly recommend IB as your options and all around deep discount broker. I've trading through them for years and have never encountered any problems. I mostly trade stocks but have also bought/sold options with them. There execution is usually lightning fast and at a buck a contract who can complain??
    If all the other brokers would quit price gauging their customers. I especially like them for option writes...$1/contract to write and if you buy it back for say .05 its only $.50/contract...fantastic! ALL the other brokers out there can't even come close and they know it. IB rules I don't care what anybody says. Go with them and you will be very pleased.
  6. www.thinkorswim.com is by far the best option broker of all time.

    genius platform, advanced analytics, intelligent customer service, market legend charles cottle behind it all and he was personally available to answer my option questions when i opened my account. what can be better than this ??

    enjoy !!!


  7. LOL ! what a funny site ! that dude is a trip.


  8. tdoc


    It sounds like IB and thinkorswim are both good choices. I have had an account with Optionsxpress for about a year now and am extremely pleased with them. I have never had to call them about ANY problems. They give free subscriptions to great options services to their active customers. I have free subscriptions to Harry Schiller and Bernie Schaeffer through them. It's good to see that the choices for online options trading are getting better!
  9. Thanxs for the comments. I passed them on.

  10. rrisch


    I gather that IB is the winner in the price per contract department. Optionsxpress and ThnkorSwim have analytic software so you can do delta analysis and other such things on your portfolio.

    Does anyone know if you can use the IB programming interface to give a 3rd party options program access to ones portfolio? If so, you could take advantage of the better prices at IB and analyze your portfolio without having to copy it into the program by hand.
    #10     Jun 30, 2003