trading should be simple - as simple as possible. having 2 buttons to buy and sell is crazy. i too see little benefit. to be honest, these reasons don bright points out go over my head. i dont think these issues will interest the casual retail trader that amtd targets. my honest opinion (call me a conspiracy nut...) is that it is just a deliberate attempt to make noobies screw up costing them another commission. thats how the industry works - screwing you out of money at every twist and turn. when i was a noob and traded stocks, i had a datek account. datek were great. then ameritrade took over and the proverbial hit the fan. all of a sudden i started noticing slippage of 2c on EVERY trade, but only when i was covering. this was a pattern too coincidental to be random, as the slippage was ALWAYS 2c no matter what the stock, or what price it traded at. when i went to close the account to move elsewhere ameritrade would not give me my money. they kept 'accidently' screwing up, like only wiring $10 or $100 etc. each time hitting me with a fee (peanuts - but its the principal). eventually my new broker offered to step in. they said they were screwing with me and they would sort it cos amtd wouldnt dare screw with another broker who knew what they were doing. to cut a longer story short, ameritrade wouldnt wire all the money, they left like 40c in the account. i figure this was because they wanted accounts to still exist for accounting purposes - make the company look bigger with a load of dormant accounts (they are still accounts). again, its not the money, its the principal. I WANTED THAT ACCOUNT CLOSED. I WANTED NOTHING MORE TO DO WITH THIS BUNCH OF SHYSTERS. i wouldnt touch these clowns with a 6 foot pole. stay away.
As I said, I'm trading free at the moment. Big deal. Had they expected me to execute two billable unwinding trades, I would not have been amused.
Past experience at other firms was that they journaled the long position to the short account to flatten it out the night of the trade. As Don mentioned, it's an advantage to be able to have such a "box" position because it allows you to (illegally) sell short on a downtick. It's unclear whether a retail customer has any liability - it's on the broker to enforce this clearly unlawful practice.
It allows you to have more than 1 position in the same security, like allowing you to initiate multiple trade setups. And most importantly, it widens the revenue stream for the company. More trades, more positions, more commissions.... genius on their part if you think about it.
Note: "Don mentioned"....that the "universal net position" is what matters for legality...the "box" does not give you any valid reason for violating the uptick rule whatsover... Just to clarify.... Don
I ran away from those brokers (Ameritrade, TD, ETrade, Datek,....) to IB. Sometimes I get tempted to get their free trades but I pause as I know they will get me one way or the other. I had the same problem with Ameritrade and Fidelity and after a couple of calls they agreed to clear those long and short positions and sometimes they charged me double commission. Here is why they do that: 1- They can charge you double commission 2- When You have two positions, you are using double margin and and with their high margin rate, compared to IB they can screw you in a couple of days specially if the position size is high. As you said having long and short position in the same account makes absolutely no sense. Ameritrade has another bug in their calculating their margin for naked PUTs. Assume you sell naked PUTs for the strike price of 20 when the stock is at 22. A few days later the stock soars to 35 and your naked PUT become safe and you assume you need less margin to hold your position but they take naked PUTs as naked Calls and increase your margin requirements. I sent them a letter two years ago and informed of their bug and asked for 3 free trades if I am right. I got a letter saying that yes I am right and they will fix that and I got 3 free trades but that problem never got fixed. I did 12 trades (stocks and options) on Friday in my IB account and I paid 12.5 for commission. If I wanted to do the same trades in Ameritrade, I should have paid about $150 for commission. In the last 2 years that I am with IB, I started to get credit interest that I never had with other brokers. As you are enjoying free trades, they are also sharpening their knife to cut your throat after that.
Another clear trick from Fidelity. I had 1000 shares of a stock in my account and I sold 10 covered Call contracts on my shares (sell to open) and on the expiry date the stock was in the money and I was expecting my stocks will be sold at the strike price and I will be cleared. On Monday after the option expiry date, I realized that I have my 1000 shares plus I am 1000 shares short because of the options with a $35 commission charged because Calls were exercised !!!!!!!!!! I was livid and I did not know how to tell those stupids that when I used sell to open when I sold the options, I meant that I want to sell covered Call. They told me I should have informed them that sell of options was for my shares. They meant that I should put an order electronically and they give them a call and stay on line for 25 minutes and tell them what I meant by my order
I understand that you can not initiate a short on a down tick. But I'm not clear why my previous example violates the short sale rule. A hypothetical example: I initiate a 1,000 share short position correctly on an up tick at 10:00 AM on Monday using a 60 minute chart that shows the stock in a downtrend. I intend to hold the position until I get an exit signal on the 60 minute chart and expect this trade to last 1 - 3 days. On Tuesday afternoon a 1 minute chart of the same stock shows an opportunity to make a quick 15 - 20 cents going long. I buy 1,000 shares and sell them 2 minutes later. On Thursday I cover the short position using the "Buy to Cover" button. This is a total of 4 orders. With only a "Buy" button serving both to initiate long positions and cover short postions, this would require 6 orders. Can it be argued that buying and selling the 2 minute long position violates the short sale rule? If this is the case, why would any broker have a "Buy to Cover" button.
Fidelity is only supposed to charge online stock rates (i.e. $8, $10.95, or $19.95) for option exercise and assignment. Why $35?