24d • General discussion
Things to consider when choosing a brokerage
There are some common sense things like making sure they have great customer service, they can execute your trades quickly, and they have the size and financial strength to weather tough times. Here are some others to think about.
Fees:
The lower the fees the more money you get to keep. If you are trading lots of options to create cash flow, the fees can add up. Normally you will pay a flat fee per options contract and if you are trading on an index like the Russell 2000 (RUT) you will probably also have to pay an index fee. The brokerage with the lowest fees isn’t always the right choice, but it’s one of the most important things to consider.
Locations:
Some brokerages do not have international offices, so if you are in Canada, Europe, or Asia, you will need to find one that you like that offers the information you need. If you can’t use Thinkorswim for your charting, find a brokerage that provides good charting tools, maybe InteractiveBrokers.
Minimum Account Balances:
When you think you have found a brokerage you like, make sure to ask them what their minimum account balances are for options trading in accounts like an IRA or a normal brokerage account. There may be one balance for credit spreads and another for standard puts and calls. For instance, you may only need $500 to do an Expiration Day Bull Put Spread, but the account may require a minimum of $2500. Make sure you know what the minimum amounts are before taking the time to deposit your capital.
Tier Level for Options Trading:
When you open an account and apply for the ability to trade options, you will need to answer questions regarding your experience with options trading. They are required to make sure the consumer is educated before giving them the ability to do this.
The following is not an all-encompassing list, but a few to get you started.
Fees are subject to change at any time and may be different than what is listed here. Every person and situation will be different, please choose a broker that is right for you.
1.Interactive Brokers:
Fees:
Stock/ETF Fee: $0
Options Fee: $0.70 per contract
Credit Spread Cost: Double the options fee (buying and selling contracts)
There will also be an Exchange Processing Fee for credit spreads on indexes.
Services:
Wide range of tradable assets (including cryptocurrencies).
Lower margin rates compared to Thinkorswim.
Professional-level order management features.
Mobile App:
Feature-packed mobile app with advanced capabilities.
No demo mode, but powerful tools for active traders.
Pros:
Commission-free stock, options, and ETF trades.
A relatively high minimum balance is required to earn interest on uninvested cash.
Access robust research resources and trading tools.
Cons:
Some users find the website navigation less intuitive.
- Charles Schwab:
Fees:
Stock/ETF Fee: $0
Options Fee: $0.65 per contract
Credit Spread Cost: Double the options fee (buying and selling contracts)
There will also be an Exchange Processing Fee for credit spreads on indexes.
Services:
Comprehensive wealth-building tools.
Excellent customer service and free planning guidance.
Supports trading in bonds and mutual funds.
Mobile App:
Robust mobile app with extensive features.
Schwab’s thinkorswim platform for advanced charting and trading.
Pros:
Commission-free stock, options, and ETF trades.
Large fund selection.
Strong research tools.
Cons:
Relatively high broker-assisted trade fee.
Not available in Canada and other international locations.
3.Fidelity:
Fees:
Stock/ETF Fee: $0
Options Fee: $0.65 per contract
Credit Spread Cost: Double the options fee (buying and selling contracts)
There will also be an Exchange Processing Fee for credit spreads on indexes.
Services:
Long-term wealth-building focus.
Extensive research and retirement planning assistance.
Offers index funds with no expense ratio.
Mobile App:
User-friendly mobile app with educational resources.
Suitable for both beginners and active traders.
Pros:
Fidelity offers $0 trading commissions for online U.S. stocks and ETFs.
It provides a large selection of research providers, making it easier for investors to access information.
Fidelity has a reputation for excellent customer support.
Their zero-fee index funds are a bonus for cost-conscious investors.
Fidelity’s mobile platform is user-friendly and well-regarded.
Cons:
Fidelity charges relatively high fees for broker-assisted trades.
Some users find their desktop trading platform, Fidelity Active Trader Pro, a bit dated and slow to respond.
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Things to consider when choosing a brokerage
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