Options Commissions: This 1 Trick Can Save You Thousands

Option Trading Commissions

Last week the stock prices of all the major retail brokerage houses took a hit, down several percent.

The reason: There is now a price war in commissions.

One options brokerage dropped their commission per stock trade from $7.95 per trade to $4.95 per trade. And then another lowered theirs as well.

Now it seems the others will follow.

Wait.

$5 per trade?

They just lowered their rate to that now?

I’ve been paying less than that at the same brokerage for years.

No that’s not right.

Ameritrade, where I have most of my accounts, only lowered their rates to $6.95.

That is over $3 per trade more than what I pay at the same brokerage, for the same service. And I know that I am still overpaying. I get better rates at my other accounts.

Holy moly.

If you are overpaying in options commissions, you are literally flushing thousands of dollars away for no reason.

 

Same goes for option commissions.

Some people pay $6.95 per trade plus .75 per option.

Others pay $4.95 plus .25 per option

Others pay $1.50 per option

Others pay $1.25 per options.

Others pay  .75 per option

ALL AT THE SAME BROKERAGE!

And it has nothing to do with how much money you have in your account or how much you trade.

That is what they want you to believe.

It has to do with how persistent you are in getting them to give you a lower rate.

And if they still don’t give it to you?

Move to another broker that will.

Most of the brokerages now are all public companies. They live and die by how many new accounts they sign up on a quarter to quarter basis. Use this to your advantage.

 

Don’t let your options brokers do this

It drives me crazy when I hear from a trader, that “my broker won’t let me do so and so strategy”.

What?

Your broker won’t let you?

It’s your money.

They are not your parents.

If they say no, find another broker that will.

There are dozens of them out there that will gladly take your money and let you do whatever you want.

Plus they will charge you lower rates and fees.

 

“But I like their software/service/alerts/app/etc”

That’s great.

I am not telling you to close your accounts.

Say you like the software your current broker provides but not the rates.

Open an account at another broker and transfer 90% of the account.

Keep a small amount in the old account so you can keep using the software.

Do all your analysis, tracking, modeling there but the trades at the new broker.

 

“But doesn’t that get confusing?”

We are literally talking about thousands of dollars a year. Even if you are not that active.

I have one account where they charge me $1.50 per option, and an account at another broker where they charge me .50 per option.

That is $1 per option difference right?

Even on a small $10,000 account, that is still close to $50 a month in extra fees or $600 a year.

That means I have to make at least 6% on this account just to overcome the extra commissions.

Then I have to overcome the .50 per option I am still paying.

So yeah at tax time it does involve a little more paperwork for my CPA. But if you are trading with any size, you are shooting yourself in the foot if you do not move your money to the best/cheapest broker you can find.

Rates change all the time.

But eoption has always been low priced.

Interactive Brokers is very cheap.

And if you do some digging online you will find others that will negotiate with you.

 

Being loyal to your options brokers can be a very expensive proposition.

8 Comments

  1. steve on March 6, 2017 at 7:06 pm

    Tastyworks is the lowest commission broker, because it’s a 1 dollar per contract fee plus .10 for exchange and regulatory, but the real benefit is there are no fees to close the position.

    • Allen Sama on March 7, 2017 at 4:10 pm

      This is their teaser rate. Actually others have gotten prices as low at 50 cents per contract so even though you think you are getting a great deal, in comparison, you are not. They are a very new broker so it might be wise to open an account if they will grandfather the commission not to increase, but I would want to see how they do for at last a year before moving major funds over. Make sure all their security, software stability, order execution works the way it is supposed to. The only way to determine that is when there is some panic in the markets and orders are flying fast and heavy.

  2. Mike on March 6, 2017 at 10:49 pm

    For stock trading I have an account with Sharebuilder. Recently I was interested in purchasing an otc issue and they wanted an extra $150.00 on top of the $6.95 commission to do the trade. Wasn’t gonna happen and now I’m shopping, thanks for bringing it up.

  3. Anthony Curtain on March 7, 2017 at 8:41 am

    I use Eoption at 3 per ticket and 0.15 per contract

    Also leave 10k in a tos account so I can use all the features and indicators available to ’tis

    Best of both worlds

    Cutting edge software with heaps of indicators and add ons if you need

    And cheap as commissions

    Also eoption has a new platform that works heaps better than their lest one

    They bought one off someone else

  4. larry on September 30, 2017 at 4:40 pm

    how much are government fees and taxes on a trade? My broker lumps the charges all together with his commission.

  5. larry on September 30, 2017 at 4:42 pm

    I read where it only costs one dollar to trade with interactive brokers. Is this correct?

    • Ameen Kamadia on October 2, 2017 at 5:03 pm

      Commissions are negotiable.

  6. Al B on October 5, 2017 at 7:29 pm

    If you are trading as little as 40 contracts per qtr your commissions should be lower. My broker only charges me a flat 0.50cts per contract. But I’m a volume trader. Al b

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