Brokers and commissions

[ChadK]

Yeah, $0.50/contract seems impossible for mere mortals. You're lucky you lucked into such great rates. If I got $0.70 or $0.75/contract on TOS, I'd most likely leave IB.

I left IB years ago (2007? really? wow, time flies) when I got TOS to give me $1.00. Even happier when I got $0.80 then $0.75. The analytics and tools that TOS has was worth $1.00 back then, and I'd probably agree with dwilliams that I'd pay $1.00 now at TOS vs. so-called $0.75 at IB.

[Kim]

1.00 at TOS is probably worth it, but not much higher.

[damnu812]

Anyone ever use Zecco for option trades? I use them for stock trades and have been happy with them, $4.95 for each trade(stock)

[cwerdna]

In at $3.43 and $3.42 earlier this morning.

I got the same.on IB. However td Ameritrade just approved me for $1 per contract so I might consolidate because I know beforehand

Wow. $1/contract (I'm assuming no ticket charge) is very good. Don't mean to derail this thread too much, but about how much in commissions were you doing a month with them?

I complained to TOS a month ago about the $1.25 per contract commission and got shot down. "$1.25 is the lowest commission I have ever seen and we can't go any lower"... Bah time for another nasty help ticket with threats about leaving for IB I guess

I haven't tried complaining to get my $1.25/contract any lower, but there was one guy here who was at $0.70/contract on TOS but he was doing in INSANE # of trades/month. I don't think most mere mortals can get that rate. I think he also get it before TOS was bought by TD AM.

[Dawajmeister]

In at $3.43 and $3.42 earlier this morning.

Wow. $1/contract (I'm assuming no ticket charge) is very good. Don't mean to derail this thread too much, but about how much in commissions were you doing a month with them?

I haven't tried complaining to get my $1.25/contract any lower, but there was one guy here who was at $0.70/contract on TOS but he was doing in INSANE # of trades/month. I don't think most mere mortals can get that rate. I think he also get it before TOS was bought by TD AM.

Don't want to spend too much time off topic on this thread, feel free to inbox me if you guys have more quesitons. I have 2 accounts IB and TOS, and I have been mirroring trades in both accounts for about 2 months. Plus a few additional GOOG and AAPL IC's and Bflys in my TD account. I called Ameritrade yesterday and said I had 2 accounts and was paying b/w .7 and $1 on commissions at IB, and would move my account over to TD if they could get me between .7 and $1 with no flat fee. I also said I would double the number of contracts I traded (I allocate $1000 per trade so with the 2 accounts I was doing $2000 per trade). They said the office of the President would have to approve it, and called me the next day (today) and said it was approved, would take effect by Friday. I also don't have a very large amount of either account btw.. so it's more about contracts traded I think.

IF you have more ?s inbox me.

[cwerdna]

^^^

http://steadyoptions...__160#entry7285 was the reference to the insane # of trades/month.

Unless I'm misreading your post, I don't see anything in it about how much in commissions you're doing. I was doing over $700/month in commissions on TOS when I was being charged $2.95/contract, before I got it lowered.

Feel free to answer and continue the discussion in the thread I pointed to.

Edited October 17, 2012 by cwerdna

[Dawajmeister]

^^^

http://steadyoptions...__160#entry7285 was the reference to the insane # of trades/month.

Unless I'm misreading your post, I don't see anything in it about how much in commissions you're doing. I was doing over $700/month in commissions on TOS when I was being charged $2.95/contract, before I got it lowered.

Feel free to answer and continue the discussion in the thread I pointed to.

I just looked at my statement it doesn't have commission totals listed.. I trade all of the SO trades at a $1000 per trade allocation, plus about 8 RIC a month at a $1000 per trade allocation. So not a huge amount... I made sure to mention IB and said I was looking for something b/w .70 and $1 and would consolidate my money and my number of contracts traded would double.. Remember this is about a month of activity on there at the above levels.

[cwerdna]

In TOS, under Monitor > Account Statement, if you scroll all the way to the bottom, it'll list Commissions YTD.

I'm currently at $6251.55 in commissions YTD. I got moved to for $1.25 contract earlier this year (I think in June).

[cwerdna]

Has anyone recently negotiated w/TOS to go below $1.25/contract?

That's what I'm at but I find that w/Red Option ("newsletter") auto-trades, they tend to trade quite a few contracts. In some cases, their normally ripoff to me pricing (https://www.tdameritrade.com/pricing.page#Options) of $9.99 + 0.75/contract is better than my $1.25/contract, but not always.

I'm almost thinking of having some of the strategies switched over to my other account (which is a TD AM account) that has the ripoff pricing.

Unfortunately, autotrading for Red Option is only available on TD AM/TOS. I'd otherwise have it done on IB, if I could.

[Marco]

I think how this happens is as follows:

I think brokers get charged by exchanges for 'traffic' i.e. resting orders in their order books then changing the limit etc. This can amount to quite a bit if you have a smart order routing system placing orders at exchange A then pulling it and placing it exchange B because it now has a better bid vs. your offer then moving the order to exchange C and then back to A ...

So what their 'smart' order routing does is to evaluate whether your limit has any chance of getting filled (your guess how it does that but I suppose it has to be near mid) if it has a good chance of getting filled it is actually resting the order in an order book. Presumably the exchange with the best bid. If the algo for whatever reason thinks the order is not worth resting somewhere it is just held on the internal order book and 'monitored' until the algo decides it's now worth placing the order. So what might have happened in above example is that you place your first oder and the algo decides to only rest it internally. When you placed the second order the price has moved enough for the algo to place it directly in the order book where it is filled instantly but it is slow to realize that the other order is also executable now.

This is 50% speculation and 50% talking to IB (which as we know is not always THAT fruitful and you get different answers if you talk to different people)

This is why changing the order by one cent forth and back sometimes works - this seems to trigger the 'revaluation' of the algo and the order gets placed at the exchange rather then just being kept internally. As I said quite a bit of speculation on that issue on my side...

[Rob]

Is the current rate on IB of .70/contract with $1.00 minimum what you all are referring to regarding your accounts? I got a little confused when I read earlier posts about 70 cents, then 75 cents, and now I see that it looks like 70 cents on their website with a dollar min? I called them to clarify and I got a semi rude agent who said they haven't had 70 cent flat fees in over a decade. 

[Mikael]

GTC -- and you got filled at $3.10?!? 

 

On what platform? (TOS, IB, or another?)

 

If it's on TOS, I'm sort of pissed off, and I'll add that to my log of improperly routed trades.  (There's something wrong with TDAmeritrade's routing and/or trade matching software -- I now have a log of over 50 trades in the last three months that are major discrepancies.  For example, had a straddle I was trading in two accounts.  I entered the first order to buy as a 20 contract at $2.10, and THEN I entered the second order, in a separate account, to buy, the same straddle, 10 contracts at $2.05.  The $2.05 was filled first -- even though it was a lower price.  This happens frequently.)

 

I did this trade on a Canadian broker - Questrade. I'm planning on switching over to IB because the commission is alot lower. However, somebody told me if you want your order to be filled it's better to put it as DAY instead of GTC because brokers take DAY order over GTC orders to fill since they will be cancelled by the end of the day, so they potentially can lose out on commission if you don't place the order again.

 

not sure how true that is but does make sense logically. 

 

as a side note i was also following this trade on ToS paper trading and that got filled too. but then again it's paper trading LOL.

Edited April 30, 2013 by Mikael

[Mikael]

I think how this happens is as follows:

I think brokers get charged by exchanges for 'traffic' i.e. resting orders in their order books then changing the limit etc. This can amount to quite a bit if you have a smart order routing system placing orders at exchange A then pulling it and placing it exchange B because it now has a better bid vs. your offer then moving the order to exchange C and then back to A ...

So what their 'smart' order routing does is to evaluate whether your limit has any chance of getting filled (your guess how it does that but I suppose it has to be near mid) if it has a good chance of getting filled it is actually resting the order in an order book. Presumably the exchange with the best bid. If the algo for whatever reason thinks the order is not worth resting somewhere it is just held on the internal order book and 'monitored' until the algo decides it's now worth placing the order. So what might have happened in above example is that you place your first oder and the algo decides to only rest it internally. When you placed the second order the price has moved enough for the algo to place it directly in the order book where it is filled instantly but it is slow to realize that the other order is also executable now.

This is 50% speculation and 50% talking to IB (which as we know is not always THAT fruitful and you get different answers if you talk to different people)

This is why changing the order by one cent forth and back sometimes works - this seems to trigger the 'revaluation' of the algo and the order gets placed at the exchange rather then just being kept internally. As I said quite a bit of speculation on that issue on my side...

 

marco just a quick question, doesn't IB charge for changing orders? so if you keep on switching orders for 1c... don't the cancellation fees add up?

[Marco]

marco just a quick question, doesn't IB charge for changing orders? so if you keep on switching orders for 1c... don't the cancellation fees add up?

IB does charge you when YOU change an order (not for combos though) and I think it is for that exact reason (the exchange charges them) But if your limit stays the same and they move the order around to different exchanges they wouldn't charge you but they still might occur a cost from the exchanges hence their algos will try to move them around as little as possible.

I would only do that changing forth and back thing with combo orders to avoid changing fees. Even though if you do get filled in the end you get all or some of that fee back depending on how often you changed it - I don't remember the exact numbers but I think you could change the order 3 times and if it then got filled you basically paid no changing fee - and that was before they lowered these fees quite a bit.

 

Anyway I do pay IB a lot of fees over the year and that order cancellation/changing fee is the least of my issues. I trade a lot of spreads though where that doesn't apply ...

I don't quite understand why option fees are so much higher than stock fees. If I buy 100 GOOG at 800$ they charge me 1c per share or 1$ for and 80k$ order if I buy 200 call spread that costs 1$ premium  I spend 20k USD but pay about 200*0.75 = 150$ fee. I'm aware that I leverage a position which is much bigger than the 80k stock order but I find the ratio of fees quite extraordinary. That and that U.S. broker charge a fee per share or lot rather than a %'age fee which makes it super cheap to trade big names like GOOG or AAPL and super expensive trading shares below 10$ (especially on the option side)

*** end of rant ***

[Mikael]

IB does charge you when YOU change an order (not for combos though) and I think it is for that exact reason (the exchange charges them) But if your limit stays the same and they move the order around to different exchanges they wouldn't charge you but they still might occur a cost from the exchanges hence their algos will try to move them around as little as possible.

I would only do that changing forth and back thing with combo orders to avoid changing fees. Even though if you do get filled in the end you get all or some of that fee back depending on how often you changed it - I don't remember the exact numbers but I think you could change the order 3 times and if it then got filled you basically paid no changing fee - and that was before they lowered these fees quite a bit.

 

Anyway I do pay IB a lot of fees over the year and that order cancellation/changing fee is the least of my issues. I trade a lot of spreads though where that doesn't apply ...

I don't quite understand why option fees are so much higher than stock fees. If I buy 100 GOOG at 800$ they charge me 1c per share or 1$ for and 80k$ order if I buy 200 call spread that costs 1$ premium  I spend 20k USD but pay about 200*0.75 = 150$ fee. I'm aware that I leverage a position which is much bigger than the 80k stock order but I find the ratio of fees quite extraordinary. That and that U.S. broker charge a fee per share or lot rather than a %'age fee which makes it super cheap to trade big names like GOOG or AAPL and super expensive trading shares below 10$ (especially on the option side)

*** end of rant ***

 

okay, just to clarify. if we trade straddles, strangles, iron condors or whatever option strategy that is a combo (meaning more than just a single put or call) then they don't charge any fees if you

 

1) cancel the order outright

2) change the limit value on the order

 

thanks for the answer, because i'm thinking of changing to IB for options. 

[Marco]

Is the current rate on IB of .70/contract with $1.00 minimum what you all are referring to regarding your accounts? I got a little confused when I read earlier posts about 70 cents, then 75 cents, and now I see that it looks like 70 cents on their website with a dollar min? I called them to clarify and I got a semi rude agent who said they haven't had 70 cent flat fees in over a decade. 

its 0.70 with 1$ min however they pass on any exchange liquidity fees and rebates which leads to fees between 0.15 and 1.50$ per lot (both rare). Members here seem to argue about this but Kim assumes a long run average of 0.75/per lot including these fees and rebates which is roughly what I got when I did the average of my commissions quite a while back.

Assume 0.80 if you like and you still are cheaper than TOS - the only alternative I would consider using given their systems and pretty decent execution.

[Marco]

okay, just to clarify. if we trade straddles, strangles, iron condors or whatever option strategy that is a combo (meaning more than just a single put or call) then they don't charge any fees if you

 

1) cancel the order outright

2) change the limit value on the order

 

thanks for the answer, because i'm thinking of changing to IB for options. 

correct. no changing or cancellation fees for 2 leg or more combos.

[Kim]

The cancellation fee for single options has been recently reduced to $0.01.

 

Regarding Marco's speculation - it sounds right to me. It happened more than once to me that changing the order by 1-2 cents (sometimes even up the sell order or down the buy order) would get an instant fill.

[Rob]

its 0.70 with 1$ min however they pass on any exchange liquidity fees and rebates which leads to fees between 0.15 and 1.50$ per lot (both rare). Members here seem to argue about this but Kim assumes a long run average of 0.75/per lot including these fees and rebates which is roughly what I got when I did the average of my commissions quite a while back.

Assume 0.80 if you like and you still are cheaper than TOS - the only alternative I would consider using given their systems and pretty decent execution.

Thank you for your response.

[Kim]

I checked it several times - the monthly average is always between 0.75 and 0.80.

 

As an example, today I paid total of $0.10 for 2 spreads (4 contracts) of FOSL - and it was with PSE (which usually charges a fee, but today I got a rebate - still have no idea how it is possible).

 

Here is the IB commissions schedule - http://interactivebrokers.com/en/index.php?f=commission&p=options1

[cwelsh]

Answers to the various questions:

 

1)  I always try to close as one order at first, but if I don't get fills, change it to legs.

 

2) TOS does not have fees for canceling orders or changing orders (and as much as I do that, its part of the reason I use them -- particularly as, despite them using a per trade and per contract fee, they are not THAT much off IB)

 

3)  I don't care what their algorithm does, if that's what they're doing they are violating half a dozen laws and trading rules.  (610 and 611 jump to mind, but there's half a dozen others).  It also violates their own stated policies.  Just so you know, when I confronted them with it, and went fairly high up in management chain, I was assured OVER AND OVER that this never happens, and I just must be reading the order screens wrong.  (Which is why I'm compiling a log, with actual trades).  The one time I sent in statements showing where it had happened, I got a letter back, they apologized, said it must be a one time glitch, they are looking into it, and they refunded the difference in the execution prices.  I too have had it where I change an order .01 or .02 and it immediately gets filled.  That's not what I have issues with, what should NEVER happen is:

 

   a.   You have an order to buy option XYZ at $1.00, that is not getting filled in account A

   b.   You then put an order to buy option XYZ at $0.98 in Account B that immediately gets filled.

 

That simply cannot happen.-- they are open to big time fines if it does.

 

4)  I typically only trade day orders unless I have a reason to have one on the books at open

 

5)  I have my day order back up at $3.00 to get the calendar closed off.  I'm glad I closed the straddle on the weekly yesterday -- even though the price has moved another $2.00, it's down further.  I won't be trading LNKD on the straddle weeklies again.

[srf335]

Chris, regarding your example in point #3 above.  Are you routing these orders to a specific exchange with ToS?

 

My understanding from discussing with TDA/ToS is that when selecting "Best" routing, they pick and place the order on what they determine to be the "best" exchange at the time they accept your order.  Once placed, they leave the order on that exchange until it is either filled, cancelled or it expires.  Unlike IB, they won't proactively move an order to another exchange once it is placed, even if it would fill on the other exchange (I explicitly asked about this scenario because of problems I was having getting fills).

 

If true, it seems that could create the situation where a newer order gets filled at a lower price on a different exchange because the older order is parked on an exchange with a higher bid/ask combo.  

 

I'm not familiar enough with trading rules/laws to know how this applies, so I am interested in your perspective.  The last event that prompted me to talk in length with ToS was the fact that about 4 months ago I noticed >80% of the "Best" orders I was placing were being routed to ISE.

[Marco]

I think execution and SMART order routing is where the value of a broker lies as much (if not more) than commissions. So there are cheaper guys around that TOS and IB but from what members report they didn't get orders filled that were filled on IB and TOS and/or at much worse prices. If TOS really only places the order on one exchange and then doesn't move it / monitor it for better execution elsewhere then their 'smart' or 'best' order routing isn't really worth that name

[Mikael]

So basically based on what srf335 said I take it that IB will theoretically have a faster fill than TOS since they proactively move your orders to exchanges that have higher probability of filling your orders.

Combined with the lower commissions IB seems like a no brainer for me over TOS

[cwelsh]

I never self route, don't have the time for that, so use their smart routing software.

 

As for which is better for execution between IB and TOS -- I really think they're about the same.  I've run simultaneous accounts on each, and could not notice any difference.  Sure order ABC might get filled first on IB, but then order DEF would get filled on TOS next. 

 

When testing simultaneous orders at equal prices, using dual monitors and two mice, and attempting to place the orders at the exact same time, I could tell no difference on what got filled first.

 

My complaint is on what appears to be occasional routing glitches.  It HAS to be due to one of the following:

 

a) Smart routing doesn't update as fast as new deal flow.  So I place the first order, TOS routes it to what it thinks is the best exchange, and it sits.  Then a new order comes and gets placed through a different route. This would occur if there are different algorithms for placing new orders and managing open orders.  This would also mean they have an idiot programmer and have violated routing rules.

 

  TOS first tries to match orders to their internal accounts and will hold orders at certain prices to profit more on their internal trading.  Many firms do this (I have one client in particular whose firm admits to it, and states the fines that go along with it don't come close to wiping out how profitable it is).  I refer to this as the "screw the little guy."  TOS denies they do this.  (And yes, it does violate trading rules -- but it happens ALL of the time in larger brokerage houses).

 

c.  TOS software is just glitchy.

 

Anyways, I need to stop hijacking this thread.

 

My $3.00 day order is still not filled.

[Kim]

Same here. I missed some trades and can't execute as well as Kim in general: SO reported 18% and 30% for Mar/Apr, but all I could manage was 7% and 13%, respectively. Some trades had been opened before I arrived, so I wasn't in them. Commissions seem to be eating 3-5%. I'm hoping I can get closer to SO's performance with more experience.

 

This month I'm down ~12%, but I did cut my VIX trade in half at breakeven, and reentered at -.75 (stupid, in hindsight).

 

Luckily I've been doing some directional trades on the side, which have worked stunningly well in this up-up-up environment. I think that a combination of volatility trades and directional trades could work very well. They're very time intensive, though, always need to keep an eye on the market during the day.

You need to remember that SO reported performance is before commissions, so you should not aim to replicate it. 3-5% commissions seems like too much to me - are you referring to per trade or monthly?

 

With IB, if we do ~$3 spreads (which is about average), commissions should eat 1%. With 15-20 trades and 10% allocation, that's total of 1.5-2.0% per month.

[Andre]

Thanks for not letting me spew numbers off the top of my head.

 

In March, I paid an average of $65 per trade, on a 3.2k allocation. So that's 2.0%.

In April, I paid an average of $57 per trade, on a 3.4k allocation. So that's 1.7%.

 

And this includes those very expensive VIX calendars and the occasional dollar trade.

[Andre]

Wait — at first I thought my numbers actually agreed with you, but then I reread your comment more carefully.

 

You're saying it should be around 1% per trade? In which case, it was double for me in March, and 2/3 more in April. This is IB.

 

Commissions per month depend on the number of trades, so it's not a good reference.

[Kim]

Thanks for not letting me spew numbers off the top of my head.

 

In March, I paid an average of $65 per trade, on a 3.2k allocation. So that's 2.0%.

In April, I paid an average of $57 per trade, on a 3.4k allocation. So that's 1.7%.

 

And this includes those very expensive VIX calendars and the occasional dollar trade.

It could be that you took the cheaper trades on average.

In March the average trade was $3.32, $3 commissions - that's 0.9%

In March the average trade was $4.51, $3 commissions - that's 0.6%

 

We had few double calendars (6 out of 32 trades) so that would double the commissions for those trades, but overall, it should still be around 1%.

[Andre]

Sorry for the comment spam. Here's my data from March and April:

 

I think your numbers are mostly right if you just consider ordinary straddles. It's the VIX calendars that skew the numbers.

 

Edit: I should note that this isn't very scientific. I'm just dividing the commissions by what was my mental allocation that month, not the exact cost of each trade. So your numbers are likely to be more exact.

Edited May 20, 2013 by abreis

[indiana*josh]

think your numbers are mostly right if you just consider ordinary straddles. It's the VIX calendars that skew the numbers.

 

The $3/straddle figure assumes an IB commission of 75 cents per contract.  Sometimes it is more, and sometimes it is less.  Since I started in February, I've paid $1,051.37 in commissions on 1188 contracts, for an average of 88.5 cents per contract, which is 18% more than the advertised rate of 75 cents.

[Kim]

Sorry for the comment spam. Here's my data from March and April:

Untitled.png

 

I think your numbers are mostly right if you just consider ordinary straddles. It's the VIX calendars that skew the numbers.

 

Edit: I should note that this isn't very scientific. I'm just dividing the commissions by what was my mental allocation that month, not the exact cost of each trade. So your numbers are likely to be more exact.

Okay, we also did few adjustments which increased the numbers. VIX are more expensive. I still think that the numbers are closer to 1-1.2% than 2%.

[cwelsh]

And you can always do trades in larger blocks -- which will (a) increase your risk but ( lower commissions.

 

Depending on the size of your portfolio, commissions have a different impact.

 

For instance, on TOS, if I buy 100 contracts of a $3.00 straddle, The commissions are only 0.4% TOTAL (to open and close) of the trade.  (yes zero point four percent). 

 

And no, I don't even trade in blocks that large, but ideally over time you will grow and commissions as a % will go down.

 

And I would also encourage everyone to look at a year to year investment performance.

 

Yes we will have bad strings of trades, thats why position sizing is so important.  But also look at the losses, so we've had 5-7 trades that lost 3-4%.  Before that we had 10-12 that gained 8%.

 

I'll take that ongoing ratio anytime.  I would not worry until there was 3-4 months of bad results, and that just hasn't happened, and is unlikely too -- particularly when you combine in hedging with the VXX, calendars, and the other trades.

 

REMEMBER POSITION SIZING IS KEY

[Marco]

agree on all on the above, the point above lower %age comm with increasing ticket size is only valid though if you pay a ticket fee (xyz $ per trade plus abc$ per lot) With the above example at IB I pay the same %age comm no matter whether I trade 1 straddle (2*~0.75 = ~1.50 or 0.5% of total premium) or 100 (all no's x 100 and same 0.5%)

[barefoottrader]

Thats why I left TOS for IB... plus commissions kill you if you get less than 10 contracts. I just moved all of my accounts to IB and happy so far. I do miss the TOS platform. IB TWS is not bad, but Analyze tab is something that I cant replace.... I kept a small open account with TOS to have the platform, but its just more cumbersome to have both open. 

 

I used to be with IB, but consolidated my accounts at TOS 2 years ago. Commissions aren't an issue for me at TOS. The real issue on trades like straddles is routing and fills. IB and TOS will route the order to multiple exchanges, but TOS then only fills with one exchange. IB on the other hand will fill the order across multiple exchanges - you get faster and better fills. On the other hand I trade a lot of SPX options and there is no advantage between brokers. For those considering IB, I highly recommend them especially if you trade other products (futures, forex, etc.). 

[chenthilan]

what is the typical commission you pay @ IB? i'm currently with TOS and the fills are not great.

[bam1960]

.70 per contract

[chenthilan]

ok thanks

[Maxtodorov]

what is the typical commission you pay @ IB? i'm currently with TOS and the fills are not great.

 

.70 is the official number (listed on the website) plus there are exchange fees and those vary. However the actual costs vary. I still cant fully figure out why, but my commissions seem to be different on every order. However on average, I pay less than $1 per contract. That is very useful for orders of my size, as I can chose to only follow 2 or 5 contracts on some trades. At TOS I was paying 7.95 plus .65 or .75 per contract. So if you wanted to do a small allocation, the commissions would eat the profit. Also, at TOS its almost impossible to get a RUT IC or RIC filled as one transaction at mid price. You pretty much have to either pay the BID/ASK or leg in. 

 

In fact the move to IB was caused by my recent burn in RUT IC. I bought a CALL LEG, then market suddenly jumped up, and the PUT credit pretty much left me in the dust. So I ended up getting out with a loss. I seem to get much faster fills at IB.  STZ is a good example.... got in right after KIM at the same price. I see folks had to leg in at TOS.

Edited June 26, 2013 by Maxtodorov

[PaulCao]

.70 is the official number (listed on the website) plus there are exchange fees and those vary. However the actual costs vary. I still cant fully figure out why, but my commissions seem to be different on every order. However on average, I pay less than $1 per contract. That is very useful for orders of my size, as I can chose to only follow 2 or 5 contracts on some trades. At TOS I was paying 7.95 plus .65 or .75 per contract. So if you wanted to do a small allocation, the commissions would eat the profit. Also, at TOS its almost impossible to get a RUT IC or RIC filled as one transaction at mid price. You pretty much have to either pay the BID/ASK or leg in. 

 

In fact the move to IB was caused by my recent burn in RUT IC. I bought a CALL LEG, then market suddenly jumped up, and the PUT credit pretty much left me in the dust. So I ended up getting out with a loss. I seem to get much faster fills at IB.  STZ is a good example.... got in right after KIM at the same price. I see folks had to leg in at TOS.

 

IB fees varies due to various exchange liquidity rebate/taking fees; e.g., you'll always pay more if you submit a market order vs. limit order. See here: http://steadyoptions.com/forum/topic/1098-discussion-acn-april-2013-trade/?p=18573

 

I have IB account for actual trading and ToS for ThinkOnDemand. 

 

I believe Lightspeed is probably the cheapest for retail: 0.60/contract; http://www.lightspeed.com/pricing/commission/. 

 

Best,

PC

Edited June 26, 2013 by PaulCao

[Micahjw]

Maxtodorov,

Do you have to pay the exchange fees? Can you get data from some other source and not pay the large monthly costs for the exchange data? When I looked into IB they quoted rates on various exchanges from 30 to 127 a month and that would kill any cheaper rates for me. Also, they seemed to charge for canceling/modifying orders. Which, I don't know about others, but a lot of times I put in a limit and then cancel and and slowly move up a few pennies until I get filled. Don't really care to get charged on cancelling, but I guess if its small it doesn't matter that much.

[Maxtodorov]

Maxtodorov,

Do you have to pay the exchange fees? Can you get data from some other source and not pay the large monthly costs for the exchange data? When I looked into IB they quoted rates on various exchanges from 30 to 127 a month and that would kill any cheaper rates for me. Also, they seemed to charge for canceling/modifying orders. Which, I don't know about others, but a lot of times I put in a limit and then cancel and and slowly move up a few pennies until I get filled. Don't really care to get charged on cancelling, but I guess if its small it doesn't matter that much.

We should probably talk this in another forum, as this for STZ trade. But in short, exchange fees are not DATA fees. Data fees are $10 per month (that you really need), if you do not hit $30 in commissions. I have no problems with reaching $30 per month. There is $1.30 per month in fees for options data... But in the end, 2 TOS trades cost about that much. 

[Kim]

My average commissions with IB are in the 0.75-0.80 range, still way cheaper than TOS. As for cancellation fees - they don't charge them for spreads, only single options, and the fees have been reduced recently to 0.01, so it is not really something you should be concerned about. Unless you can get TOS to lower their commissions to $1.00 or less (with no order fee), the savings with IB will be HUGE. If you still want the TOS platform, just open a paper account with them.

[semgrana]

For what it's worth if you open a new  TD Ameritrade account, equity trades are free for 2 months.  For options, they usually charge a $9.99 fee plus $0.75 per contract.  But during this 2 month period, they are waiving the $9.99

[Kim]

For those still not aware, we have an agreement with TOS - they charge SO members 1.50 per contract with no order fee. Better for smaller accounts than the 0.75 plus 9.99. I personally think IB provides better value, but if you insist to be with TOS, just letting you know that you can do better than the official rates. 

[Guest Peticolas]

So how is the U.S. tax reporting from IB? TDA is so effortless, so I'm worried I'll suddenly have a tax prep bill that will wipe out my savings.

[Gary]

I came across this thread and learned of a new resource that I hadn't heard of before - the SEC 606 report. Brokers are required to publish this report, which explains their execution practices and statistics. Reading the thread and looking at this report for each broker may remove some of the mystery around why some brokers seem to have better fills than others.

 

The upshot validates much of what has been discussed here many times ... IB seems to route to the most locations and seems to have a better routing algorithm in most cases, resulting in better overall fills. TOS also seems to have a fairly good system, although maybe not quite as good from an execution perspective as IB. Of course, many folks love TOS's analytical capabilities.

 

I'm curious if anyone feels strongly that any other broker besides IB and TOS has similar or better execution quality. My impression is that when it comes to execution quality (which is a huge part of overall trading success) there isn't really anyone else in the retail space who consistently performs at the same level as these two.

 

I personally use IB for trading and TOS for analytics. IB just gives you so much flexibility in terms of products (e.g. fx and futures), the execution is great and the commissions are among the best. On the downside, which can be a shock to new traders who expect the "retail packaging", the interface is klunky, customer service isn't that great, the commission savings are "lumpy" (due to pass thru fees), and data fees can eat away at your account if you're not very active. I think all of these downsides can be a bit overwhelming for new traders - that's why TOS may be a great option for those just starting out. You can get the $1.50 rate negotiated by Kim (no ticket fee) and learn the ropes at a very attractive commission rate (for a small / new account) without all of the headaches associated with IB. Then, once the all important trading aspects are second nature, you can switch to IB and realize better fills & commissions while learning how to manage all of baggage that comes along with IB. Just my 2 cents...

 

Here's a link to IB's recent SEC 606 report if you're interested: http://www.interactivebrokers.com/download/1Q_2013_IB_ORDER_ROUTING_REPORT.pdf

[Marco]

interesting report, shines a bit of light on some things I'd always wanted to know (paying for order flow etc)

thanks for sharing 

[barefoottrader]

I came across this thread and learned of a new resource that I hadn't heard of before - the SEC 606 report. Brokers are required to publish this report, which explains their execution practices and statistics. Reading the thread and looking at this report for each broker may remove some of the mystery around why some brokers seem to have better fills than others.

 

The upshot validates much of what has been discussed here many times ... IB seems to route to the most locations and seems to have a better routing algorithm in most cases, resulting in better overall fills. TOS also seems to have a fairly good system, although maybe not quite as good from an execution perspective as IB. Of course, many folks love TOS's analytical capabilities.

 

I'm curious if anyone feels strongly that any other broker besides IB and TOS has similar or better execution quality. My impression is that when it comes to execution quality (which is a huge part of overall trading success) there isn't really anyone else in the retail space who consistently performs at the same level as these two.

 

I personally use IB for trading and TOS for analytics. IB just gives you so much flexibility in terms of products (e.g. fx and futures), the execution is great and the commissions are among the best. On the downside, which can be a shock to new traders who expect the "retail packaging", the interface is klunky, customer service isn't that great, the commission savings are "lumpy" (due to pass thru fees), and data fees can eat away at your account if you're not very active. I think all of these downsides can be a bit overwhelming for new traders - that's why TOS may be a great option for those just starting out. You can get the $1.50 rate negotiated by Kim (no ticket fee) and learn the ropes at a very attractive commission rate (for a small / new account) without all of the headaches associated with IB. Then, once the all important trading aspects are second nature, you can switch to IB and realize better fills & commissions while learning how to manage all of baggage that comes along with IB. Just my 2 cents...

 

Here's a link to IB's recent SEC 606 report if you're interested: http://www.interactivebrokers.com/download/1Q_2013_IB_ORDER_ROUTING_REPORT.pdf

 

This is great advice for new traders.

[CJFerreira]

I switched my IRA to Interactive Brokers for about two weeks before switching it back to E*Trade.

During that two week period I did not experience any noticeable improvement in fills. Their advertised rate of $0.70 per option commission was a total joke. My actual costs ranged from $0.49 to $1.09 per option due to unpredictable exchange fees, and my negotiated commissions at E*Trade for similar trades during the same period were less!

I appear to have made two accidental trades during this period (maybe?) which were probably due to their awful trading interface (my fault - learning curve?), but I couldn't seem to reconcile their trading report with my portfolio display (WTF?!)

When I put in a request to transfer the portfolio back to E*Trade, they refused to release over $500k in my portfolio because a $300 dividend check forwarded from E*Trade had not cleared their 10-day holding period. This only came to light when I pressed them as to the hold-up (pun not intended). At this time I still don't have any movement after a week's time.

With E*Trade I negotiated $0.60 per option with a reduced fee of $4.99 which is spread over all legs of a single order, so a 10-contract Iron Condor would cost me a total of $0.60 x 10 contracts x 4 legs = $24 + $4.99 = $28.99 total commission, or about $0.72 per option. The same trade using IB might run over $40, depending on the exchange fees. Granted, this special rate with E*Trade may be due to my account size, but the overall costs with IB was nowhere near their advertised prices, plus they nickel and dime you for everything on top of that.

Finally, I was totally frustrated with their log-on process. They require you to use a physical authentication card that requires you to carry a credit card sized device that generates security codes that must be entered when you log in. If you don't happen to have the card with you, or you lose it, you cannot access your account. Well, you probably could after telephoning a live person, but that could be problematic in off hours... No entering trades using an iPad either.

Bottom line is that I don't trust IB to service my account in a professional way. Their prices are unreliable and unpredictable, and their interfaces are awkward, to say the least. Maybe others believe that they can get better fills from them (I couldn't), but personally, I wouldn't trust them with my money.