Brokers and commissions

[smorgoun 1]

Nope, they charge for modifying as well, but after you submitted the order.

However, they do indicate that order may incur cancel/modify fees BEFORE you submit it -- hence, there is a chance to modify it for free (not sure if my English is explanatory enough

Edited July 12, 2012 by smorgoun

[Kim 7,943]

So if you modify it to a round number, there is no Modify fee? it doesn't make sense.

One thing worth mentioning (important for us): those fees don't apply to spreads. Spreads can be cancelled/modified as many time as you want.

[smorgoun 1]

Agree with spreads -- no extra fees for cancel/modify

Also does not makes sense to me -- but I observe such behavior...

Try it -- you do not have to submit anything -- just create an order, see CxFee warning, then change the price to a round number (.x5 or .x0)

Maybe it has something to do with liquidity...

[Kim 7,943]

They might not display the warning, but I think they still charge the fee. The warning is displayed because this is a penny increment order.

[Marco 223]

They might not display the warning, but I think they still charge the fee. The warning is displayed because this is a penny increment order.

yeah, maybe they just display the warning the first time or whatever the reason I'm pretty sure they still charge you.

[Dawajmeister 43]

stay away from eoptions unless you are just going to be doing straddle/strangles, or calendars.. their interface is horrible.. and if you enter a IC, you can't close out just the Puts or calls at once, without calling in. Also, on a spread or straddle, there is no option for GTC unless you call it in. And when you call it in, the commission doubles. from 3 and .10 to 6 and .10

Going to eventually consolidate my TOS and eoptions and move to IB.

Also a lot of times the short call/put on a calendar doesn't match up right and ends up being a margin play.

Edited July 12, 2012 by Dawajmeister

[BillP 0]

I don't think OH charges for just modify or canceling an order. I could be wrong. I never knew anyone charged for this.

[Marco 223]

I don't think OH charges for just modify or canceling an order. I could be wrong. I never knew anyone charged for this.

Ja I think there aren't many other than IB charging for it. However the exchanges charge the brokers for it so others just have higher fees to reflect that. Also you get a few (not sure how many) changes free if you eventually trade. Say you change it 3 times and then eventually get filled then they rebate you for the changing fees. They also aren't massive. So unless you change every order 30 times before you get filled or put in orders and cancel them again all the time this shouldn't be a big bill. And as said before for most trades on this forum (e.g. spreads) these fees don't apply anyway.

[Rusty 0]

I received an email from Generic Trade. They advertise .59 per trade. However, I cannot determine what a "trade" is at this point; i.e. a contract, or position, or spread, etc. There is no charge for their online platform called Generic Trader, but their advanced Firetip platform costs $59.00/month. I plan on contacting them later to find out their full commission schedule. Looks like they are staffed 8-5CST. Does anyone have any experience with GT?

[Kelly Park 10]

I have been in communication with IB support about the high commissions I have been paying and they told me to set my options routing default (in the Global Configuration/SMART Routing menu) to Highest Rebate instead of SMART. Is this a good idea? How do you guys have it set? Will this reduce my ability to get good fills?

[Rusty 0]

GT Update - I just called them. They only offer options on Futures, not equities or ETF's, so not a match for me. The .59 is per contract plus exchange fees.

[Marco 223]

I have been in communication with IB support about the high commissions I have been paying and they told me to set my options routing default (in the Global Configuration/SMART Routing menu) to Highest Rebate instead of SMART. Is this a good idea? How do you guys have it set? Will this reduce my ability to get good fills?

To be honest I don't know the answer, but as SMART only fills you at the exchange with the higher price is the fill is better INCLUDING the higher exchange fee, I don't see how the other setting will get you better fills.

[cwerdna 12]

How about MB Trading? Thanks to the Barron's article, I discovered their very low commissions of $0.95/contract (http://www.mbtrading...px?page=Options)?

Since nobody's responded, I take it nobody's tried them?

How about Lightspeed Trading? Their Direct Market Access is $0.60/contract ($1/min) w/no ticket charges. But, it looks like there's $18/month in required market data fees and they require $25K min initial funding for access to that platform..

I've applied for an IB account earlier tonight. I guess I'll get to see how I like/dislike them once funding's completed.

[Guest akbrtrdr]

It can be a daunting task finding the right broker but no sense in reinventing the wheel with all the experience on this board. Just got off the phone with IB, They do have a minimum commission of $10 a month (waived first 3 months) and .85 per contract (their website says .70 ) with a minimum of $1 (if only 1 contract is traded.)

I will probably trade 1-3 contracts (might graduate to more later) does real world experience say this is a viable way to profit and IB is the correct broker to work with?

Or is there a better broker for "small" trades?

Thx

[Kim 7,943]

Okay, first of all, the $1 minimum applies to the whole trade, so if you do spreads, you automatically are above the minimum in every trade.

Not sure why they ask for 0.85 while the website says 0.70 (and all of us are paying 0.70) - is it possible that the 0.85 included all the extra fees? Most of us are paying 0.70 plus exchange fees and some other fees. Check with them - if it doesn't, you should insist on 0.70 which is what they advertise on the website.

[xpresstalk 3]

I am with tradeking and have not had this problem. I have placed 3 RICs in the last 2 weeks all were fine.

I guess I should have clarified. I almost opened an account with TradeKing. Then, I saw that they were merging with Zecco, I checked out Zecco. I went with Zecco because they had a better mobile app. Big mistake! My main account is OptionsXpress. They are expensive but, I have never had the drama I have had with Zecco. I would NOT recommend them to anyone. I applied for a IB account today! As soon as approvals are in and I close out some trades, I'm moving ALL funds to IB.

Edited July 16, 2012 by xpresstalk

[Guest akbrtrdr]

Okay, first of all, the $1 minimum applies to the whole trade, so if you do spreads, you automatically are above the minimum in every trade.

Not sure why they ask for 0.85 while the website says 0.70 (and all of us are paying 0.70) - is it possible that the 0.85 included all the extra fees? Most of us are paying 0.70 plus exchange fees and some other fees. Check with them - if it doesn't, you should insist on 0.70 which is what they advertise on the website.

I'm not sure either .85 could've been a slip of the tongue. I agree, the minimums are nothing as they will be met quickly.

[Kelly Park 10]

Please understand the exchange fees BEFORE deciding on a new broker. I switched to IB and am paying between 0.82 and 1.17 per contract for almost all trades, due to exchange fees. I know that is not Kim's experience with IB, and maybe mine will gradually come down, but right now it is frustrating.

[cwerdna 12]

Please understand the exchange fees BEFORE deciding on a new broker. I switched to IB and am paying between 0.82 and 1.17 per contract for almost all trades, due to exchange fees. I know that is not Kim's experience with IB, and maybe mine will gradually come down, but right now it is frustrating.

Which plan are you on? Flat rate or Cost plus? (http://www.interacti...hp?f=commission)

edit: Whoops! Scratch that. It looks like that doesn't make a difference for options. I was busy going thru the process last night of selecting various options, going thru the disclosures, etc.

Is there some other brokerage you'd recommend that's cheaper than what you're paying that also allows reasonably complex orders (e.g. IC and RIC) to be placed all at once?

Edited July 17, 2012 by cwerdna

[Kelly Park 10]

Is there some other brokerage you'd recommend that's cheaper than what you're paying that also allows reasonably complex orders (e.g. IC and RIC) to be placed all at once?

I just switched to IB a couple of weeks ago, so I am hoping to get it sorted out and be down to the 0.75 or so average that others are experiencing. But I wanted folks that are considering IB (and other brokers) to understand that the exchange fees are not insignificant. Marco's explanation, earlier in this thread, is very helpful at understanding them. But even placing limit order between Bid and Ask, I am still getting most commissions between 0.82 and 1.17, which can alter your decisions about which trades to enter and their sizing.

[guarneri 0]

Kelly, I recently opened an account with IB as well, and the average commissions seems to be close to 0.75. I made the mistake in the beginning that I was not considering that straddles/strangles had two legs, and thought my commission was too high.

So, just wanted to make sure that if you are trading 10 contracts for a straddle and the commission is $16, then you should be dividing $16/20 and not $16/10 to get the per contract rate (since you have 10 calls and 10 puts for a total of 20 contracts.)

[cwerdna 12]

For me, I'm not switching yet. I'm just trying out IB. IB's platform looks totally alien to me, so I need to learn it. My deposit won't be credited until 7/23, so I have a little time.

If they're not worth the inconvenience for the savings over TOS, I'm sticking w/TOS. At least I got my TOS commissions down to $1.25/contract.

I also might give MB Trading and Lightspeed Trading a shot, if IB doesn't work out.

[Kelly Park 10]

Unfortunately, I am not undercounting contracts. I am getting hit with 0.45 per contract exchange fees on most trades, on some or all legs. And that is with limit orders that sit on the boks for awhile before filling. I had a good fill yesterday on a AAPL diagonal, rebated so it was 0.70 total for both legs. Maybe it will all average out eventually.

[Kim 7,943]

Kelly, I really appreciate that you are sharing this info. People should have the whole picture and go with the open eyes.

I'm still not sure why our commissions differ so much. I do get charged over $1.00 per contract from time to time, but over time, it seems always to average below 0.80.

Those fees are really annoying, and the problem is that they are unpredictable. The problem is that at least for me, there is no real alternative. OH and eoptions seems to have a lot of issues with execution etc. so the only real alternative is TOS. If you can get their fees down to below $1.00, I think it is definitely better option than IB, especially considering their tools and customer service.

[pgrace0154 0]

Contract Is Combo? Net Total Commission Net Incl.

SPX JUL 27 '12 1375 Straddle SMART -2,155.00 2.99 -2,157.99

SPX JUL 27 '12 1380 Straddle SMART -2,130.00 2.99 -2,132.99

SPX JUL12 1375 Call Option CBOE -1,110.00 1.50 -1,111.50

SPX JUL12 1375 Put Option CBOE -1,050.00 1.50 -1,051.50

IB Commissions

1380 straddle bought at the ASK

1375 Straddle bought < ASK

1375 Call at the ASK

1375 PUT < ASK

Straight buys no round trip and it has always been so.

[pgrace0154 0]

It reformatted when I posted. "commission" should be over the 2.99's and the 1.50s

[Kim 7,943]

I think SPX has higher commissions if I remember correctly.

[cwerdna 12]

Contract Is Combo? Net Total Commission Net Incl.

SPX JUL 27 '12 1375 Straddle SMART -2,155.00 2.99 -2,157.99

SPX JUL 27 '12 1380 Straddle SMART -2,130.00 2.99 -2,132.99

SPX JUL12 1375 Call Option CBOE -1,110.00 1.50 -1,111.50

SPX JUL12 1375 Put Option CBOE -1,050.00 1.50 -1,051.50

IB Commissions

1380 straddle bought at the ASK

1375 Straddle bought < ASK

1375 Call at the ASK

1375 PUT < ASK

Straight buys no round trip and it has always been so.

Hmm, so they're charging you ~$1.50/contract? If so, that's worse than the $1.25/contract I'm now getting at TOS.

[Xfanman 9]

And here is why Options House fills are not as fast or well priced as IB. This is the response I received today regarding fills on Spreads at OH -->

Hello,

We route spread orders to one options exchange based on the exchange quoting the best bid/ask for your spread order at the time you submit it. You cannot select the exchange on spread order tickets. Other firms may leg into the spread by routing each leg to different exchanges even though you submit both legs on a single order ticket. Option exchanges do not have a National Best Bid Offer (NBBO) like stock exchanges so it is possible that two of the same order routed at the same time to different exchanges could be filled at different prices.

If you have additional questions please contact our Trade Desk, 1-877-653-2500 Option 2.

Regards,

Tom

Customer Service

OptionsHouse

141 W. Jackson Blvd.

Suite #800

Chicago, Illinois 60604

Toll Free (877) 653-2500

Fax (866) 492-2478

Edited July 19, 2012 by Xfanman

[Marco 223]

And here is why Options House fills are not as fast or well priced as IB. This is the response I received today regarding fills on Spreads at OH -->

Hello,

We route spread orders to one options exchange based on the exchange quoting the best bid/ask for your spread order at the time you submit it. You cannot select the exchange on spread order tickets. Other firms may leg into the spread by routing each leg to different exchanges even though you submit both legs on a single order ticket. Option exchanges do not have a National Best Bid Offer (NBBO) like stock exchanges so it is possible that two of the same order routed at the same time to different exchanges could be filled at different prices.

yep, that's one reason why I like IB even though they are not the absolutely cheapest. I think their order routing and execution is much better than many of the brokers that beat them in fees. And you'll more than make up for a slightly higher comm if you get better fills a lot of the time.

[Kim 7,943]

Here are my commissions today (not necessarily representative, just a normal day):

NFLX 0.69

AAPL 0.69

HAL 1.12

SPY 0.34

[Marco 223]

did 7 trades today with

0.73

0.31

0.45

0.76

0.76

0.93

0.76

(non weighted) average 0.67

that's on single option trades, 2 and 4 legged strategies mostly liquid names (like AAPL and SPY) but also 1-2 more illiquid ones.

So I think a 0.75 long term average is a reasonable assumption, I'm surprised to see some people regularly paying more than 1$/lot

[Thaze 4]

I had a question relating to IB if you guys (IB users) don't mind to clarify. In addition to playing the earnings trades, I currently hold stocks and do my trades through OH. I was considering doing an ACAT transfer and transferring my whole account to IB. The issue I'm running into is when using the flat rate fee I've noticed that their fee is .005 per share with a minimum order of $1.00, therefor requiring a minimum purchase of 200 shares. On an account my size, I cannot afford to always buy 200 shares of the stocks I like to invest in (AAPL etc) in addition to my earnings plays. Is it possible to order smaller amounts of shares and they just charge a flat fee for those shares or do they just dis-allow the purchase? I would just transfer a portion of my account but then I lose margin on both which is quite annoying. I would like to move to IB, but I'm not sure if I'm ready to go into earnings plays 100% and lose the one section I feel more comfortable with, the stock purchases. I'm just stuck in a messy situation due to OH's horrible fills / more expensive commission (on trades my size) and I'm unsure where to go to from this point forward. Any advice would be greatly appreciated.

Thanks,

Thaze

Edited July 20, 2012 by Thaze

[cwerdna 12]

The issue I'm running into is when using the flat rate fee I've noticed that their fee is .005 per share with a minimum order of $1.00, therefor requiring a minimum purchase of 200 shares. On an account my size, I cannot afford to always buy 200 shares of the stocks I like to invest in (AAPL etc) in addition to my earnings plays. Is it possible to order smaller amounts of shares and they just charge a flat fee for those shares or do they just dis-allow the purchase?

I recently joined IB but am waiting for my deposit to post.

I think you're misreading it. I doubt there's any requirement to purchase 200 shares of stock. I think what http://individuals.i...hp?f=commission (and from the example) is saying is that the min. commission for stock orders is $1.00. If you buy 1 share, 25 or 100 at time, or anything <=200 shares, you're going to get charged $1 commission.

For me, I don't know about OH, but of bigger concern when doing an ACAT transfer is the cost basis info will probably be lost (not carried over). If you use Gainskeeper (I use it w/TD AM and TOS) and have something complex going on w/those stock (e.g. bought some here, sold some here, split, spinoff, etc.), those aren't good candidates (IMHO) to transfer over.

When I transferred some stocks from TD AM to TOS (this is after the buyout but before the integration was complete), I was advised that cost basis info wouldn't carry over. They were correct. Thus, I only moved "simple" stocks and those where I could earn some covered call income (had 100+ shares, was optionable, etc.).

Edited July 20, 2012 by cwerdna

[smt1 2]

I had a question relating to IB if you guys (IB users) don't mind to clarify. In addition to playing the earnings trades, I currently hold stocks and do my trades through OH. I was considering doing an ACAT transfer and transferring my whole account to IB. The issue I'm running into is when using the flat rate fee I've noticed that their fee is .005 per share with a minimum order of $1.00, therefor requiring a minimum purchase of 200 shares. On an account my size, I cannot afford to always buy 200 shares of the stocks I like to invest in (AAPL etc) in addition to my earnings plays. Is it possible to order smaller amounts of shares and they just charge a flat fee for those shares or do they just dis-allow the purchase? I would just transfer a portion of my account but then I lose margin on both which is quite annoying. I would like to move to IB, but I'm not sure if I'm ready to go into earnings plays 100% and lose the one section I feel more comfortable with, the stock purchases. I'm just stuck in a messy situation due to OH's horrible fills / more expensive commission (on trades my size) and I'm unsure where to go to from this point forward. Any advice would be greatly appreciated.

Thanks,

Thaze

It's just $1 minimum commission. Buy 1 share of AAPL? YOu get charged $1 commission, not $0.005.

[Thaze 4]

Thanks for the fast responses guys, I really appreciate the help. Looks like I'll be switcing soon .

Edit: I'll probably just liquidate my positions on Monday and buy them again after transferring the cash (hopefully they won't increase too much).

Edited July 21, 2012 by Thaze

[pgrace0154 0]

Marco. Kim and Kelly,

I opened the HAL 30 srtraddle for 1.52 2 calls and 2 puts on the 19th. Commissions 3.83

Closed 2/20 for 1.92 Commissions 3.02

total 6.85 / 8 = .956C

1.92 - 1.52 = .40 .40/1.52 = 26% Gain. Add the commissions of .95 per option and the gain is cut by more than 40% closer to 50% That is 8 options total and IB says that is the way they charge, at lease that is my understanding from talking to them. Now if any of the three addresses above have any ideas about getting my commissions down to whak Kim and Marco are reporting I'll send you a nice gift at Christmass.

Thanks for your consideration,

Pat

[cwerdna 12]

Thanks for the fast responses guys, I really appreciate the help. Looks like I'll be switcing soon .

Edit: I'll probably just liquidate my positions on Monday and buy them again after transferring the cash (hopefully they won't increase too much).

I don't know what kind of turnaround you're expecting but I recall ACAT transfers of securities (from TD AM to TOS, when they still used Penson) took a little while (on the order of days, IIRC) and orders had to be cancelled on the sending side. I also transferred an entire account from another brokerage that used Penson to TOS (when they still used Penson). It took a little while too. I don't know about ACAT w/cash only.

If you want to fund your account with IB w/ACH (there are other methods), after you go through the application process, you'll need to put in your bank account #, its routing #, etc. and IB (just like other banks and brokerages) need to make small test deposits and withdrawals. Having that show up on the other side takes at least a day or two. Once you confirm the micro-deposit amounts, then you can initiate an ACH xfer from IB. I was approved on Tuesday morning and at some point this week, after confirming the test deposit amounts, I did the ACH $ xfer. The money was supposed to be credited on the coming Monday (7/23/12). It actually got credited today, well after market close.

Bottom line: Don't expect things to be that fast. You could possibly do an ACH from the bank side to IB, but the process looks screwy. I didn't want to jump through hoops for that.

If you want to speed things up, apply tonight. Initiate the ACH test deposits tonight. It'll be a week or so before you can trade. I don't know if wiring money would be faster, but that's likely going to cost $.

Edited July 21, 2012 by cwerdna

[cwerdna 12]

Marco. Kim and Kelly,

I opened the HAL 30 srtraddle for 1.52 2 calls and 2 puts on the 19th. Commissions 3.83

Closed 2/20 for 1.92 Commissions 3.02

total 6.85 / 8 = .956C

1.92 - 1.52 = .40 .40/1.52 = 26% Gain. Add the commissions of .95 per option and the gain is cut by more than 40% closer to 50% That is 8 options total and IB says that is the way they charge, at lease that is my understanding from talking to them. Now if any of the three addresses above have any ideas about getting my commissions down to whak Kim and Marco are reporting I'll send you a nice gift at Christmass.

I think you've got your terminology a bit wrong. So, your average was 95.6 cents per contract? From what I'm reading yes, you bought 2 calls, 2 puts and then sold 2 calls and 2 puts = 8.

That's still not bad. I've negotiated on TOS down to $1.25/contract. I before was paying $2.95/contract on TOS, which I thought was good, until Kim gave me feedback otherwise. If I you tried the same thing on TD Ameritrade's ripoff schedule (https://www.tdamerit...om/pricing.html), it'd be $9.99 + (4 * 0.75) = $12.99 to open and another $12.99 to close.

$6.85 total is a bargain compared to $25.98.

Edited July 21, 2012 by cwerdna

[Kim 7,943]

Marco. Kim and Kelly,

I opened the HAL 30 srtraddle for 1.52 2 calls and 2 puts on the 19th. Commissions 3.83

Closed 2/20 for 1.92 Commissions 3.02

total 6.85 / 8 = .956C

1.92 - 1.52 = .40 .40/1.52 = 26% Gain. Add the commissions of .95 per option and the gain is cut by more than 40% closer to 50% That is 8 options total and IB says that is the way they charge, at lease that is my understanding from talking to them. Now if any of the three addresses above have any ideas about getting my commissions down to whak Kim and Marco are reporting I'll send you a nice gift at Christmass.

Thanks for your consideration,

Pat

Pat,

Your gain was not cut by 40%. You paid 0.95*4=3.80 commissions per spread. So your gain was reduced from $40 per spread to $36.20 per spread (23.8% instead of 26.5%). And don't forget that 1.50 spread is considered commissions consuming, our average spread costs more than double, so impact of commissions with IB would be less than half.

That said, I was charged 1.12 per contract for HAL trade, but only 0.34 for SPY trade. I hate the fact that those commissions are unpredictable and IB cannot provide a good explanation how to avoid or reduce them. However, on average, they are still significantly cheaper than TOS which I consider the only real alternative.

[pgrace0154 0]

Kim,

Firstly what you paid is immaterial to this post unless you can tell me how I can get your rates, as was the whole thrust of the my post.

Secondly The inference of your post was that my trade was not done with IB. It was IB.

Thirdly I don't see how you can make any conclusions about gain/loss % without including the opening and closing trades.

Eight total trades at .95C per trade.

Fourthly even if I have to abandon small $ trades I have no intention of leaving your servie as I consider the educational benifit probably worth the price anyway, although your rationals for entering or exiting a trade are too brief (more verbage needed).

P.S Kelly I included you because you seem to be having the same commission woes as me with IB.

regards,

Pat

[guarneri 0]

pgrace0154,

The way I read Kim's response was that even if you had a broker where you paid zero commissions, your gain would have been 26% in this particular trade. With IB's commissions, your net gain was 24%. Your commission reduced your profit by 2% - not too shabby in this particular trade.

So, you would have made $80 if there were no commissions. (2 spread contracts * 100 * 0.40)

But you paid ~$7 in commissions to IB, so made ~$73.

$73 net profit in one day by investing $304 is $73/304 = 24% gain.

In general, since most of these earnings trades are typically priced at about twice the entry price of HAL, your average commission overhead will be half as much as in this trade - so will be about 1% commission overhead.

Edited July 21, 2012 by guarneri

[cwerdna 12]

pgrace0514,

I think the point Kim's making is that "commissions are unpredictable and IB cannot provide a good explanation how to avoid or reduce them." That's his motivation for posting examples of what he was charged. They're all over the map.

I noticed that at http://individuals.i...parebrokers.php, they're advertising $1 commission for 1 option. Funny enough, there's an "Execution Price Comparison" table which looks like it has 2 columns swapped.

I personally find IB's schedule daunting and confusing (http://individuals.i...php?f=otherFees). It seems the unpredictable nature comes from where the order's routed and is further complicated by execution credits. Maybe Kim or some other folks here do enough contracts/month to get a better deal too (http://individuals.i...hp?f=commission).

[RobertB 5]

The way I read Kim's response was that even if you had a broker where you paid zero commissions, your gain would have been 26% in this particular trade. With IB's commissions, your net gain was 24%. Your commission reduced your profit by 2% - not too shabby in this particular trade.

Actually (using the original, non-rounded values), a 26.5% gain reduced to a 23.8% gain is a 10.2% reduction in gain.

You're confusing percentage "points" with percentage itself. That is, although reducing a 26.5% gain to a 23.8% gain is only a 2.7% "points" reduction, that reduction, in percentage terms, is a 10.2% reduction. Thus, the commissions in this example cost 10.2% of the gain, which is the key percentage to keep in mind (not the mostly irrelevant percentage "points" drop).

[pgrace0154 0]

Thank you all for responding and trying to help, it is very much appreciated.

I can see now that I should never have brought up % gain at different commissions. I have only muddied the waters.

My bottom line is: I am consistently paying 1.5C per unit per trade (a unit being 100th of one option. Some are paying less that 1C per unit. Also as far as I know I have never received a rebate. I have talked to their customer service and their trade desk many times to know avail. I will post no more on this subject.

Thank you all again.

Pat

[Kim 7,943]

Actually (using the original, non-rounded values), a 26.5% gain reduced to a 23.8% gain is a 10.2% reduction in gain.

You're confusing percentage "points" with percentage itself. That is, although reducing a 26.5% gain to a 23.8% gain is only a 2.7% "points" reduction, that reduction, in percentage terms, is a 10.2% reduction. Thus, the commissions in this example cost 10.2% of the gain, which is the key percentage to keep in mind (not the mostly irrelevant percentage "points" drop).

Robert,

There are many ways to look at impact of commissions. I prefer to look it as percentage of the spread value and not percentage of the gain. If we adopt your logic, then if you make 4% ex-commissions and 2% after commissions, your gain is reduced by 50%. Technically, this is true, but since the percentage gains vary a lot, it doesn't give a full picture.

The bottom line is: this whole extra exchange fee sucks, but over time, it doesn't change the big picture. I don't have any special deal with IB and I don't think I'm charged less than Pat or Kelly (the fact is that I was charged for HAL trade more than Pat). But I do the math every month, and over sample which is big enough, I never average more than 85-90 per contract, usually less than 80 cents. btw, like I mentioned, the SPX example was not representative - they charge more for SPX. So the real question is: do you have an alternative?

[guarneri 0]

Actually (using the original, non-rounded values), a 26.5% gain reduced to a 23.8% gain is a 10.2% reduction in gain.

You're confusing percentage "points" with percentage itself. That is, although reducing a 26.5% gain to a 23.8% gain is only a 2.7% "points" reduction, that reduction, in percentage terms, is a 10.2% reduction. Thus, the commissions in this example cost 10.2% of the gain, which is the key percentage to keep in mind (not the mostly irrelevant percentage "points" drop).

Robert,

Just like Kim, I actually find the commissions as % of the spread value more useful than % of the profit. I have both of these on my spreadsheet that tracks trades, but I find the % of the spread value more useful. It makes it easier for me to see my profit target. (e.g. if I am targeting 10% net profit and the commissions are 1%, then my real exit target is 11%.)

I basically add the commission cost for both the entry and exit to the initial spread cost to find my break-even price point (for IB, I just use the 0.75/contract as the average cost.) Then I have values for various targets (5%, 10%, 15% etc.)

This way, I can also use the commission cost to choose among the various brokerage firms I currently have accounts with (with different commission rates.) e.g. for lower priced spreads and high number of contracts, I might choose a different brokerage firm to reduce my commission overhead.

So, the commission as % of the spread helps me take/plan an action even before I have a profit (and hence commission as % of profit doesn't exist yet.)

Edited July 21, 2012 by guarneri

[RobertB 5]

There are many ways to look at impact of commissions. I prefer to look it as percentage of the spread value and not percentage of the gain. If we adopt your logic, then if you make 4% ex-commissions and 2% after commissions, your gain is reduced by 50%. Technically, this is true, but since the percentage gains vary a lot, it doesn't give a full picture.

Just like Kim, I actually find the commissions as % of the spread value more useful than % of the profit. I have both of these on my spreadsheet that tracks trades, but I find the % of the spread value more useful. It makes it easier for me to see my profit target. (e.g. if I am targeting 10% net profit and the commissions are 1%, then my real exit target is 11%.)

My comments were mostly of a pedagogical nature. As I've discussed in previous posts within other topics, we often without thinking slip into forgetting the difference between percentage gains/losses and percentage "points" gains/losses. I think it's helpful to some readers to be reminded of this difference from time to time.

I agree that the commissions cost as a percentage of the spread itself is an extremely important metric. I use it myself all the time. However, this metric is more directly related to risk than to profit. That is, it's a cost-of-trade parameter. The lower the commissions as a percentage of the spread value the lower one's risk. But, when closing the trade and asking how the commissions have affected your profits, it is important to focus on the commissions as a percentage of profits, not the percentage "points". For example (using unrealistic, easy calculation numbers), say you open a 1.00 straddle with commissions of 0.01. Later, you close the straddle for 1.01. Here, it would be totally misleading to state that your 1% "points" (of profits) commissions were only 1% of profits. Indeed, actually your commissions would be 100% of profits.

Again, this is just something to always keep in mind when thinking in percentage terms.

[Kim 7,943]

Point well taken Robert, I think we are in a full agreement here.

[Thaze 4]

I don't know what kind of turnaround you're expecting but I recall ACAT transfers of securities (from TD AM to TOS, when they still used Penson) took a little while (on the order of days, IIRC) and orders had to be cancelled on the sending side. I also transferred an entire account from another brokerage that used Penson to TOS (when they still used Penson). It took a little while too. I don't know about ACAT w/cash only.

If you want to fund your account with IB w/ACH (there are other methods), after you go through the application process, you'll need to put in your bank account #, its routing #, etc. and IB (just like other banks and brokerages) need to make small test deposits and withdrawals. Having that show up on the other side takes at least a day or two. Once you confirm the micro-deposit amounts, then you can initiate an ACH xfer from IB. I was approved on Tuesday morning and at some point this week, after confirming the test deposit amounts, I did the ACH $ xfer. The money was supposed to be credited on the coming Monday (7/23/12). It actually got credited today, well after market close.

Bottom line: Don't expect things to be that fast. You could possibly do an ACH from the bank side to IB, but the process looks screwy. I didn't want to jump through hoops for that.

If you want to speed things up, apply tonight. Initiate the ACH test deposits tonight. It'll be a week or so before you can trade. I don't know if wiring money would be faster, but that's likely going to cost $.

How do I innitiate the micro deposits before the ACAT transfer? I'm stuck on the funding section (part 3) of the application and it wont let me precede until I select a method of payment, which I had planned on being the ACAT. I can't find a way around it all and would hate to transfer it while I still have positions open. Think I might just wait and close them out for peace of mind rather than just getting over-excited and rushing things. If you know a way to do the micro-deposits before the funding step to get the initial approval though, I'm all ears.

Edited July 21, 2012 by Thaze