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Interactive Brokers Platform/ Probability of profit
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cmh1008, in General Board
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By Ringandpinion
I wanted to start a new topic on recent problems with major retail brokers. With the recent dropping of commissions and subsequent massive influx of new retail traders (for many reasons), the major retail brokers have all run into slow downs, outages, backlogs and other failures. I've been aware for sometime that my fills on both TOS and IB have had intermittent problems. The recent thinkorswim outage was a real pain to me and I didn't get hurt by it, just massively inconvenienced, no doubt others were hit in the pocket book. I'm a big fan of TOS, mainly because I've been on their system for a long time, their rates aren't the greatest but they don't have any other fees. The problem I see is that there is no end in sight for these brokers to be overloaded. Little or no commissions, zero or very little account size, and massive new resources needed on their part to solve the problem.
I don't have a problem with a minimum account size and I would even be willing to pay a little more in fees or even a monthly tithe for a platform to get better fills and steadier service. I'm starting the broker search now, I'm not looking forward to any of this, I was happy with what I had but I don't think I have that any more. I'll post my efforts here if anybody is interested and would appreciate feedback from others as well.
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By cwerdna
I figured I'd start a general topic on IB since this isn't about commissions.
I found a quirk w/IB that I'd not seen w/TOS. I bought a FDX call (not a trade discussed here) and had an open sell order on it. With the sell order open, I tried to buy another FDX call and IB won't let me. It says "Order Reject: This account cannot have open orders on both sides of the same US Options contract in any related accounts."
If I try to override and transmit, it rejects it for the same reason. Known issue? Any workaround or just something I have to live with?
I can do the same thing on TOS (and am doing it now). it doesn't care. It lets me do that.
I'd rather not cancel the open sell order on FDX as I'd get hit w/a cancel/modify fee on IB, which is something unheard of on TOS (and most brokerages that I'm aware of).
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By Kim
I want to talk today about commissions.
Lets assume that you buy a straddle for $2 ($1 each option). I have an account with IB (Interactive Brokers) and pay 0.70 per contract. So for me to do a round trip trade is 2.80. This is 1.4% of the cost of the trade. So if my gain is 10%, then I keep 8.6% after commissions.
If you pay $1.5 per contract, then your total cost is $6. That's 3%. You need 3% gain just to break even.
Some brokers charge you per ticket fee plus per contract fee. This might be a good deal if you do a lot of contracts. For example, if you do 20 contracts and pay $5 per ticket plus 0.30 per contract, then you pay 0.55 per contract. But if you do just 2 contracts, then it's 2.80 per contract.
Also some brokers charge a fee per ticket per leg, others per ticket for the whole spread. For RIC which is 4 leg trade, it's a huge difference. Since you make it as one trade, you might pay one per ticket fee with some brokers or four fees with others.
Commissions is one of the reasons why I don't like cheap stocks. A straddle on a $100 stock might cost around $5.00-6.00. Paying $2.80 commissions is only 0.5% of the trade. But straddle on $15 stock can be only $0.70, so $2.80 is 4% of the trade. A huge difference.
When choosing a broker for those strategies, remember that commissions can make a huge difference. Check the fine print and do the math which broker is better for you based on the number of contracts you are going to trade.
Update: For those who don't want to read the whole thread, it seems like most members really like IB. Barrons's agrees:
Based on Barron's numerical calculations, Interactive Brokers (interactivebrokers.com) claims the No. 1 spot overall for the third-straight year.
http://online.barrons.com/articles/SB50001424053111904628504579433251867361162
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By cuegis
Have all of the IB customers received the email last night (Mar 17) informing us that we have to change our data feed subscriptions by
April 1, 2017, otherwise we are going to be defaulted to 20 minute delayed quotes? With each quote being a "snapshot" of a moment in time and no longer "streaming" info?
I was not 100% sure what I needed to do but, I added a $4.50 package that appears to turn the delayed data back into real-time streaming data.
I think that was the correct choice, but I just wanted to hear from others
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By Crazy ayzo
I'm looking for someone that is a power user of some of the following... Tradehawk with Tradier, Interactive Brokers, Optionnetexplorer ONE, CMLviz TradeMachine... and any other tools that you find particularly useful. My schedule is fairly flexible. I'm in the pacific time zone.
If this is something that interests you either post here or PM me with an hourly rate. It's ok if you only know some of the tools, I don't expect anyone to know them all. I can pay via paypal.
After I get a better handle on the tools, I'd also be interest in working with someone on strategy of non-directional trades.
P.S. I did get Kim's approval before making such an off-topic post.
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By Kim
The impact of commissions on your results can be astonishing.
This excellent article by Business Insider is asking the right questions (and also answering some of them):
When you pay commission fees for online stock trades, where does that money go? Do you get better execution by paying $9.99 to TD Ameritrade than by paying $1 to Interactive Brokers? How much better? Enough to justify the difference in price?
Their conclusions:
At least 17 million investors overpaying for online brokerage Only 12% of commission fee is used for trade execution at top brokerages Over $1.8 billion per year wasted on unused premium services Lets analyze one specific month, January 2015, and see how different commissions structure can impact the returns of our SteadyOptions model portfolio.
SteadyOptions $10k model portfolio traded 228 contracts in January. If you paid $0.75/contract with no ticket fee, you spent $171 on commissions, which is 1.7% of your portfolio value. While not cheap, but considering the fact that we produced 20.7% ROI in January (12.4% return on the whole account assuming 10% allocation), it is completely reasonable.
However, if you had a ticket fee of $8, in addition to $0.75/contract, you would pay $427 in commissions, more than double. In this case, your returns will be reduced by 4.3%.
This will make HUGE difference in the long term. To see how huge, I went to pro-trading-profits.com, a third party website that tracks performance of 400+ newsletters. I clicked on SteadyOptions performance report and played with different parameters. Using the $0.75/contract with no ticket fee, a $10,000 portfolio would produce $35,693 gains since inception. Adding $8 ticket fee to each trade would reduce the gains to $23,869.
The impact of the ticket fee is especially significant if you have relatively small account.
Of course commissions is only part of the whole package. Other factors include tools, platform, customer service etc. Barron's publishes a comprehensive brokers review every year. Here is the last one. Interactive Brokers (IB) was ranked #1 by Barron's third year in a row. This is the broker I personally have been using for the last 7 years and I'm very happy.
Barron's mention that "IB offers a lot more support to new clients, including individuals, especially those with larger accounts. Yes, using the word "support" in the same sentence as Interactive Brokers (without the modifier "dismal") is a change for us, but the firm has clearly made this a point of focus."
Their conclusion:
"Interactive Brokers continues to have extremely competitive pricing, and the lowest margin fees of any broker in our survey. You may incur some data fees, but the firm takes care of any options-exercise costs, which can generate unexpected fees at many other brokers."
On the open section of our forum, we have couple very useful discussions about brokers:
Brokers and commissions
Interactive Brokers tips, tricks, webtrader etc.
There is a consensus among our members that IB and TOS by TD Ameritrade offer the best combination of commissions, platform, and execution. If you decide to go with TOS, I highly recommend that you negotiate a commissions structure that does not include a ticket fee.
Here are couple more good articles worth reading:
The Truth Behind Broker Commissions - Learning Markets
Comparison of online brokerages in the United States
Relative Importance Of Options Brokerage Fees
For Canadian traders, here is an excellent study on the commissions schemas offered by Canadian discount Brokers.
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By Kim
I tried to to buy 1 Apr SPX 1300 put and getting an error message that I have insufficient margin. The message indicates that the margin will increase by 53,985 (see attached image).
I opened a ticket with IB. Their response was:
I couldn't believe this, but the fact remains.
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By Bschulz
I'm opening an account at IB and wondering if there is a promotion code or partner code to use for SO members?
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By Kim
This demonstration shows how to execute some of our trades in Interactive Brokers.
Download video:
Executing Orders in Interactive Brokers.wmv -
By Kim
Options Trading is a business. As in any business, there are costs. One of the major costs is commissions that we pay to our broker (other costs are slippage, market data etc.)
While commissions is a cost of doing business, we have to do everything we can to minimize that cost. This is especially true if you are an active trader. The impact of commissions on your results can be astonishing.
This excellent article by Business Insider is asking the right questions (and also answering some of them):
Click here to view the article
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