guarneri

I think micro-deposits are done when you setup an ACH account at IB. So, basically go to account mgmt, select funding, deposit funds, and setup an ACH initiated at IB. Enter your bank details etc. It will then do two micro-deposits to your bank, which you will then verify after coming back to Account mgmt. Once bank is verified, you can do cash transfers using ACH, initiated at IB. Note that IB will withhold your ACH transfers for 4 business days after receiving them - so you won't be able to use those funds for 4 days. So, just plan accordingly.

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.)

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.

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.)

I think several people here use IB (InteractiveBrokers) with under 20K in portfolio and can do all the trades, including RICS. TOS (ThinkorSwim) is another platform lots of people like. Both have pros/cons (TOS has better customer service, but higher commissions , while IB has lower commissions and you are pretty much on your own.)

Kim, I understand that your model portfolio is based on a $1000 of allocation per trade, and you do straddles/strangles for lower priced stocks and RICs for higher priced stocks. My question is: Would you change anything if you had a much bigger allocation amount per trade? Say if you allocate $20K or even $50K allocation per trade, would you still use RICs or would you just use straddles/strangles to minimize the commissions. Anything else you would change or would need to consider if you had large allocations such as these? Thanks.