There’s never been a better time to trade options than now!
The technology, speed and information have never been better.
However, not all brokerages are created equal, especially when it comes to trading options.
That’s why we created this report.
In it you will find:
Let’s jump right in.
What most people don’t realize is making money with options is about more than just buying and selling at the best prices.
Yes, that’s a big part — but there’s another side to trading that most people overlook…
Commission.
Say you buy 500 contracts of a $1 option. A couple weeks later, it jumps to $2 per contract, so you decide to sell.
That’s a quick double, right?
Not really. In fact, your total gains could be anywhere between 88–98%.
The difference depends on how much commission you had to pay to make each trade.
Commission is the money you pay to your broker to execute a trade. That means you owe him money every time you buy or sell options.
Yep, he gets you coming and going.
But not all brokers charge the same commissions. And shopping for the best deal can have a big impact on your bottom line. For options traders, a good broker is an absolute must.
And it’s about more than just commission.
When looking for an options broker — there are the four things you should be looking for…
Not every firm is options-friendly.
In fact, over 90% of firms detour investors from using options.
They either make it very tough to get approved for options… make it extremely expensive… or just have a terrible options platform.
Why?
Well, quite frankly it’s an extra risk. So they make the process so hard that people give up or are denied the approval needed for options trading.
You want to look for a firm that makes options trading easy. Yes, you will still have to fill out a form or two. But at the end of the day… you want it to be a pretty painless process.
Most retail investors overpay in fees — and it can severely affect their returns.
If they do get approved and get the right approval, they typically trade one or two contracts.
Even if they do make a profit, the ticket fee and commissions eat away most of the profits.
[A ticket fee is a fee brokerage firms charge on top of your commission rate. For example, if you are charged $1 per contract for your options trade, a broker may charge that $1 plus an additional $5 for placing the trade. That additional charge is the ticket fee.]
If you find a broker that doesn’t charge a ticket fee — it can easily save you hundreds of dollars per year. So do your homework.
Understand exactly what you are paying and when. It could mean the difference between a profit and a loss.
Who clears your trades is very important and often overlooked. Luckily, most reputable brokers use reliable clearing firms.
[A clearing firm is what your broker uses to place your trading orders. They are responsible for how fast and at what price you get in on any trade you make.]
Are they updating their platform with the latest tech? Do they have an app you can download to your phone so you can trade anywhere?
In this day and age it might seem like a no-brainer, but this is something you should be looking into.
Especially an app.
When it comes to Hot Money Trader, things move fast. You will want access to your trading platform on the go.
Other questions you should ask:
Now that you know what you should be looking for in an options broker, let’s take a deeper look at three options-friendly brokers.
Please note this guide is for information purposes only — and it’s just your first step in choosing an options broker. We do not favor one broker over another, and it’s up to you to decide which one meets your needs.
Website: https://www.tastytrade.com/tt/
Commissions: $5.00 per stock trade
Options: $1.00 per contract (+ $0.10 per
contract clearing fee)
Account Minimum: $2,000
*A clearing fee is for completing transactions and is often times loaded into the commission rate or ticket fee
Tastytrade Commission Breakdown
You purchase XYZ $10 January 2018 calls for $1 per contract. You decide to purchase 5 contracts initially costing $500.
Fees are $1 per contract and $0.10 per contract clearing fee to open.You will pay an additional $5.50 to open this trade.
Total amount paid is $505.50. There is no commission to close.
Total Commission Cost to Open and Close Trade: $5.50
*Disclaimer: XYZ is not a real stock and cannot be traded. This is not an official recommendation
Website: www.tdameritrade.com
Commissions: $6.95 per trade
Options: $0.75 per contract (+ $6.95 ticket fee)
Account Minimum: None
TD Ameritrade Commission Breakdown
You purchase XYZ $10 January 2018 calls for $1 per contract.
You decide to purchase 5 contracts initially costing $500.
Fees are $0.75 per contract plus a $6.95 ticket fee. You will pay an additional $10.70 to open this trade. Total amount paid is $510.70.
To close this trade it will cost you an additional $10.70 in commission. Total Commission Cost to Open and Close Trade: $21.40
*Disclaimer: XYZ is not a real stock and cannot be traded. This is not an official recommendation.
Website: www.tradestation.com
Commissions: $5.00 per trade
Options: $0.50 per contract (+ $5.00 ticket fee)
Account Minimum: $5,000
TradeStation Commission Breakdown
You purchase XYZ $10 January 2018 calls for $1 per contract. You decide to purchase 5 contracts initially costing $500.
Fees are $0.50 per contract plus a $5.00 ticket fee. You will pay an additional $7.50 to open this trade.
Total amount paid is $515.00. To close this trade it will cost you an additional $7.50 in commission.
Total Commission Cost to Open and Close Trade: $15.00
*Disclaimer: XYZ is not a real stock and cannot be traded. This is not an official recommendation.
Finally, while every effort has been made to keep our information as up-to-date as possible, prices and other data are subject to change. So make sure to check before you sign up with any broker.
Four Steps to Better Commission Fees
Most people don’t realize that they have the power when it comes to what you pay a broker — not the other way around…
The commission fees you pay your broker are negotiable — just like your car’s MSRP!
Most pay what the firms advertise and don’t know the ins and outs of fees.
The key is that you actually need to call the firm’s trading desk (preferred) or at least email your potential broker. The firm wants your business — make them work for it.
Here’s what to do:
Step 1: Never pay a ticket fee. Only pay per contract.
Step 2: Never pay more than $1.25 per contract.
Step 3: Call the trade desk and negotiate this.
Step 4: Repeat every year.
Follow those steps and you will be on your way to saving hundreds of dollars per year…
I cannot stress this enough: Before you open any brokerage account, you should do some research on your own.
And if you already have a broker that you use and love, reach out them. You might be surprised by what they are willing to do to keep you as a customer.
Lastly, for Hot Money Trader you will need Level 2 clearance or higher to trade options.
Have any other questions? Don’t hesitate to drop me a line at [email protected]. My team and I read every email that comes in.
To your wealth, freedom and options!
Joshua Belanger