I have some stock in my brokerage account at Vanguard. I opened my Vanguard account in order to take advantage of their low cost mutual funds, but the application form lets you check a box to get a brokerage account too, so I checked the box.
Well, after I got some stock in there, I started to think about the costs. $25 for a stock trade, $30 + $1.30 per contract for options. With a $10,000 stock position, that's a half-percent just to get in and out. I need something cheaper if I ever want to buy or sell anything. I have a stock position with 8600 shares, on which I occasionally write covered calls. That's $141.80 for a one-way transaction. Too much. It's time to switch.
I've narrowed down the choices to brokerages that have decent offerings for options trading, and have low commissions. Here the brokerages I'm considering:
Pros and cons time. A big pro of E*Trade was that I already had an account. Don't ask me why I didn't trust them with my large stock positions. They've certainly never given me any reason to be skeptical, but nowadays their prices are not competitive with newer brokerages. So let's keep shopping.
If my goal is to reduce costs, you can't go lower than zero. So Zecco's "zero cost commissions" were a real draw. They've recently changed their minimum balance to $25,000 to get free commissions, which I might be able to pull off, but I'm more interested in options anyway. Zecco's options commissions are competitive, and being able to buy and sell covered call positions with paying commission on the stock part is effective. Their web site is not awesome, and I still have some doubts about their business plan, but their trades are clean, and the price is right. If you want to try it out, I'd appreciate it if you use my referral link.
Trade King gets high marks from the press. I've been around their web site, and it does its job. The prices are very competitive with Zecco (if you've used up your free trades, or can't make the $25K minimum). Zecco is still cheaper, but Trade King will make a fine fallback.
Options House is really interesting. $2.95 stock trades, and $9.99 options trades. A subsidiary of PEAK6 investments, which means they might stick around, even if it takes them time to become profitable. The big draw is that they have no per-contract options commission. You pay $9.99 for 1 contract or 1000. Their website also has a "virtual" account, that you can use to trade in real time with "funny money." There are some bugs with the virutal account calculating my buying power that I trust are not in the real account. I've exercised their support department by making some mistakes in opening my account, and they've sorted it out nicely. If you want to sign up for an account, please use my referral link.
For now, though it means having three accounts, I'm going to keep my Vanguard mutual funds at Vanguard (a no-brainer), my small stock positions at Zecco (although I'll try to get up to the $25K minimum to get free trades), and my large options positions at Options House.
I'll let you know in the coming months how it's going.
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Saturday, February 7, 2009
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5 comments:
I don't trust zecco - they keep changing the rules. first it was 40 free trades, then 10, then you needed $2500 and now $25000. there probably going out of business soon, and I don't want to lose all my money.
I don't think there's any risk of Zecco going out of business. If they do, your securities are held by the clearing firm, Penson Financial Services.
It's a bummer about the new minimum to get free trades, but the regular price trades are still really cheap.
from your analysis above, it seems like options house is cheaper to use than zecco for individual investors in stocks ($2.95 vs. 4.50). Am I missing any fine print?
You're right, Anonymous. But if I can put $25,000 in that account, the stock trades are free. (For now.)
I actually trade more options than stocks, and for small positions (less than 10 contracts) the options trades at Zecco are cheaper than Options house. That's why I'm still looking at both brokerages.
I will probably keep all of the accounts open, because on high volume days, any of these online brokerages can have trouble, so if I want to make some quick trades to take advantage of market turmoil, it's good to have a backup.
wells fargo is much better than zecco. also, with 25K, you get 100 free trades per year for each account, then $5 per trade above 100.
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