Better options commissions -- TDAmeritrade or IB?
- Thread starter HotTip
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It really depends on many other factors as well than that when choosing a brokerage firm.
For an example.
Investor A with Firm A will receive a .50% interest on his cash balance for potential assignment, Investor A has 200K,sitting there, 500K AUM total. Only does one or two trades every other month. Investor A is a basic Put and/or covered call writer and does not borrow. Interest income if cash is never used for taking delivery of an equity position would be 1000 (83.33 monthly)
Investor B with Firm B is an Iron condor writer, has 30K cash, 800K AUM total does several trades per month. sometimes borrow's on margin.
Firm A has high margin loan rates, and of course 9.95 trade + .75 cent per contract.
Firm B has very low margin loan rates, but pays only .05% on cash balance and 0.25 to $1.00 per contract trade
But they charge 10 dollar monthly for the account if trade commissions are less than 10
Investor A makes sense with A and B with B
You need to look at more than just one aspect of the Brokerage firm before making a decision. It is never a no brainer
Yes, there a a number of factors that should be considered when choosing a brokerage firm. However, since this was a specific question about TD Ameritrade versus IB, you should consider accurate details:Quote from KINGOFSHORTS:
It really depends on many other factors as well than that when choosing a brokerage firm.
For an example.
Investor A with Firm A will receive a .50% interest on his cash balance for potential assignment, Investor A has 200K,sitting there, 500K AUM total. Only does one or two trades every other month. Investor A is a basic Put and/or covered call writer and does not borrow. Interest income if cash is never used for taking delivery of an equity position would be 1000 (83.33 monthly)
Investor B with Firm B is an Iron condor writer, has 30K cash, 800K AUM total does several trades per month. sometimes borrow's on margin.
Firm A has high margin loan rates, and of course 9.95 trade + .75 cent per contract.
Firm B has very low margin loan rates, but pays only .05% on cash balance and 0.25 to $1.00 per contract trade
But they charge 10 dollar monthly for the account if trade commissions are less than 10
Investor A makes sense with A and B with B
You need to look at more than just one aspect of the Brokerage firm before making a decision. It is never a no brainer
TDA charges 5-7% more on margin borrowing than IB (depends on amount borrowed), IB achieves better execution rates and both pay kaka on cash balances. TDA pays .03% on cash balances. That's point oh-three! Even if IB pays zero, it's a mute (sic) topic.
So while your hypothetical scenario is a lovely on paper example of possibilities, reality is, regarding TDA vs IB, this one really is a no brainer.
C'mon man! You need to consider all aspects of these numbers before making a brokerage choice. Don't belittle the opportunities at TDAmeritrade.
If you're a big shot with a million AUM, you can make $25 a month in yield at .03% APY using their cash sweep into FDIC insured accounts. How can you turn that down when all you have to pay is $19.99 for assignment/exercise and $9.99 +.75 per contract per option trade? What a deal!
Hey spindr, I'm not endorsing any brokers here but you can negotiate rates with all of them. They are pretty much all the same if you have a large account. It's amazing what you can get if you just ask for it.
I pay 1.25 per contract at thinkorswim. They actually let you pick commissions..
Point well taken but I think it's more than just account size. IMHO, shares/contracts traded is more imp't to them - unlike the Fool Service brokers who often get an annual account fee and get a monthly bump for AUM.
I've transacted with far more brokers than I care to admit but only 3 in my 10+ years of internet trading. While my account size is decent, at times, my trade frequency has been very high due to PDT-ing. Despite that, TD Ameritrade couldn't, errrr wouldn't even get close to IB's rates. (And yes, I asked nicely
). So I don't think they're all the same for the larger account and definitely not for the smaller or less active guy.I have no axe to grind with TDA. The best rates they offered me would have taken a lot more out of my pocket (5 figures per) so they're not for me.
Quote from spindr0:
Point well taken but I think it's more than just account size. IMHO, shares/contracts traded is more imp't to them - unlike the Fool Service brokers who often get an annual account fee and get a monthly bump for AUM.
I've transacted with far more brokers than I care to admit but only 3 in my 10+ years of internet trading. While my account size is decent, at times, my trade frequency has been very high due to PDT-ing. Despite that, TD Ameritrade couldn't, errrr wouldn't even get close to IB's rates. (And yes, I asked nicely
I have no axe to grind with TDA. The best rates they offered me would have taken a lot more out of my pocket (5 figures per) so they're not for me.
I know a customer that got rates at TOS (not TD) that were actually less then IB's. Yes, he did a lot of volume. Honestly man, it just comes down to negotiating.
I wonder if that customer extensively used margin when trading? Given TOS's exorbitantly high margin rates relative to IB, I believe if you use margin quite a bit then you're better suited to choosing IB as a broker. That being said, I loaded the demo of IB's TWS and nearly tore my hair out. Their platform is extremely slow and complex as all hell. I tried to load an option montage displaying all strikes on the SPX and it took forever to do so whereas in TOS it loaded in a matter of seconds. Due to TOS's superior trading platform I don't mind paying their rates, but if IB could actually make a feature laden and faster trading platform I would switch in a heartbeat.