commission to profit ratio

[yip1997]

Quote from Cache Landing:

This is never the advice that I would give. Take profits when your target is reached. If you want to reduce commissions, change the position. I rarely enter a position that would eat more than 10% of projected profits round trip. The only reason it sometimes turns out higher than that is if I was wrong several times. So obviously the other way to reduce commissions is to be wrong less frequently.

Cache,

You are right. I pay less than 10% of my commission for most of the time, but sometimes i lose money. It is part of the game to have some losing trades.

I also like to take profits when there are better opportunities to use the buying power.

 

[acerbits]

Stop using BMO! they are vultures when it comes to commission! Get an account with Questrade, easy to move money around using Online fund transfer and you get like 4.5% interest on ur balance + low commission!

 

[spindr0]

Quote from yip1997:

No. Why do you think its crazy? What is your average commission to profit ratio?

If you trade for 75 cts per contract, you can forget about calculating commission to profit ratios. You can then just focus on making a profit (all it takes is 5 cts on the option to do that

 

[opt789]

Quote from yip1997:

No. Why do you think its crazy? What is your average commission to profit ratio?

I use the following formula to find the ratio:

total commission in a year / net profit in the same year.

If that is how you figure it, then how do you calculate it if you happen to have a losing year? You would get a negative percentage which doesn't really tell you much. By your formula if you are a good (very profitable) trader then no matter what you pay in commissions your ratio is low, but if you are not so good and end up with only a small profit then you could have been paying the lowest commissions in the world and your ratio is going to be high.

It's just me, but I think in terms of commissions to expected profits per strategy. There are so many different option strategies that you are not comparing apples to apples. Two simple examples: if you buy options and look to sell them for a profit over the next couple days, and bail out of the trade if the market starts to turn, then you will trade a lot and have a lot of commissions and your ratio will probably be high. On the other hand, if you just sell an OTM option once a month and wait until it expires worthless, or get out at some predetermined exit point, then you will trade very little and your ratio will probably be very low.

So it does not seem to make sense, to me at least, to compare ratios unless you know how good the trader is and exactly what strategies he employs. The only thing I can say for sure is that if you are paying more than $1/contract all in then you are paying too much.

 

[forex-forex]

Quote from acerbits:

Stop using BMO! they are vultures when it comes to commission! Get an account with Questrade, easy to move money around using Online fund transfer and you get like 4.5% interest on ur balance + low commission!

Ok.....I will check them out.

 

[spindr0]

Quote from opt789:

It's just me, but I think in terms of commissions to expected profits per strategy.

Not that I would have any use for it but if I were dabbling in calculating ratios, I'd want to know what percent of my capital per trade was being eaten by commissions, eg., how much is my overhead per trade?

The simplest thing is to find the lowest commission schedule with no minimum ticket and then just fahhhgettttabout it. Focus on yer trading.

 

[yip1997]

Thanks for all the response.

I am paying 0.75 per contract without ticket charge. What I really want is to evaluate my trading performance.

 

[thecalip]

I learned the importance of commission on my first down year after another down year. My first year was profitable, and I told myself that I can ignored commission as long as I am profitable. Yet, that's the key words, as long as "I AM PROFITABLE". After my first down year, I look into commission, and it ate away 20%+ my profit.

When trade in option, I am only trading stock/index that at least $50+. Preferred them to be in the $80+

 

[cdowis]

I discovered that some "winning" positions were losers when I include commissions, so I now include commissions in my profit expectation.

I now screen out trades that I previously had placed.