Commissions on Options Trades

[Don Bright]

Quote from babutime:

Kinda confused here.

So 1-2 cents per contract as in 1 option contract representing 100 shares?

Or as someone said multiply by 100 to get the actual $1 to $2 per contract in which case that's mad expensive!!!!

How come I only pay 0.70 per contract so a 10 lot costs me $7 with a minimum of $1 per trade?

Why is retail cheaper? How is IB f#ck!ng me? Someone fill me in...

*lost*

First I'm trying to post a simple rebates received list. I'll do that in a minute when I figure out how and find a decent example.

You are probably paying about $1.00 - $3.00 per option contract. I was simply trying to point out the zero's as Mr. Morse said. One contract = 100 shares = about a buck to three bucks each way.

100 shares of underlying is about 35-50 cents each way. You can buy and sell for a penny and make money, especially with rebates.

For example:

Shows rebates on 200 share trades, and a charge for one taking of 25 cents. The 1.05 were for 500 share trades.

So, if paying say 40 cents per 100 shares (80 cents), but getting back 46 cents, you end up paying 34 cents in commission for 200 shares, pretty nice, if I do say so myself, LOL.

Don

 

[rmorse]

Quote from Don Bright:

First I'm trying to post a simple rebates received list. I'll do that in a minute when I figure out how and find a decent example.

You are probably paying about $1.00 - $3.00 per option contract. I was simply trying to point out the zero's as Mr. Morse said. One contract = 100 shares = about a buck to three bucks each way.

100 shares of underlying is about 35-50 cents each way. You can buy and sell for a penny and make money, especially with rebates.

For example:

Shows rebates on 200 share trades, and a charge for one taking of 25 cents. The 1.05 were for 500 share trades.

So, if paying say 40 cents per 100 shares (80 cents), but getting back 46 cents, you end up paying 34 cents in commission for 200 shares, pretty nice, if I do say so myself, LOL.

Don

Your zero is in the correct place. Except your flipping back and forth between talking about shares and option contracts, which is confusing me. If I pay $1/ contract, and that is my only cost, and I buy an option for $1.03 and sell it for $1.05, I break even.

 

[Don Bright]

Quote from rmorse:

Your zero is in the correct place. Except your flipping back and forth between talking about shares and option contracts, which is confusing me.

LOL..I'm trying to keep it simple. I was comparing trading the underlying, paying what could be 17 cents per 100 shares to the trading of one option contract at 100 cents to 300 cents. Keeping all the zero's in the right place.

As I'm sure you're frightfully aware, so many get confused by the pricing of commissions, that's the reason I dove in here in the first place.

When people say they pay 20 cents per THOUSAND shares, then I know it's a Canadian rebate firm with a single ticket charge, so as to not be confused with a real trading firm like yours or mine. I know I pay more than 20 cents per thousand by a long shot, LOL.

Don

 

[metameta]

On IB remember to set your Smart Routing option to Highest Rebate, 80% of the time routes me to NASDAQOM and with rebate costs about 30 cents per contract vs standard 70 cents. Just don't hit the bid or ask aim for the middle of the spread otherwise usually routes me to the most expensive venue.

 

[489]

Quote from rmorse:

Yes, they are talking about $1-$2 per contact when your paying $0.70 per contract. You're receiving a platform for electronic execution, where your firm also gets payment for order flow. The hedge fund is receiving a suite of business advisory from their broker, that you don't require or need. That person requires services that helps them run their business, come up with solutions for issues, cap- intro, communicating with third party administrators, accountants and attorneys, etc, is what the rest of the fee is for.

We are not comparing the same service.

IB commissions of 70 cents per option contract and 1/2 cent per share stock apply to all accounts, including individual traders, hedge funds, financial advisors, introducing brokers, prop traders, IRAs, trusts, yada yada yada. All account types get execution, clearing, reporting, RegT or Portfolio Margin, and they also have a free cap intro program for registered/audited hedge funds.

What other services are required for which other brokers charge an addt'l $1.30 per contract?

 

[def]

Quote from 489:

IB commissions of 70 cents per option contract and 1/2 cent per share stock apply to all accounts, including individual traders, hedge funds, financial advisors, introducing brokers, prop traders, IRAs, trusts, yada yada yada. All account types get execution, clearing, reporting, RegT or Portfolio Margin, and they also have a free cap intro program for registered/audited hedge funds.

What other services are required for which other brokers charge an addt'l $1.30 per contract?

also need to add again that RMORSE loves to make you think that IB is selling order flow to market makers. IT IS NOT. What would be more interesting is to ask him for the 606 data from the firms he uses for routing. I'd place a nice wager that orders sent from IB side by side with whatever system he normally uses obtain as good or better fills over a period of time.

I should also add that iB also has a size desk so anyone doing large size does have a group they can call to find a counter party and that so called "guaranteed" price.

 

[rmorse]

Quote from def:

also need to add again that RMORSE loves to make you think that IB is selling order flow to market makers. IT IS NOT. What would be more interesting is to ask him for the 606 data from the firms he uses for routing. I'd place a nice wager that orders sent from IB side by side with whatever system he normally uses obtain as good or better fills over a period of time.

I should also add that iB also has a size desk so anyone doing large size does have a group they can call to find a counter party and that so called "guaranteed" price.

From your Website: page three.

https://www.interactivebrokers.com/...rmSampleView?ad=order_routing_disclosure.html

Payment for Order Flow - Options: IB receives order flow payments in varying amounts from U.S. option exchanges, specialists and/or market makers pursuant to the mandatory marketing fee programs that have been adopted by the exchanges and approved by the SEC. If multiple exchanges are quoting at the NBBO for an option order and IB has discretion as to where to send the order or a portion of it, IB generally will “break the tie” by sending the order to an exchange where it will receive the most payment for the order or to an exchange designated by the firm from whom IB will receive the most payment (typically IB’s affiliate Timber Hill LLC – see below).

All routing brokers accept PFRF. It's why they set up their routes. We, Victor Securities, Do Not Receive that money, and pay routing fees for our clients to have DMA. I'm not quite sure why you follow me around ET, I have nothing against your firm. I've NEVER said anything negative against any of our competitors.

 

[sle]

Quote from 489:
What other services are required for which other brokers charge an addt'l $1.30 per contract?

There is a huge difference between execution ability for a retail trader and an execution ability for a institutional client. An institutional client can call up 5 banks, put them in competition on an order and virtually trade at mid. Can IB get me 10k contracts of 1250/1350 SPX put 1x2s at screen mid? Goldman could, and the client will be happily paying $2 per contract for the fact that he's otherwise minimizing transaction costs.

So yes, that dollar-fifty per contract actually buys you value.

 

[Options12]

Quote from def:

also need to add again that RMORSE loves to make you think that IB is selling order flow to market makers. IT IS NOT.

Def, please review your statement for accuracy.

This disclosure, among others, appears on IB's 606 (emphasis added):

Affiliate Relationships: As specialist on various options exchanges, IB’s affiliate Timber Hill LLC may be responsible for allocating payment for order flow that is generated in its assigned options classes, depending on the design of the applicable exchange’s SEC-approved payment for order flow plan. As much as consistent with these plans, Timber Hill pays such funds to Interactive Brokers. For Boston Options Exchange orders, Timber Hill pays IB $1.00 for eligible contracts executed against Timber Hill (excluding contracts that are executed at better than NBBO).

 

[FSU]

Quote from sle:

There is a huge difference between execution ability for a retail trader and an execution ability for a institutional client. An institutional client can call up 5 banks, put them in competition on an order and virtually trade at mid. Can IB get me 10k contracts of 1250/1350 SPX put 1x2s at screen mid? Goldman could, and the client will be happily paying $2 per contract for the fact that he's otherwise minimizing transaction costs.

So yes, that dollar-fifty per contract actually buys you value.

Whether you use Goldman, IB or most others, if you have an order of that size, it will be shopped around. There are many groups, institutions, etc that will all be called with the order no matter what broker gets it. IB has the same numbers on speed dial as the other brokers.

The person who will pay a premium rate is the one who is "showed" the order. He will pay the floor broker along with usual clearing charges.