Interactive Broker's Commission Structure for Options

N

newwurldmn

This might sound like a trolling post but I am having real trouble understanding this:

How are IB commissions calculated?
I'm seeing the following if you trade less than 10,000 contracts/month:
70 cents for the smart router
anywhere from 0 to 90 cents if you are a customer taking liquidity (my style of trading): I'm assuming 20 cents/average
4 cents regulatory fee
5 cents clearing fees
= almost $1.

I trade about 10,000 contracts a month in my account.

TOS's published rates are 75 cents/contract plus a nominal ticket fee.
Etrade's fees are similar.

How do people consider IB cheap when they pass on all their direct costs onto you. Even investment banks who commit capital and provide research services don't do that as they charge $1/contract to their clients all in.

Am I missing something here? I am looking to switch brokers but right now, the difference between IB and my current commission rate is significant and it doesn't make sense to me.
 
newwurldmn said:
This might sound like a trolling post but I am having real trouble understanding this:

How are IB commissions calculated?
I'm seeing the following if you trade less than 10,000 contracts/month:
70 cents for the smart router
anywhere from 0 to 90 cents if you are a customer taking liquidity (my style of trading): I'm assuming 20 cents/average
4 cents regulatory fee
5 cents clearing fees
= almost $1.

I trade about 10,000 contracts a month in my account.

TOS's published rates are 75 cents/contract plus a nominal ticket fee.
Etrade's fees are similar.

How do people consider IB cheap when they pass on all their direct costs onto you. Even investment banks who commit capital and provide research services don't do that as they charge $1/contract to their clients all in.

Am I missing something here? I am looking to switch brokers but right now, the difference between IB and my current commission rate is significant and it doesn't make sense to me.
More...

Another thing to consider is TOS's rates are "all in". If you are trading single listed products like the SPX or VIX you will be hit with additional exchange fees from IB of around .40.
 
I didn't even notice the vix charges.

It seems like my reasoning is right. IB isn't cheaper on hard costs. Perhaps their execution is actually better but I would rather have a bird in the hand than two in the bush.
 
Depending on what you trade, another option would be to clear a firm such as Apex through an introducing broker. This would bring your costs down to around the .50 level. You would need a trading platform which would cost between $100 and $400 including quote fees. You would then pay for all exchange fees, but also get any rebates. The problem with this arrangement is you would need a separate account to trade futures. You would also need a minimum of about $250,000. Another advantage here is you could direct your trades directly to the COB and see all COB resting orders.

If you are trading mainly VIX or SPX products, I think TOS would be the cheapest due to their "all in pricing".
 
It depends on the underlying and exchange. I've specified BATS or PSE because I know they're cheaper.

Equities are around $0.75 to $1/contract on most exchanges but as low as $0.30.

Indices traded on CBOE are the highest at about $1.25/contact.

I mainly trade RUT which is $0.34/contract.
 
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