The Cheapest Option Broker

D

dragonman

I am trying to find the cheapest online option broker for a retail trader regarding US options as measured by the commissions per option contract (I trade usually low volumes so I measure the commission per single contract and not per larger volumes).

So far Lightspeed ($0.60 with $1.00 minimum), IB ($0.70 with $1.00 minimum), MB ($0.95), and TOS ($2.95) are the cheapest that I found, but there may be other brokers with cheap option commissions of which I am not aware and I would appreciate if you let me know about them.

I heard some stories about problems with brokers (such as regarding their customer service) and I know there are other important things except for price, so I try to find the best balance between cheap price and reasonable service. Thanks in advance for your feedback.
 
$2.95 seems high on TOS. I currently pay $1.25/contract and I'm by no means a high roller and don't do hundreds of contracts a month. I did open my account several years ago, so maybe things have changed since they got picked up by TDA. They won't match IBs price, but you might at least ask and see if they can do better than $2.95.
The TOS platform itself is first rate for options.
I use both TOS and IB currently and that's been a good combo.
 
I agree with TheGoonior. I also have TOS and negotiated to $1.50 a contract outright with no ticket charge. I only swing about 200 contracts a month, so that's the best rate they'll give me as of now. I just heard that they will match their parent company, TDA, which is $9.99 plus $0.75 a contract. Probably a better deal if you consistently put on trades of about 14 or more contracts at a time. Their platform great for options trading, however, I can only compare with one other company.

OptionsHouse may have slightly better rates but the platform was not for me. Not as easy to use as TOS.
 
+1 re negotiating TOS' rates. also remember to take into account other fees like ib's modify/cancel fee. yes you can get credited on this for PART of the fee but it can still add up if you modify/cancel orders a lot. i know i do this alot (and pls don't say "if you always hit the bid/ask you'd never have any fees:D ). the total package (all fees, execution, security of funds,etc) should be taken into account when looking at a broker.
 
Quote from FrankSlaughtery:

+1 re negotiating TOS' rates. also remember to take into account other fees like ib's modify/cancel fee. yes you can get credited on this for PART of the fee but it can still add up if you modify/cancel orders a lot. i know i do this alot (and pls don't say "if you always hit the bid/ask you'd never have any fees:D ). the total package (all fees, execution, security of funds,etc) should be taken into account when looking at a broker.
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The exchanges charge the cancel fees. IB provides a credit for executions so if you trade cleanly, there are no cancel/modify fees passed through. Most brokers overcharge you on the commission side and eat the cancel fee. So for someone who modifies/cancels orders a lot, IB may not be the best place for you.

Why shouldn't someone say "if you always hit the bid/ask you'd never have any fees." ? It's true (check out their "execution credit" page).
 
Quote from spindr0:

The exchanges charge the cancel fees. IB provides a credit for executions so if you trade cleanly, there are no cancel/modify fees passed through. Most brokers overcharge you on the commission side and eat the cancel fee. So for someone who modifies/cancels orders a lot, IB may not be the best place for you.

Why shouldn't someone say "if you always hit the bid/ask you'd never have any fees." ? It's true (check out their "execution credit" page).
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Also, IB does not charge cancel/modify fees for spread US option orders (as long as I am aware of).
 
Quote from FrankSlaughtery:

+1 re negotiating TOS' rates. also remember to take into account other fees like ib's modify/cancel fee. yes you can get credited on this for PART of the fee but it can still add up if you modify/cancel orders a lot. i know i do this alot (and pls don't say "if you always hit the bid/ask you'd never have any fees:D ). the total package (all fees, execution, security of funds,etc) should be taken into account when looking at a broker.
More...

With TOS, they rebate you some amount (don't remember what it is anymore) if you go over some amount and you're doing the standard 2.95 rate. You have to take that into consideration when thinking about re-negotiating.
I'm at 1.50 as well, after complaining bitterly about some of the changes that have taken place since the takeover. Holding me in place for now.
Ability to modify/cancel w/o charge is key: I just did this today for a few extra bucks on an order to close out, made me some decent change doing that. Had I had to think twice because of some fee, I would have missed my chance.
 
I don't recall if others do this, but one thing I like about TOS is that they don't charge a commission to close out a short option position that is <= $0.05. Very useful if you write a lot of options and don't want to watch the paint dry while you wait for those last few pennies to expire.
 
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