Sane Bull US Indexes

Saturday, July 25, 2009

Commissions and My Broker of Choice

Many financial newsletters and trading gurus will not include commissions in their returns, usually because every broker charges a different price. While this is reasonable and I understand that, I will list all of my commissions in my posts that relate to actual or proposed trades. I feel it is a more accurate representation of what I do!

The most common commission structure for options is to charge a base fee, and then add a per contract charge. This is the method my broker TradeKing
uses. The base fee at TradeKing is 4.95 and then there is a per contract charge of 0.65, therefore:

1 contract trade: 5.60 or (4.95 +(0.65*1))
2 contract trade: 6.25 or (4.95 +(0.65*2))
3 contract trade: 6.90 or (4.95 +(0.65*3)) etc.

Stock trades at most brokers is flat rate:

TradeKing charges 4.95.

There are cheaper brokers out there, but I like TradeKing for three reasons:
  1. Their customer service is second to none. Any issue is dealt with in a timely manner, and you can contact them online via chat or email or on the phone.
  2. Their research tools are in depth, detailed, helpful and included at no extra charge (except streaming quotes, but a covered call writer has no real use for streaming quotes! The included real time quotes will work just fine, besides if you are only looking at one stock you can go to google finance and get streaming quotes!)
  3. The community. There is a thriving community at TradeKing with forums, a leader board, user sponsored IRC chat and more!

Commissions are a real cost of doing business to any trader or investor of any kind. I will show my commissions on all trades I discuss and include what the cost of doing business is. You will be able to see the commissions in relation to profit and how much of a drain on profits they can be! However, as I pointed out in #2 above, they are worth it if you get good tools from your broker!

Soon, I will start getting to my current open trades!

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