Different people have different criteria when choosing a broker… For me, the key factor is commission… Ya, although they always say, you shouldn’t choose a broker based on commission, I find it hard to agree…
Commissions can easily take up a huge percentage of your profits, especially if you are doing options combination that involves multiple leg (such as an Iron Condor), you would want to watch your commission.
Else, even if you sold the options for a $1 profit and they all expire worthless, you’ll find that your profit may only be about 50 cents after commissions. If you did not take this into account when you calculate your odds in trading, a supposedly profitable trading system can easily end up being non-profitable.
So, which broker do I use?
Personally, I use thinkorswim… for a number of reasons
1) They have one of the most user-friendly platform with lots of tools to facilitate my trading.
2) They only require an opening minimum of $3500… a comfortable amount when I was starting out… I would definitely not want to risk $10, 000 when I was still a beginner…
3) They let you trade any options combination you like… This is unlike some brokers that may restrict you from selling naked CALLs (not that I do something so risky, but I just like the freedom)… Or sometimes, some brokers only allow new traders to buy options… which is total bu**shit in my opinion, an absolute loss-loss situation….
4) Their commission is not the lowest, but the beauty is, they actually offer to match the commission of most major web-based brokers (such as E*Trade, optionsXpress etc)… (Unfortunately, they do not match two of the lowest commission brokers out in the market: InteractiveBrokers and OptionsHouse*)…
Nonetheless, I am happy with the choice that I’m given at thinkorswim… So, in order to compare which commission rate I should use, I created a spreadsheet to compute the commissions for each broker based on the number of contracts I expect to trade… The winner so far is Schwab (for 15 contracts)…
Actually, Schwab is the best for me because I couldn’t qualify for thinkorswim EX/RATES #1, cos that requires me to have $25,000 in my account… I’m not there yet, but maybe, just maybe…. soon I’ll reach that amount…
*Btw, if you trade more than 12 contracts each time, and you are a US citizen, OptionsHouse offers the lowest commission (other than Interactive Brokers which has a absolutely complicated platform as they are more geared towards professional traders)… too bad I’m not a US citizen… maybe I should negotiate with thinkorswim for OptionsHouse’s rates…
Anyway, I’ve attached the Excel File that I use here…. Feel free to use it…
