As options traders, we are always looking for the best combination of a great trading platform and low commissions. The low commission part is even more important for us spread traders because we inherently trade more contracts than a straight put or call buyer. We trade twice as many contracts for a credit spread, and four times as many for a condor–so commissions for us are a big deal.
My personal rule of thumb is to try not to give up more than 10% of my collected premium to commissions–some brokers take as much as 40% making their commission structure unworkable.
The different brokerages are constantly upgrading their platforms and trying to be more competitive on their prices.
Options House has the lowest commissions, but we’ve had some negative reports on their platform which means getting filled on your trades can become difficult, and their system is a little clunky to use.
OptionsXpress is too expensive. Plus with their platform, the options prices aren’t even updated dynamically making trading while the market is open extremely cumbersome.
We’ve had good reports on the Trade Monster platform and their commissions are reasonable so I opened an account to check them out. Their platform is good and their commissions are low, but I found it almost impossible to get filled inside the spread–which means you end up paying too much for the options you buy, and get paid too little for the options you sell. That higher cost washes out any commission savings and makes it hard to recommend them.
Tasty Trade has a good platform and it was founded by Tom Sosnoff, one of the original founders of thinkorswim. I like their platform but at last check, they don’t have virtual trading–which is pretty important for someone wanting to learn but not wanting to lose real money while doing so.
For traders outside the U.S., a good brokerage is Interactive Brokers and that’s our prime recommendation for Australian traders. Reports have it that the platform is good and the commissions reasonable, however, it can be a little difficult to learn in the beginning.
For Canadian customers, we recommend the Thinkorswim platform available through the Canadian firm, TD Waterhouse.
What we are looking for in an ideal brokerage is to have a great trading platform, the ability to get you filled inside the bid/ask spread, smart routing to all the major options exchanges to get you the best price either buying or selling, and low commissions.
That’s a rare combination, but fortunately, it does exist.
For over 20 years now thinkorswim has had the best platform for options trading and they are continuously improving it. They are one of the only brokers that can consistently get us filled inside the bid/ask spread. Most of the other brokers–especially the really low commission ones–sell their order-flow making good executions almost impossible because the brokerage is actually getting a kick-back on that full bid/ask spread, which means they have zero incentive for getting you filled inside of it.
Thinkorswim was founded by options traders in Chicago to be the best platform available–in fact, they were so successful TD Ameritrade bought them back in January of 2009–so to get the platform now you need to open an account with TD Ameritrade.
Thinkorswim doesn’t sell their order flow so we tend to get excellent fills using their platform–in fact, you can almost always get filled halfway between the bid and the ask which is a huge saving and really adds to your bottom line. One of the great frustrations for subscribers is when I get better fills than they do on our recommended trades–but when we talk to them it always turns out they are using a broker that may have good commissions, but doesn’t get good fills. The solution is to open an account with a broker that does.
Thinkorswim is great at getting you filled inside the spread, and their published rates are competitive–just 65 cents per contract with no ticket fee. Plus index options are generally even cheaper than that. That’s close to the lowest commissions out there, but with a much better platform AND you can work the spread for lower buys and higher sells.
Since Thinkorswim has the best platform and trade fills all we needed was a little bit of recognition to make them the really obvious choice. I’ve been working with them to get special commission rates for our subscribers ever since Tom Sosnoff started the company back in the late ’90s–and we’ve done that several times over the years. But now with commissions so low, and with a new larger corporate owner, there is little room to drop their rates.
However, they still recognize our group as conservative spread-sellers so they give us great service. Plus they will still negotiate on commissions if you are really doing a lot of contracts. They can see our people tend to trade more contacts than average because we have two sides to every trade–and sometimes four with a condor. Plus we generally trade consistently every week.
So if you want to access the benefits of the Thinkorswim platform, and you want to be acknowledged as being part of our group, use this special link to open your account.
If you are planning on trading a lot of contracts–say 500 or more per month–call or email TD Ameritrade and let them know what you’ll be doing, and how much money you are planning on putting in the account. If you plan on trading a lot of contracts you may be able to get an even lower rate than what is published.
Remember with narrow spreads–like 2 dollar or 2.50 spreads, you can end up trading a lot of contracts even with a modest account. For example, to bring in $1000 on a two-dollar condor with a .40 cent credit it takes 25 contracts per side times 4 sides equals 100 contracts. If you do that four or five times a month it could come to 500 contracts per month or more. Plus you may be doing some additional trading on your own outside of our recommendations, so that would add to your volume as well.
So go ahead and follow the steps above to get started. If you have questions you can call our offices at 877 507-7878, but the easiest approach is to fill out the forms to open an account and then contract TD Ameritrade to find out if you qualify for even lower rates based on your options volume.
Once you’ve done that you’ll have all three of the most important features of a brokerage going for you–low commissions, a great trading platform, and the ability to get filled inside the bid/ask spread–and that’s exactly what we want.
*TD Ameritrade, Inc. and Cashflow Heaven Inc. are separate, unaffiliated companies and are not responsible for each other’s services and products.