Any Option Brokers Out There?

Options Trading Topic: Any Option Brokerage Firms Out There?

Dear Options Trading FAQ:

I would like to join your option trading membership list. Additionally, I have a question - do you know of any brokerage houses that specialize in option accounts, and/or any brokerage which does discount option trades? The traditional discount brokerage houses seem to have particularly non-discounted option commissions. Thanks. Great options trading stuff by the way!

Paying Too Much in Commissions:

Dear Commission Conscious:

It is my feeling that in option brokerage service, you get what you pay for. If you are satisfied with the deep discounter's option service, then stay with them by all means. The commissions can be outrageously low. This is great for the very small trader where commissions can be a huge percentage of the trading stake. But if you trade seriously, or in size, you may be better serviced at a firm specializing in options.

The bit of money you save on the commission with "El super cheapo" won't mean much if you suffer below-par executions, aggravating service, or can't get them to pick up the phone. You don't have to pay full service prices for top notch work, though. Many options trading firm's commissions, for instance, are competitively structured. Look for a good balance between the price you pay and the service you get.

It's a question of immediate access to floor information (how many contracts ahead of you on the floor, who is bidding in size, etc.) and in the competence of the person who picks up the phone. In checking for a broker, ask what the order procedure is. How are the executions? Who are you speaking to? An inexperienced order clerk, or a savvy Registered Options Principal (series 4)? If you are a serious option player, the last thing you need to do is to spend your time educating an order clerk. Have you ever tried explaining the difference between a debit spread and credit spread to a newbie clerk? Or how about asking for an explanation of a margin requirement?

As for particular brokers, the best route is to get recommendations from people you know and trust. Ask around. Sometimes it is difficult because option trading can be such a lonely pursuit. In that case, call all the firms you can and carefully go over the materials they send you. What sort of orders do they accept? Stops? Contingents? OCO's? You can open up a small trial account to see how things go. How easy are they to work with? Is the style of the desk something you would be ok with? If you've placed orders with seasoned professionals, you'll really miss it when you move to a mass market firm discounter.

Speaking of placing orders, many have asked about the right way to give an order. I'll discuss this in an upcoming letter. How you deal with the broker on the phone can mean the difference between a successful execution and a poor or missed fill.

Good luck and trade well! Remember, an educated options trader is the best options trader. Browse these books books on trading options.

Tags: Options Trading, Options Broker, Options Commissions

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