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Commission Favorable Strategy

Discussion in 'Options' started by Harry, Jul 30, 2016.

  1. Harry

    Harry Well-Known Member

    I was watching one of Jim's presentation about how he was using kevlar in his IRA account and I thought ... hmmm, why not? However, when I checked, my IRA has pretty tight restrictions, I can take it to only 1 broker and that is Charles Schwab and they charge 9 + 0.75. I can probably negotiate with them, but lets assume that's what it is.

    Now I know different strategies have different risk rewards and they take higher precedence in decision making as compared to commissions. However, if I wanted to evaluate a strategy only from the perspective of commissions, then it would imply that a strategy with a lot of trades and a strategy with lot of small trades will fare worse. For example, I buy a butterfly as a single trade vs 2 leg-trade, cost is different. Then I add a teenie, its 10 bucks gone just to add it, and 10 bucks to sell it eventually. However, in a nested condor for example, I take a full leg (5-10 contracts) and either exit it full or roll it fully (not always) and I never have to wonder if my cost would have been just 1.25 vs 9.75.

    I wonder if someone has analyzed the commission impact on our strategies and analyzed this new greek that I am calling "Fomma" = Fees for running 1 cycle of strategy with typical number of orders for let us say a 5K portfolio, 25K portfolio and a 100K portfolio.
  2. Harry

    Harry Well-Known Member

    For example, I was evaluating the bearish butterfly strategy. Lets not get into the evaluation of the trade, but let us say I was looking at a 75 point spread with a 50 point roll, so I have a butterfly at 2050-2125-2200 and the next butterfly at 2100-2175-2250. An alternate strategy may be a 75 point roll so the initial butterfly remains at 2050-2125-2200 but the next butterfly is at 2125-2200-2275 where basically (first) 2 legs of the butterfly cancel out existing positions of the first butterfly giving a net 2050-2125-2200-2275 so when I close the trades, half my job is already one. Now the question is not whether this is a good setup or not, as there could be many variations of this ... a mid point between the 2 options I described above could be a 60 point spread and a 60 point roll which achieves the same thing.

    However, I wonder if people evaluate such moves as part of their trade planning? ... or am I over-thinking this as the costs are anyways a very small part of gains ... or losses :)
  3. status1

    status1 Well-Known Member

    I think you are a little more concerned about the the commissions rather than the trade
    You should not make trades based on which one has less fees but rather which is a better trade in a given situation and how much risk you have in the trade If you are a successful trader that can constantly make good income than the fees are not that important If you are just starting out or can only make a small amount on each trade than maybe you should consider a different brokerage
    I am sure TDAneritrade has IRA accounts although I am not sure what restrictions they have plus you could use the analyzer tab to follow the trades which Is essential I think in order to trade these more complex trades Also I am not sure if Schwab has a similar platform as Options express with whom they merged but they cannot handle BWB they have to manually adjust the margin because they cannot do it automatically If you are just doing balanced butterflies and condors you may get by with that if you don't mind the higher fees
  4. Harry

    Harry Well-Known Member

    Thanks status1 : I am probably a few months away from evaluating a good trade from a bad trade, so right now it is just searching / asking questions that come to mind.
    I have TDA and is my primary platform for trading, but for my company IRA the only way is Schwab. Maybe eventually I decide it is just not worth trading with Schwab, but ... then maybe I could execute some very simplistic strategy there without a lot of moving parts and that's what I am trying to think through.
  5. Marcas

    Marcas Well-Known Member

    I did try to negotiate commissions with them - no success - but also my account with then isn't that big. Because of this I trade there only simple strategies placed at optimal time - as much as I can to minimize commissions on adjustments . I think Streetsmart can give one some interesting data about options. I keep this account for no particular reasons except theirs reputation.
  6. tom

    tom Administrator Staff Member

    I have a contact at TD Ameritrade/TOS who is trying to get a discount for CD members setup. I'll keep everyone updated when/if they have something for us.
    TomKNVB likes this.
  7. Rtb

    Rtb Well-Known Member

    Tom can you findout if your contact at TOS can open a trading account for someone in the UK, it would be appreciated. I have tried previously with no luck.
    Last edited: Jul 31, 2016
  8. vega4mike

    vega4mike Well-Known Member

    TOS don't accept UK accounts, I am in the UK and was with them for years when the firm was run by Sasnoff, then TD ameritrade bought them, and I along with some other european territories where sent notices that our accounts will no longer be accepted. They may have changed their policy, but i doubt it.
    Rtb likes this.
  9. Boomer34

    Boomer34 Well-Known Member

    Great news!
  10. tom

    tom Administrator Staff Member

    I doubt they will allow UK accounts if they don't currently. I can ask my contact if they are considering re-opening access to the UK and other countries.
  11. Aditya

    Aditya Well-Known Member

    This is great Tom. Looking forward to hearing about this.

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