Cost Effectiveness of Interactive Broker

[cpatte7372]

Hello all,

IB provides a great service for independent traders. Its unbeatable for novice traders wanting to dip their toes into trading with real money.

However, now that I am purchasing shares in greater quantities I'm investigating whether IB it is a cost effective as some of its rivals that offer a single fee no matter how many shares one trades. Even an IB representative privately told me that if I were purchasing shares in excess of 500 then I may be better off seekig another broker.

I was wondering if there is anybody who would agree that trading over 500 shares per week is more expensive with IB than many of the other brokers out there?

Cheers

Carlton

[AllenCook]

You say "500 shares per week" but I would hope you mean more than 500 shares per transaction. Keep in mind that the "other" brokers you may be referring to charge on a "per ticket" charge (i.e., regardless of the amount of shares). But even then, anything over 500 shares is 0.005 per share @ IB; thus, 1000 shares @ IB would cost you $7.50 for one side ($15 round trip). It would be pretty easy to create a table to determine the breakeven point to compare between two brokers. Then, you could determine what is better based on your style of trading.

Of course, there are other considerations I typically think about: Direct access capability, products offered (there are few that come close to IB), the various platforms, etc.

Personally, I keep separate brokerage accounts based on the type of trading I am doing. For example, 1 for short-term trading (IB), another for swing trading and another for longer-term investments (something E*Trade or Fidelity are more geared toward and where I may buy more shares).

[dgellman]

Cost Effectiveness of Interactive Broker

I have been with IB since the very beginning. They were the very first to charge $1 per option..PERIOD!
Everyone else had a "ticket charge". Meaning, $29.95, just to place the order, THEN $2.95 per option.
Now, the rest of the (brokerage) world had to catch up. So, you are seeing $1 per option all around.
I went there because I came from trading options on the "floor", and they were founded, and owned by a group of AMEX options traders.
They had the best direct access way before everyone else even had direct access.
I am still with them, but, as of late, I had to open another account, as they are lacking in their ability to provide the resources for Forex, and futures.

[cpatte7372]

dgellman,

Thanks for your comments, however I don't think you answered my question.


AllenCook, I wasn't aware that anything over 500 shares cost 0.005 per share - I'll have to check that out with their customer service. However, lets say I didn't buy 500 shares in one contract but instead bought 300, then 150, and 200 shares in one day. That would cost me $13, correct?

Also, as I have only used IB I'm not sure what is meant buy "per ticket", could you tell me what that means?

Cheers

Carlton

TD Waterhouse would charge approximately $10 per each of those trades Carlton. That assumes you traded fairly often and qualified as a "Premium Plus" trader at 72 trades per quarter. Until you reached that level you would be paying $18 to $12 per trade. This means for the trades you mentioned, your commission charges at best would be $30, at worst would be $48.

Interactive Brokers Commission Schedule Commission Schedule would be $6.50 to enter the trades and $6.50 to exit the trades ($13 total).

The previous prices I mentioned in the post below were just to enter the trades. Double that amount to also include exiting of the trades. Of course, there are other low priced brokers you should consider, however, with the trade volume you are referring to, I doubt you will be able to save any money, at least with respect to commissions.

There are other services though, that a broker may provide which would make higher up front commission costs more palatable, such as market research or 24 hour 7 day a week support. You should review these features as a package based on what you really need IMHO.

[FibbGann]

If your going to be an active trader.I would say Cybertrader all the way. I have experienced many brokers and no one touches them IMHO. All the true goodies you get with them just flat out rocks!

[AllenCook]

Originally posted by cpatte7372

AllenCook, I wasn't aware that anything over 500 shares cost 0.005 per share - I'll have to check that out with their customer service. However, lets say I didn't buy 500 shares in one contract but instead bought 300, then 150, and 200 shares in one day. That would cost me $13, correct?

Also, as I have only used IB I'm not sure what is meant buy "per ticket", could you tell me what that means?

Cheers

Carlton [/B]

Yes, if you broke up the trades into 3 transactions, it would be $13. The levels apply per trade transaction. "Per ticket" also means per each trade transaction (regardless of the number of shares in each transaction.)

Thus, if you bought 650 shares in one transaction, the commission would be $5.75 vs. the $13 in 3 trades. However, if you use another broker that charges per "ticket", say $7.50 per, then the commissions would 3 X $7.50 or $22.50 in total. However, with a per ticket charge usually you can trade any amount of shares (usually up to some limit [usually up to 5000 or 10,000 shares]). You should really familiarize yourself with the IB commission schedules and information as well as make sure that you fully understand how commissions work for other brokers when doing comparisons (a lot of times you may be comparing apples to oranges).

Again, there are a lot of factors to consider but the most important is to understand how the broker matches up with your trading style (e.g., # of shares traded, how often, products offered, etc.)

[cpatte7372]

Guys,

Just wanna say thanks for all your comments.

Cheers


Carlton