If you sell options, you feel my pain. We work so hard to turn a profit on contracts, only to have gains taken from us by way of excess options trading fees. I’ve sold options for 1.5 years now. Most of my trades we’re through Schwab. This broker charged me $9.71 to open a contract. Since I usually close contracts before expiration, I had to pay another $9.71 to exit my position. This comes to options trading fees per contract of $19.42.
I negotiated with Schwab for many months and the best I could do was to reduce my options trading fees down to $6.46 per trade, or $12.92 to open and close a contract. This was much better, but still way too much money to pay for a simple service.
I’m happy to announce that I’ve finally moved all of my accounts over to Interactive Brokers. I kept one Roth IRA, my wife’s account on Schwab, just so I can take advantage of their research tools. Aside from that, I’m all-in with IB.
Options Trading Fees Scenarios
Using my actual numbers, I’ve made take home revenue of $9,794 dollars. I’ve also paid $2,414 in trading fees. This is a staggering 24.6% of my income earned. Now, keep in mind that not all of my trades were profitable. Also, while in the initial learning phase I spent too much money in fees, trying to make every contract profitable.
My fees have gone down significantly over the past year, just because I’ve been smarter about my trades, but still, Schwab was sticking it to me.
If I had been on Interactive brokers the entire time, my fees total fees would have been somewhere close to $300 dollars. A difference in fees of $2,114. This is because IB charges me $1.09 per trade. Opening and closing a contract costs me $2.18 VS $19.42. This is serious money. It’s even more serious when you consider that I’m increasing my volume of trades. As my portfolio grows, so to will my options trading activities. Had I stayed with Schwab, my trading fees over the next 20-years could have easily passed the $50,000 mark. It’s insanity.
My takeaway is that options trading fees are killers to options income. If you trade options, I recommend you look into Interactive Brokers. It’s the cheapest broker I’ve found in the space. This is also a win for me on the stock buying front. My stock purchase fees have dropped from $6.46 per trade to $1 dollar.
How much do you pay per contract? Do you use Interactive Brokers? If yes, what do you think of the service? Do you know of any cheaper brokers than IB?