Interactive Brokers

KenLong answered one year ago …

I dont have an account at Interactive, but I have looked into them many times and I know a few people who do have accounts there.

They are a high volume site. They do more volume than any other site I know of.
They also have lower prices than any other site, have access to all the major exchanges, domestic and international, offer trading in all the different markets, stocks, futures, forex, and options, and offer some of the best speed and fills of any brokerage. They also have great analytical tools, charting, a profesional trading platform, all the usual stuff.
All of this information is available on their web site.

The reasons I dont have accounts there are mostly due to my size and volume, and how some of their fees would affect me. They are really geared towards high volume and high activity. Both of which I lack.

There are a few fees and perks that arent disclosed right up front, which can have a great effect depending on how they're used.

Theres a 10.00/month service charge, which can be offset by transaction and data fees. Very minor.

They have fees for many of the perks that other brokerages give away, news feeds, real time data feeds, level II quotes, etc. These fees are not extreme and can be easily offset by their low transaction costs. This is actually a good thing, they keep their transaction costs to a minimum and pass the fees for the extras on to the people who use or want them.

They have fees to cancel or modify orders. The fee varies depending on which exchange the order is routed through, and can be offset by any completed transaction fees during the same day. For example: On stock orders there is a 0.12 cancel or modify fee, with a max 0.24 execution credit. On option orders the fee varies from 0.10-1.50/cancel or modify, depending on the exchange, and is offset by a 0.25 per contract execution credit, capped at 3.75/order, if you use their SmartRouting. The credit is less if you direct route your orders.

This may not seem like much to an active trader who trades high volume, but if your less active or trade smaller orders it can become substantial, if you do a lot of cancel/modifies.

The big plus, that they dont tell you about up front, is that they have no exercise or assignment fees for domestic options transactions. This is really big. Just think about a multi legged trade that gets executed on you, first your assigned, so your broker, or you, has to execute your hedge to complete the contract. Thats two assignments right there. If you sell a lot of options, covered calls, naked puts, spread trades, etc, its sure to happen sooner or later.
An entire strategy could be built around this one fee, selling, In The Money, Puts and Covered Calls.

As you can tell, I'm very interested in Interactive Brokers. I was going to open an account there, but was concerned that I'm not active enough or big enough to offset their fees, and did not have a set strategy, and the experience to implement it, in place to benefit. I still have them in mind, but in the meantime I was able to negotiate a good deal with ThinkorSwim, 1.50/contract, flat rate, no minimum.