HI put sellers. A common question I am often asked is "Is the trade worth it when the commission cost are so high"
I, as well as most traders hate commission cost but it is past of doing business. I very seldom eliminate a trade because of the commission. Example; it is the last couple of days of a trading month and I see a trade that might make me 100 dollars. But the commission cost might 25 so I net only 75. Yes it is 25% of the trade but what are the options? I can say no thank you, and pass on the profit of 75 of bite the bullet and take in the $75. I certainly don't like it, but I am not going to pass on the the money to 'show the brokerage.' I also keep an ear out for any brokerage that offers better rates.
Otherwise, it is part of the cost of business.
Jerry
10 comments:
Just curious, which broker do you use?
ThinkOrSwim offers multiple commission options.
You can always ask for a better rate.
I'm on TOS and pay a flat 5.00 ticket charge +.75 a contract. 10 lot 12.50 25 lot 26.25
if your Av. lot size is over 25 best to look around.
Also my margin rate was .0745 one e-mail got it down to .035
Bottom line if you see a better rate ask your broker for it, I bet ya they at least match it.
That said Don't even try and get IB's .018 on Portfolio Margin accounts
I got back a polite we have bills to pay and the .035 offer. :+)
Hi KJ, I use Ameritrade. I have been with nearly all the standard ones, but T.D. Amer treats me pretty good as an APEX trader.
Gary & John, I hear that ToS only charges commissions on the sell portion of a put if the buy back is .05 or lower, is this true?
True, TOS charges NO commission for closing (buying back) positions of .05 or less. When there's more than a week left prior to expiration and the premium drops below .10, I'll enter a GTC limit order to buy back the position at .05
John, Did you know when you buy to close for .05 it’s TOS taking your short they don’t close it. A small % of them go ITM to a point where they make enough to cover all that they lose.
I wonder with TD now the parent company how long they will keep this in place.
Thanks Gary. I didn't realize what happens to it within TOS's larger account; but I'm happy that the Put position is sold/closed in my account. Note, once the Put Strike is within a week of expiration, I will usually keep the position through expiration.
But..when it's 2+ weeks out, I like to close these low premium puts to free up my margin for other opportunities. Also, I've seen premiums dip to .05, and then shoot back up on bad news or a sudden stock price drop. So being able to get out early when I've already collected most of the profits is great.
Note2, it also depends on the price I sold the put and the # of puts, too. For example, if I sold the put for less than .15 to begin with, then I might still keep the position.
Regardless, I will say that having this option (no pun intended) to buy back my puts at .05 or less commission free is a nice service.
John I went back and looked the last one I closed for .04 was Dec.116 puts on IWM I closed it on Dec. 14 less than a week (3Days) NO commission.
I don't remember hearing the longer than a week rule.
The "longer than a week" is not a TOS rule --- rather, this is a comment about my personal decision making process for closing the position early or keeping the position through expiration. In another words, if there are several weeks left to expiration, and the premium has dropped to .05, then I will often close it (commission free) to free up the margin for other opportunities. But, if I am within a week of expiration, I'll usually keep the position (and collect the .05 myself) through expiration. Hopefully, this clarifies what I was saying.
I find that it gives me a little more freedom in my decision making process once the premiums drop to .05 or less.
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