OptionsXpress (OXPS) delivered a pretty solid third-quarter earnings report this morning.
Revenues came in at $62.3 million, a 7% year-on-year decrease. EPS was 28 cents a share, beating the consensus analyst estimate by two cents. New new account growth was 6,600 for the quarter, with customer accounts coming in at a total of 349,900, a 13% increase. Daily average revenue trades (DARTs) rose 12%.
In an interview with Reuters, CEO David Fisher said that it is “aggressively” looking at acquisitions. I would imagine that companies like TradeKing, TradeMonster, or SogoTrade could be on OXPS’ radar screen. This has me feeling a bit wary about my position in OXPS – are they signaling an extended slowdown in growth? Are they simply trying to buy growth?
In a recent article for Minyanville, options expert Steve Smith noted the following about optionsXpress:
From 2001 to 2007 total option trading volume increased by more than 30% a year. By being one the first firms to specifically target option traders OptionsXpress was able to ride that growing wave, which helped offset the demise of day traders when the tech bubble burst.
But, overall option trading volumes will likely grow in the 20% range this year and will likely slow in the future. Likewise, OptionsXpress’s new account has slowed from about 18% to around 9% over the past two years.
Options trading volumes are very likely to continue slowing, and the playing field is a heck of a lot more crowded these days. Even companies like Fidelity and Schwab are aggressively pushing their options capabilities to attract commission-generating options traders and trading commissions are likely to continue falling.
I imagine the online brokerage industry will push options commissions down closer to Interactive Brokers’ (IBKR) levels. For options trading at or above $0.10, IBKR charges just 70 cents per contract with a $1 minimum. That’s insanely cheap and good for traders, but not necessarily good for the online brokers.
disclosure: I am an OptionsXpress (OXPS) Shareholder