Yes, the online broker pricing war is still on. Fidelity Investments announced today that it is cutting its commissions for online stock trades from $8-$19.95 per trade to a flat $7.95 fee. This news comes just a month after Charles Schwab (SCHW) announced it would be cutting its own stock-trade price down to $8.95 a trade.
Fidelity also said it is waiving commissions on 25 ETF’s from BlackRock’s (BLK) iShares division. If you recall, Schwab announced eight commission-free ETF’s back in November.
However, even with its new $7.95 per-trade commission, Fidelity is still charging much more than smaller competitors like TradeKing and Thinkorswim.
So if you’re looking for the absolute cheapest trading commissions, you’ll have to look elsewhere. That said, Fidelity is offering a better deal for stock traders than E*Trade and Ameritrade – and it does have the benefit of a branch network.
Nonetheless, when choosing an online broker, commissions should never be your primary focus – unless you’re moving heavy volumes.
Let’s talk Thinkorswim, the love of my trading life.
Yes, I love Thinkorswim, but they have way too many commission rate plans. There’s a standard rate plan, and two others called EX/RATES #1 and EX/RATES #2.
Here’s the breakdown of how the standard plan for stock and options trades works:
For stocks, it’s 1.5 cents per share with a $5 minimum. That works out to the following:
- 100 shares – $5
- 1,000 shares – $15
- 1,500 shares – $22.50
- 2,000 shares – $30
- 5,000 shares – $75
- 10,000 shares – $150
The alternative is the flat pricing plan, which is $9.95 a trade with a 5,000 share maximum. Here the choice is simple – if you normally trade less than 500 shares per transaction, just go with the per-share plan. If you typically move more volume than that, go for the flat pricing. And of course, if you trade heavy heavy volume, call Thinkorswim (or any broker for that matter) and ask for a deal.
On to options. On the “Standard” rate plan, trades are charged as the lesser of: $2.95 per contract or $1.50 per contract plus $9.95 (only one $9.95 charge for unlimited spread legs). That works out to:
- 1 contract = $2.95
- 5 contracts = $17.45
- 10 contracts = $24.95
- 20 contracts = $39.95
- 50 contracts = $84.95
- 100 conracts = $159.95
Cheaper plans are available for those who do more volume – $1.25/contract with $12.95 min per leg, and $0.95 per contract with $19.95 min per leg.
On options, I’d stick with the standard rate plan if you don’t do a lot of volume. If you’re averaging more than 5-10 contracts a trade, consider the cheaper plans. I say this because if you normally trade just a couple contracts at a time, the $2.95 per contract crate is pretty cheap.
To make things even MORE complicated, Thinkorswim actually lets you choose the rate plans of some other online brokers. You’ll have to call them directly for more info on that – I’ve never tried it.
Another piece of advice:
Look at your actual trading records. See how your P&L would be impacted by each rate plan. There are a lot of moving parts, so be aware that my point of view won’t work for everyone. These calculations should be consiered ROUGH.