Investing Adventures

Here’s a review on an options-based discount brokerage, OptionsXpress. OptionsXpress prides itself on catering to the broad market including options, futures, and bonds to name a few.

Fees/Commissions: OptionsXpress has a tiered fee structure. Starting with their options schedule, their fee is broken into two groups: 35+ trades per quarter and 0-34 trades per quarter. Taking the 35+ trades per quarter, OptionsXpress charges a flat rate of $12.95 per trade for up to 10 contract trades. Every contract trade after is $1.25. If you trade 0-34 options per quarter, OptionsXpress will charge a flat $14.95 for up to 10 contract trades, and $1.50 thereafter

OptionsXpress’ stock fee schedule is also tiered. 9+ stock trades per quarter runs $9.95 per trade for 1,000 shares (per trade). For every share above 1,000 per trade, OptionsXpress charges $0.01. If trading less than 9 stock trades per quarter, the fee runs $14.95 per trade (up to 1,000 per trade) and $0.015 per share above the 1,000 limit per trade.

Other fees from OptionsXpress include no charge for broker assisted or limit order trades, $14.95 min / $1.50 per contract in a complex options trade (up to 4 legs), $29.90 minimum for a covered call trade, $14.95 plus any additional loads or fees for mutual funds, $5 / bond with a minimum of $14.95, $3.99 / futures contract plus exchange fees, as well as other fees for options assignment or exercise. Margin rates range from 6.5% to 8.75%.

Investments Offered: OptionsXpress offers stocks, options, futures, mutual funds, and bond trading. Some options are not available unless you meet their minimum requirements. Futures trading, for example, requires 3 years of trading experience plus a minimum account balance of $25,000.

Platform Features: Extremely organized and chock full of features. OptionsXpress offers up to date options chains, stock prices and free (yes, free) Level II quotes. The actual platform is fairly simple but the information that it contains is extremely valuable and useful. OptionsXpress also has various proprietary screens and research.

Security: OptionsXpress only has a login page. They do not use, at least from my experience, any sort of trading password found with competitors such as Tradeking or Zecco. OptionsXpress is also an SIPC member.

Ease of Use: OptionsXpress has a very easy to use trading platform. Everything is labeled accurately and easy to find. OptionsXpress also has convenient features including trading directly from their Level II platform.

Support: I have yet to use OptionsXpress’ support features so at this time I have no comments available.

Pros

• Favorable fee structure for heavy options trading
• Free Level II quotes
• Easy to use platform
• Very responsive trading platform

Cons

• Expensive equities trading even with tiered fee structure
• Lack of double layered security found with competitors

Summary: If you’re a heavy options trader or even a futures trader, OptionsXpress may be a good option for you. At $1.25 per contract ($12.95 minimum per trade), it appears to be one of the cheapest in the game if you achieve their active trader status (35+ contracts / quarter). Although I do not have access to their futures platform, the ability to trade around the clock makes it desirable for other futures traders. OptionsXpress also has an increasing number of mini contracts, or e-mini contracts as its called. Their search feature is extremely useful. The trading platform is well designed, easy to use, and extremely organized. Free Level II quotes is valuable beyond belief. I would like to see their equities fees brought down a bit but I wouldn’t use OptionsXpress for anything beyond options and futures trading. That being said, OptionsXpress caters to a smaller portion of the trading community, albeit very well.

Here’s a review on my primary discount brokerage firm, Zecco.

Fees/Commissions: Zecco offers $0 commissions up to 10 trades per day or 40 trades per month. Commission fees are $3.50 after the free trade requirement is met. Options trading is $3.50 + $0.60 per contract. They offer no-load mutual funds for $10 a transaction.

Investments Offered: Zecco offers basic investments including stocks, options, mutual funds and ETFs.

Platform Features: Zecco’s platform provides real-time quotes, graphs, and options chains. The more informal platform, myZecco, has forums and blogs for other investors/traders to swap ideas and questions. Zecco also has a small table below your main trade window with lines for various quotes that can be updated on the fly without having to leave the current screen.

Security: Zecco has two layers of security. First, you must access your myZecco page. From there, you can log in to any of your trading accounts using a different password. Zecco is also an SIPC member.

Ease of Use: Their trading platform was not as easy to use as TradeKing’s, but it’s sufficient for the first time investor. In order to join their money market sweep program, you must contact their customer service directly.

Support: Zecco’s main form of communication is via e-mail. They normally respond rather quickly during business hours. I did recieve an e-mail from Zecco once during the weekend so it does appear that they have a skeletal crew working the weekend shifts.

Pros

• Two layers of security
• ACH link was extremely quick (about 2 business days)
• Allow for beginning options trading with little to no investing experience
• FREE Commissions (as long as you don’t pass their limits)
• Money market sweeps average about 4%
• Daily snail mail transaction reports

Cons

• Money market sweeps requires minimum of $500 in your cash account to be eligible
• ACH deposits can take a couple of business days to clear
• Sales of equities can take a couple of business days to clear into your account
• Not the most appealing platform
• No after hours trading

Summary: Zecco appears to be gaining steam in the discount brokerage game. It’s very difficult to top a $0 commission fee on regular equities. Their options fees are also very low. Their ACH process was much quicker than TradeKing’s. Customer service has been quick to respond to my e-mails (less than 24 hours during business days). Zecco does not offer after hours trading (TradeKing does but requires you to call it in) which is either a blessing or a curse. There have been nights I wished I could have jumped in after hours. It does force some discipline though. Overall Zecco’s a very solid discount broker with great fees (or lack thereof). Remember though that you do get what you pay for. Don’t expect much in the way or aesthetics or research. The forums and blogs can be useful but I prefer other sites for my research and interaction with other investors.

Here’s a review on the discount brokerage firm, Tradeking.

Fees/Commissions: TradeKing offers a non–tiered commission schedule. All trades are just $4.95 and $0.65 per options contract. There is no minimum account balance. Mutual fund purchases range from $0 (No-load) to $14.95 (Load). All mutual fund sales are subject to a $14.95 fee. Margin rates are at 8%, non-tiered. Bond fees are $4.95, with a $14.95 minimum fee per bond transaction. Treasuries and CD’s transactions have a $24.95 fee per transaction.

TradeKing Fee Schedule

Investments Offered: TradeKing offers basic investments including stocks, options, mutual funds and ETFs. They also offer Treasury Issues, bonds and CDs. Contact a representative by phone to make Treasury, bond, and CD orders.

Platform Features: TradeKing’s platform provides useful tools include calculators, alerts, charts and graphs. Streaming news is also available on their platform. Other useful services include educational materials such as mp3s, videos, and articles. I believe podcasts are also available. Nice features to their platform includes previewing orders before execution as well as some useful tools such as a Profit/Loss calculator (unrealized and realized transactions).

Security: They use https web technology for login services. TradeKing is also an SIPC member.

Ease of Use: Their trading platform was easy to use, updating bid/ask prices and options chains constantly while you’re filling out your orders. TradeKing also automatically sweeps your excess cash into their money market sweeps account if you decide to enroll.

Support: TradeKing uses live web chat as a major avenue with customer service. E-mails to their staff were responded to within 24 hours.

Pros

• Low commission rates
• Well designed platform
• Responsive customer service
• No minimum deposit

Cons

• Extremely slow ACH deposits
• Not the cheapest discount broker anymore
• Cash isn’t accessible instantly (requires 10 business days after a deposit to withdraw via ACH)

Summary: TradeKing is a nice discount broker for novice investors. However, they’re not the cheapest investors on the block (see Zecco, Interactive Brokers, Bank of America). Their ACH profile takes 5 business days to complete a connection. First deposits via ACH take 5 business days to clear. Minimum waiting time required before trading: 10 business days. Withdrawing cash via ACH requires a 10 business day waiting period, thus not allowing someone to deposit cash and instantly withdraw the next day. As a result of the ACH issues and the not-so-low commission rates, I decided to withdraw my funds from TradeKing. If you’re interested in joining TradeKing, leave me a message so that I can issue you a referral e-mail from their platform.