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rated:
So I have a balance of approximately $80K that has just been sitting in very low interest savings accounts, and I would like to use it for stock trading. So, what would you recommend for the best brokerage for this? I'm looking for lowest fees per trade since I will mostly be doing short term holding type activity.

Yes, I know about Robinhood, but I'm looking to hear about other brokerages.

I have schwab for all of my retirement accounts. I do short term trading, and the fees really add up, so I am looking for the lowest fees.

The money will eventually be used for real estate purchases and I will have to close the account, so I am looking to avoid anything that would be a fee for closure, or needing to maintain the account open for a certain amount of time.

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rated:
Interactive Brokers seems like a consistently solid choice. They have some of the lowest fees out there.

https://www.interactivebrokers.com/en/home.php

rated:
Just curious - how much trading experience do you have?

It is really nice for new people to join in - it has been a party out there on the wall street  - buy anything and it has to go up because you bought it. Really good move too before buying a house - if u can triple your money this year,  so much lower in interest payments later. 😉

rated:
+1 to Interactive Brokers.
-1 to trading your 80k unless you *really* know what you're doing, aka Xerty level of knowledge.

rated:
 
  With OP's username, far be it from me to discourage his trading.  That said, I'm not sure it's a great idea, any more than it would be for a newbie to try to sell airline GCs on eBay without knowing about all the scammers and chargeback fraud and such that await the unwary.  

In the stock market, at least for larger, more liquid stocks, things are relatively "fair" by comparison and likely you'll just lose your commissions and spreads and get a fairly random outcome based on the stocks you pick.  Of course if you keep trading a lot, those costs add up and it will become increasingly clear whether you're actually any good at timing the market or the stocks you pick.  Some people can do this, but it's certainly not easy and you should focus on whether you think you have a real edge or not.  In smaller, less liquid stocks, you can easily lose your shirt, be subject to pump and dumps, fraudulent claims or press releases by the company insiders, etc.  There is more opportunity, but much more risk to the inexperienced and much higher costs regardless.

As I said in the Schwab thread, execution trumps costs.  If you're good enough at execution, you can make money just by trading.  From that perspective, looking for free trades is short sighted.  I like the IB platform enough that you would have to pay me to trade on some of the other retail ones, but I care a lot about execution and they are probably good enough for many.

I also think that if you have a near or medium term plan for the money like a house purchase that may be motivated by something other than how your stock picks are doing, it's probably not a great idea to be investing it since you may get caught by drawdown and stopped out at the bottom by whatever external factors make it time for you to make your RE purchase.
TravelerMSY said: +1 to Interactive Brokers.
-1 to trading your 80k unless you *really* know what you're doing, aka Xerty level of knowledge.

Thanks for the compliment.  That said, the way things are going for me, you probably only need a fraction of my level of knowledge to do pretty well for yourself

rated:
One advice to anybody trying to play on the daily ups and downs is to be not caught with their pants down on the earnings day. There are people who think that they have a sure bet on the earnings day - but (1) the earnings can go either way, (2) The direction of the stock is sometimes contrary to the earnings. Great example - INTC - good earnings, popped up in after hours and the next day or two - but has been on a downtrend since then.

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TravelerMSY said:   +1 to Interactive Brokers.
-1 to trading your 80k unless you *really* know what you're doing, aka Xerty level of knowledge.
 

Agree with the above, with one addition, 'er subtraction?
  -1 to Interactive Brokers' Viagra style ads. 

rated:
1. I own my primary residence, so the $80K is going for investment property.

2. I'm not planning on sinking $80K into a highly volatile stock. I currently have it sitting in a savings account earning 1% interest. I'm just trying to get about 3-4%, and stay fairly conservative for the stock trading. I want the money to be liquid though, which is why I do stocks.

3. I don't trade every day. I watch the market daily and I look for a nice opening in a handful of stocks that I have closely been watching. I understand the market is at an all time high, and I believe it is overpriced. I'm not looking to triple my $80K. I would be nice if I could, however I am not going to take on that much risk.

4. On most my trades I just make $100 or $200 on average. Like I said, I keep risk low and I am willing to leave gains on the table in exchange for the lower risk. But I have lots of these trades, which add up, both in profit and fees. That is why I"m looking for low fees.

I learned a very expensive lesson several years ago, and I don't plan to repeat it.

rated:
mrbigballer said:   1. I own my primary residence, so the $80K is going for investment property.

2. I'm not planning on sinking $80K into a highly volatile stock. I currently have it sitting in a savings account earning 1% interest. I'm just trying to get about 3-4%, and stay fairly conservative for the stock trading. I want the money to be liquid though, which is why I do stocks.

3. I don't trade every day. I watch the market daily and I look for a nice opening in a handful of stocks that I have closely been watching. I understand the market is at an all time high, and I believe it is overpriced. I'm not looking to triple my $80K. I would be nice if I could, however I am not going to take on that much risk.

4. On most my trades I just make $100 or $200 on average. Like I said, I keep risk low and I am willing to leave gains on the table in exchange for the lower risk. But I have lots of these trades, which add up, both in profit and fees. That is why I"m looking for low fees.

I learned a very expensive lesson several years ago, and I don't plan to repeat it.

  
If your goal is 3-4%, you can sell some deep in the money calls to get that and get a lot of safety.

Example: JNJ $113.19, sell Jan2018 $100 call for 14.75. You have 4 dividends between now and Jan 2018 of $0.8 each.

Net cost: 98.44. Position upside: $1.56 + $3.20 = $4.76.  $4.76 / 98.44 = 4.8% in slightly less than a year. Not bad given that you almost have 15% safety on the downside.

[Note: Your stock may be called before the last dividend on 11/20 but then your holding period would be much smaller - so annualized similar % return].

There is no such thing as a sure bet - so you can spread the 80K between 4-5 stocks.

 

rated:
PrincipalMember said:   
mrbigballer said:   1. I own my primary residence, so the $80K is going for investment property.

2. I'm not planning on sinking $80K into a highly volatile stock. I currently have it sitting in a savings account earning 1% interest. I'm just trying to get about 3-4%, and stay fairly conservative for the stock trading. I want the money to be liquid though, which is why I do stocks.

3. I don't trade every day. I watch the market daily and I look for a nice opening in a handful of stocks that I have closely been watching. I understand the market is at an all time high, and I believe it is overpriced. I'm not looking to triple my $80K. I would be nice if I could, however I am not going to take on that much risk.

4. On most my trades I just make $100 or $200 on average. Like I said, I keep risk low and I am willing to leave gains on the table in exchange for the lower risk. But I have lots of these trades, which add up, both in profit and fees. That is why I"m looking for low fees.

I learned a very expensive lesson several years ago, and I don't plan to repeat it.
 

  
If your goal is 3-4%, you can sell some deep in the money calls to get that and get a lot of safety.

Example: JNJ $113.19, sell Jan2018 $100 call for 14.75. You have 4 dividends between now and Jan 2018 of $0.8 each.

Net cost: 98.44. Position upside: $1.56 + $3.20 = $4.76.  $4.76 / 98.44 = 4.8% in slightly less than a year. Not bad given that you almost have 15% safety on the downside.

[Note: Your stock may be called before the last dividend on 11/20 but then your holding period would be much smaller - so annualized similar % return].

There is no such thing as a sure bet - so you can spread the 80K between 4-5 stocks.

 

  
I should add - the dividend gain would be qualified dividend - i.e. much lower tax rate - that makes this transaction even more attractive.

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Selling calls would mean I have to own the underlying stock, is that right?

rated:
mrbigballer said:   Selling calls would mean I have to own the underlying stock, is that right?
 
You can sell calls without having the stock but that is not the trade I mentioned above. The trade above is buy 100 shares of JNJ and sell 1 call. Brokers will let you do a covered call trade where you can buy the stock and sell the call in a combined transaction which executes only if it hits your limit price. This way, you don't buy the stock and then find out that the stock crashed between the time you bought the stock and sold the call.

The bigger issue is that when you open the account, you must make sure that you are enabled for "covered calls".

rated:
PrincipalMember said:   
mrbigballer said:   Selling calls would mean I have to own the underlying stock, is that right?
 
You can sell calls without having the stock but that is not the trade I mentioned above. The trade above is buy 100 shares of JNJ and sell 1 call. Brokers will let you do a covered call trade where you can buy the stock and sell the call in a combined transaction which executes only if it hits your limit price. This way, you don't buy the stock and then find out that the stock crashed between the time you bought the stock and sold the call.

The bigger issue is that when you open the account, you must make sure that you are enabled for "covered calls".

A naked put is an equivalent position to selling covered calls. The naked put does not require owning the stock, but it has a maintenance funds requirement (100% in a non-margin account) Many brokers don't allow or they restrict naked puts to highest permission levels and also charge exorbitant fees if options are exercised. If the broker price gouges on option exercises, then the below is not true with them.

IB lets you sell naked puts even in a non-margin (cash) account with basic options permission and charges no special option assignment fees when options are exercised. You can even sell naked puts ("cash-covered short puts" if you want to get technical... As they're not truly naked) in an IRA account. The cheapest way (least total commissions) to do covered calls in an ongoing manner is to start off selling a naked put. If it expires worthless, you then sell a new naked put. If instead it's exercised by the buyer then you are now holding the stock so you sell a call. If the call expires worthless you sell another call. If the stock is called away you sell a naked put (and are back where you started). Either way, there's is only exactly ONE transaction each time and one commission charged. And either one or zero commisions when you close the position for good.

With covered calls only and no naked puts, it takes TWO transactions and two commissions to initially open. If it's called away, it takes another TWO transactions and two commissions to roll it forward or one to sell a new call if it expires worthless. It then takes either one or two commissions to finally close the position vs one or zero for naked puts.

In every case, the put|covered call has less or equal commission transactions than just covered calls. In some cases it has many fewer. Additionally, it requires the least maintenance (less transactions to set up, or at least less complicated transactions if you count a combined order to open a covered call position as only one transaction).

^the above is not an endorsement of the strategy of continual selling of "covered calls" as low risk. But, if you're going to do it then it at least makes sense to do it efficiently as possible and control the commission costs - the only part of the "ROI" equation you have direct control over.

rated:
Bend3r said:   
PrincipalMember said:   
mrbigballer said:   Selling calls would mean I have to own the underlying stock, is that right?
 
You can sell calls without having the stock but that is not the trade I mentioned above. The trade above is buy 100 shares of JNJ and sell 1 call. Brokers will let you do a covered call trade where you can buy the stock and sell the call in a combined transaction which executes only if it hits your limit price. This way, you don't buy the stock and then find out that the stock crashed between the time you bought the stock and sold the call.

The bigger issue is that when you open the account, you must make sure that you are enabled for "covered calls".
 

A naked put is an equivalent position to selling covered calls. The naked put does not require owning the stock, but it has a maintenance funds requirement (100% in a non-margin account) Many brokers don't allow or they restrict naked puts to highest permission levels and also charge exorbitant fees if options are exercised. If the broker price gouges on option exercises, then the below is not true with them.

IB lets you sell naked puts even in a non-margin (cash) account with basic options permission and charges no special option assignment fees when options are exercised. You can even sell naked puts ("cash-covered short puts" if you want to get technical... As they're not truly naked) in an IRA account. The cheapest way (least total commissions) to do covered calls in an ongoing manner is to start off selling a naked put. If it expires worthless, you then sell a new naked put. If instead it's exercised by the buyer then you are now holding the stock so you sell a call. If the call expires worthless you sell another call. If the stock is called away you sell a naked put (and are back where you started). Either way, there's is only exactly ONE transaction each time and one commission charged. And either one or zero commisions when you close the position for good.

With covered calls only and no naked puts, it takes TWO transactions and two commissions to initially open. If it's called away, it takes another TWO transactions and two commissions to roll it forward or one to sell a new call if it expires worthless. It then takes either one or two commissions to finally close the position vs one or zero for naked puts.

In every case, the put|covered call has less or equal commission transactions than just covered calls. In some cases it has many fewer. Additionally, it requires the last maintenance (less transactions to set up, or at least less complicated transactions if you count a combined order to open a covered call position as only one transaction).

^the above is not an endorsement of the strategy of continual selling of "covered calls" as low risk. But, if you're going to do it then it at least makes sense to do it efficiently as possible and control the commission costs - the only part of the "ROI" equation you have direct control over.
 

  
1. At least on the TD platform, when I do a covered call transaction in a single order, it incurs one commission. Same with Fidelity. I do feel that I have less control over the execution with a single transaction. If I sell the call separately, then I can adjust the price and check bid/ask and have slightly better control.

2. The covered call example that I had above, was almost a year long transaction with a net gain of 4.76 per-share - i.e. a total of $476. Yes - the minimizing the number of transactions and costs is important, but I am not super concerned about spending another $10 which is further reduced by taxes. For short term covered call trades (which I don't like), I would be super concerned about the costs.

3. I hate cash in my account. So it is full of covered calls and puts and I have my safety limit on how many puts I sell in case market turns south and everything gets assigned. And I diversify my short put positions either by selling puts on several different stocks or selling puts on SPY. I don't like the latter as much since the option premium is much less.

4. I realize that covered call and selling puts are equivalent. But that changes a bit when taxes are considered. When you sell a put and it expires worthless, the gain is always going to be a short term gain. However, in my JNJ example above, the dividend receives the qualified dividend treatment. This example was deep in the money call - but if it wasn't deep in the money and was sold at least a year prior to the call date, the gain on it would qualify for long term capital gains. [mumble/jumble about IRS rules on covered call LT gains rules skipped].

5. One thing worth mentioning is that with covered calls/short puts with LEAP options, Dec is a great month for tax planning. You can decide to close the position or let it ride into next year. Or for a covered call, close the call and hold the stock and so on.

rated:
PrincipalMember said:   
mrbigballer said:   1. I own my primary residence, so the $80K is going for investment property.

2. I'm not planning on sinking $80K into a highly volatile stock. I currently have it sitting in a savings account earning 1% interest. I'm just trying to get about 3-4%, and stay fairly conservative for the stock trading. I want the money to be liquid though, which is why I do stocks.

3. I don't trade every day. I watch the market daily and I look for a nice opening in a handful of stocks that I have closely been watching. I understand the market is at an all time high, and I believe it is overpriced. I'm not looking to triple my $80K. I would be nice if I could, however I am not going to take on that much risk.

4. On most my trades I just make $100 or $200 on average. Like I said, I keep risk low and I am willing to leave gains on the table in exchange for the lower risk. But I have lots of these trades, which add up, both in profit and fees. That is why I"m looking for low fees.

I learned a very expensive lesson several years ago, and I don't plan to repeat it.

  
If your goal is 3-4%, you can sell some deep in the money calls to get that and get a lot of safety.

Example: JNJ $113.19, sell Jan2018 $100 call for 14.75. You have 4 dividends between now and Jan 2018 of $0.8 each.

Net cost: 98.44. Position upside: $1.56 + $3.20 = $4.76.  $4.76 / 98.44 = 4.8% in slightly less than a year. Not bad given that you almost have 15% safety on the downside.

[Note: Your stock may be called before the last dividend on 11/20 but then your holding period would be much smaller - so annualized similar % return].

There is no such thing as a sure bet - so you can spread the 80K between 4-5 stocks.

 

  Thank you for this info. My knowledge on options is quite limited, and I don't fully comprehend your example, however it is very intriguing. Do you recommend any good websites to learn about option trading?

rated:
mrbigballer said:   
  
  Thank you for this info. My knowledge on options is quite limited, and I don't fully comprehend your example, however it is very intriguing. Do you recommend any good websites to learn about option trading?
 

  
CBOE has a whole bunch of free information on options (or at least I think it is free - it is like drugs - they want you to learn about it and start trading so that they increase their volume and make money).

https://www.cboe.com/education/online-courses/fundamentals-of-eq...

But that might be overkill - just focus on understanding what a "call" is. After you do that, make sure you understand my example.

 

rated:
Why are you sending a noobie into the options pit?? So mean

rated:
user1337 said:   Why are you sending a noobie into the options pit?? So mean
  
1. I looked in this topic to see if you had posted anything to help the OP. NADA - zilch - nothing. Your post reminds me about some of the people at my old workplace who hanged around the coffee machines,  didn't do anything but were always finding faults with what other people were trying to accomplish.

2. When people hear words like "margin", "options" and they freak out. Yup - these things can be abused but when used as tools in a controlled manner, they can be extremely useful. Example - "fire" - very dangerous - stay away from it - but controlled fire is used for cooking and heating homes.

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