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Options broker for small trader?

  • #1
  • First Post: Aug 8, 2015 11:13am Aug 8, 2015 11:13am
I want a reliable broker with minimum deposit and require minimum volume to open trade. Any suggest?
  • #2
  • Aug 8, 2015 12:23pm Aug 8, 2015 12:23pm
Quoting love.l0ve
I want a reliable broker with minimum deposit and require minimum volume to open trade. Any suggest?
options are options you have to pay the option cost which is fixed. You to have the margin. So really your only debate is volume but if you go too small you will find you are not really in the true market but with a broker taking the other sideRegards
  • #3
  • Aug 8, 2015 2:13pm Aug 8, 2015 2:13pm
If you're talking about stock options, I used optionshouse.com (https://www.optionshouse.com/) for a few years. I don't think they have a minimum account size and they have lower commissions than most brokers. Interactive Brokers has lower commissions but minimum account size is $10,000. For trading options @ optionshouse it's $4.95 + .50 per contract. With IB it's often less than $1 total cost to trade multiple options and usually not more than $1.50 total cost.

SIPC & FDIC protections so don't have to worry about losing funds (except invested funds) in a bankruptcy.

***If you're asking about a forex options broker, this is not the broker you're looking for.
  • #4
  • Edited 2:48pm Aug 8, 2015 2:29pm | Edited 2:48pm
Quoting MaxDoom
{quote} options are options you have to pay the option cost which is fixed. You to have the margin. So really your only debate is volume but if you go too small you will find you are not really in the true market but with a broker taking the other sideRegards
In the US, if you're trading stocks/options, you're not trading against your broker. It's a centralized market so the broker is just routing orders to match buyer to seller similar to forex ECN style. If you're trading CFDs on stocks then you're not in the real market & you're trading against your broker/marketmaker but CFDs are illegal in the US so you'd have to use an offshore broker to trade stock CFDs.

***Not sure what you mean by "option cost which is fixed." Option prices are fluctuating all the time just like the underlying stock.
  • #5
  • Edited 10:43pm Aug 8, 2015 9:54pm | Edited 10:43pm
Thanks to all
I'm both forex trader and option trader. But spot fx is more.... you know, spikey. So i want to use 2 kind (spot and option) to hedge and lower risk as possible

In IGmarket, you can open 0.5 option contract(10$/pips/contract), but i want lower, like 0.1
  • #6
  • Aug 9, 2015 12:12am Aug 9, 2015 12:12am
Quoting love.l0ve
Thanks to all I'm both forex trader and option trader. But spot fx is more.... you know, spikey. So i want to use 2 kind (spot and option) to hedge and lower risk as possible In IGmarket, you can open 0.5 option contract(10$/pips/contract), but i want lower, like 0.1
give me an idea of the kind of hedged trade you might like to do and maybe I can show you how to do it using American equity or futures options
"If The Fool persists in his Folly he will become wise." - William Blake
  • #7
  • Aug 9, 2015 1:47am Aug 9, 2015 1:47am
Quoting The Fool
{quote} give me an idea of the kind of hedged trade you might like to do and maybe I can show you how to do it using American equity or futures options
I'm not fancy in short-term trading, medium and long term is my type

In the past of 3 years, i made steady and fine in indices and fx market (spot) base only price action (1h, 4h and daily). But as all you guy know, there is alot of fight in SUP and RES zone, if i trading in spot i easily stop out (tight SL), i counted i got SL 3-4 times, it's mean more trading fee. When market take off, i win back my loss and more than that, reward always 2-3 times risk (after loss).

1 week ago, got 2 times SL, each time risk 50$, in the third time, i win total 350$ (include third 50$), i loss 100$, win 300$. Yeah i'm lucky i'm loss 100$, only 2 times.

And CHF crisis, horrible. I loss almost the profit i made in 6 month.

My strategy is mainly, of course spot fx, in the mean time i use option as my Insurrance and reduce stop out in spot -> reduce trading fee
Example: Before CHF crisis i bullish at USDCHF, if i use option, i will buy put option contract ( out of money), so the risk when option expire is small. When SNB announce minus interest, i will loss in spot, but still make profit in option contract

Thats how i do to reduce risk
  • #8
  • Aug 9, 2015 2:43am Aug 9, 2015 2:43am
Actual trade size for OTC FX options is 1000000. So you need 10 lots position in FX market to be able properly use these options.
Nasdaq created spot fx options for smaller traders with $1 tick value and $10000 contract size. Check XDE, XDN, XDB and other tickers. Maybe you'll be able to use it for your hedging strategy.
  • #9
  • Aug 9, 2015 3:58am Aug 9, 2015 3:58am
Quoting love.l0ve
I want a reliable broker with minimum deposit and require minimum volume to open trade. Any suggest?
there are several ways to skin this cat but you need to be trading with a broker that will allow common equity management across all instruments in one account. That means you can trade spot fc and equity or futures options or shares all together and all positions draw on the same margin in the account. The only place I know that you can do that is at Interactive Brokers (IB), but the minimum balance required to trade options there is $10k. Is that too rich for you?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #10
  • Aug 9, 2015 4:01am Aug 9, 2015 4:01am
well, I suppose you might be able to trade at another broker with a smaller minimum for options who also lets you trade forex and/or futures in separate accounts. Let's assume that is what you will do.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11
  • Aug 9, 2015 4:07am Aug 9, 2015 4:07am
johnnycash mentioned the Nasdaq fx options above - the volume is very thin on them, which I don't like - I have not traded them - but I'd have to wonder about getting filled with such low liquidity - but let's assume that's not a problem. Also, there are only monthly options on them - no weeklies - also not good. But let's ignore that and see what happens if you use a long call or put along with a spot fx position.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12
  • Aug 9, 2015 4:13am Aug 9, 2015 4:13am
the USD should be getting stronger and the euro weaker so lets short fiber. You want to trade a 1/2-lot short ($5/pip) and you are willing to risk $200. That would be a 40-pip sl, ignoring comms/spreads. Below are the Aug XDE chains
Attached Image (click to enlarge)
Click to Enlarge Name: 2015-08-09_xde1.png Size: 43 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13
  • Aug 9, 2015 4:24am Aug 9, 2015 4:24am
Quoting johnnycash
Actual trade size for OTC FX options is 1000000. So you need 10 lots position in FX market to be able properly use these options. Nasdaq created spot fx options for smaller traders with $1 tick value and $10000 contract size. Check XDE, XDN, XDB and other tickers. Maybe you'll be able to use it for your hedging strategy.
IG offer trade size of FX option is 100.000/ contract. But i want lower. I dont like to put too much my hard earn money in high risk market. It's safer to put small amount money -> trade -> profit -> compounding. If things gone wrong, it wont effect my life
Quoting The Fool
{quote} there are several ways to skin this cat but you need to be trading with a broker that will allow common equity management across all instruments in one account. That means you can trade spot fc and equity or futures options or shares all together and all positions draw on the same margin in the account. The only place I know that you can do that is at Interactive Brokers (IB), but the minimum balance required to trade options there is $10k. Is that too rich for you?
10k$ is alot to me but not too much, i can trade to get it LOL
Quoting The Fool
the USD should be getting stronger and the euro weaker so lets short fiber. You want to trade a 1/2-lot short ($5/pip) and you are willing to risk $200. That would be a 40-pip sl, ignoring comms/spreads. Below are the Aug XDE chains {image}
What broker you using?
  • #14
  • Aug 9, 2015 4:28am Aug 9, 2015 4:28am
Screenshot is from TOS (Think Or Swim) platform - TD Ameritrade. But they are very expensive for low volume traders. $9.99 per trade+$0.95 per option one way. Almost $22 RT.
  • #15
  • Aug 9, 2015 4:30am Aug 9, 2015 4:30am
so now from fiber $1.0973 you go short spot 0.5-lot and instead of putting on a sl, you buy the Aug $110 call, just one of them. Below is the P/L for the Aug $110 call.
It costs $69 and comms so that'll be $79.74. That's all the call can lose, just what you paid for it. If your fiber short is wrong and eur/usd moves up, your call will start to gain $1/pip and the spot short will lose $0.50/pip. The call started out $80 or 80 pips in the hole so fiber has to move that far up for the call to b/e. That's at XDE $110.65 or spot $1.1065. Then you have to factor in what the spot position has lost to find the break even for the pair. Above that, the call is making 50c a pip.
Attached Image (click to enlarge)
Click to Enlarge Name: 2015-08-09_xdecalls.png Size: 53 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #16
  • Aug 9, 2015 4:34am Aug 9, 2015 4:34am
Quoting johnnycash
Screenshot is from TOS (Think Or Swim) platform - TD Ameritrade. But they are very expensive for low volume traders. $9.99 per trade+$0.95 per option one way. Almost $22 RT.
right, ToS - options trades on a smaller account are $9.99 flat + $0.75/contract each side. Right, if you are a one lot trader you are about 22c in the hole for the round turn. That goes down as your volume goes up - easy to work out that math - I usually trade 10-lots and up there and I am paying <5c per rt.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #17
  • Edited 4:54am Aug 9, 2015 4:37am | Edited 4:54am
the other problem you have with XDE is the 50c spread and the lack of weeklies. You can look at FXE for better volume and for weeklies, where the options can be cheaper. Your 1-lot call is still going to be $1/pip in the money
"If The Fool persists in his Folly he will become wise." - William Blake
  • #18
  • Aug 9, 2015 4:44am Aug 9, 2015 4:44am
Quoting srt
{quote} In the US, if you're trading stocks/options, you're not trading against your broker. It's a centralized market so the broker is just routing orders to match buyer to seller similar to forex ECN style. If you're trading CFDs on stocks then you're not in the real market & you're trading against your broker/marketmaker but CFDs are illegal in the US so you'd have to use an offshore broker to trade stock CFDs. ***Not sure what you mean by "option cost which is fixed." Option prices are fluctuating all the time just like the underlying stock....
hi srt,

we are on the same page here different words

by fixed I mean exactly the same as you ie: it is the same cost whichever broker you use because it is the cost of the option at the time, you can't get it cheaper at another broker

my reference to ending up with a broker taking the other side is correct, if you go to small on volume no matter what the broker tells you they will have to take the minimum exchange size, or aggregate client orders, or simply take the other side, in which case you are not dealing directly in the option but with the broker. These will be the bucket shops that use misleading wording to make you think you are trading the real options market when in fact you are trading a derivative - and are to be avoided.

With regards to CFD these do not automatically mean you are trading against the broker, it depends on the broker most will aggregate their client positions and maintain the net outcome in the real market. but again it is hard to know which are really doing this, but on centrally priced products it should not make too much of an issue unless the broker goes under. In the UK we also have a tax free option of a Spreadbet Account which operate like CFDs but there is no tax to pay on any gains made - and again choosing a reliable well regulated broker is far better than going for the low deposit low volume ones.

At the end of the day people need to understand if they want a good broker they have to trade with a well regulated broker in a respected financial environment and trade with real market sizes where the broker is only interested in the fees and not the outcome and searching for low deposit, small volume brokers just leads to exactly the opposite in general.

regards
  • #19
  • Aug 9, 2015 4:46am Aug 9, 2015 4:46am
But just buying puts/calls is very expensive so you can get around that by using spreads. I don't know how knowledgable the OP is about spreading, and I am running out of steam, 2 AM here. But in reality, there are very interesting possibilities that open up when you can combine the linear spot trade with a non-linear trade in perfectly correlated instrument. This gets somewhat complicated and you need to be able to model the options trades along with the spot trades. I don't really think of one as hedging the other - they just work together. The spot trade works to defeat the hazards of the time-dependent options trade in ways that very much improve the r:r of the latter. You can look at futures same as spot and work out pairs trades between futures and futures options. But these doors lead into some big rooms and I'm not going to repeat here what I might cover in the options thread. Anyway, I hope the above helps some....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #20
  • Aug 9, 2015 4:49am Aug 9, 2015 4:49am
Quoting The Fool
the USD should be getting stronger and the euro weaker so lets short fiber. You want to trade a 1/2-lot short ($5/pip)
oops I meant 1/2 a minilot above or 50c/pip....
"If The Fool persists in his Folly he will become wise." - William Blake
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