menu

Discount Brokers

E*TRADE

E*TRADE - Cheapest Options Broker

E*TRADE, through its industry leading OptionsHouse trading platform, charges only $4.95 + $.50 per contract for options trades when at least 30 trades are placed each quarter. Otherwise, options trades are $6.95 + $0.75 per contract. OptionsHouse by E*TRADE was awarded #1 for Options Trading (5 stars). Not only that, but OptionsHouse's platform was awarded #1 Web Based Platform and provides a slew of options tools useful for options traders of all styles.

Comparing Brokerage Commissions

Trading cheaply is fairly straight forward, however investors should be careful when deciding on a final broker. The regular prices paid for stock and option trades are not the only cost factor that matters. There are a variety of other important factors that can effect the net cost per trade when trading stocks and options online. Here's a list of the most important:

  1. Are there tiered commission rates? Most brokers offer flat-fee stock trading. Some brokers though, especially active trading focused brokers, offer per-share trading. Both have their pros and cons; it really depends on the order size you trade, on average. For example, placing 2000 share orders, on average, would make a per-share broker expensive compared to a flat-fee broker. The vast majority of investors, over 99%, trade with a flat-fee broker.
  2. What is the order execution quality? - For discount trading, nothing helps more than having your broker consistently achieve fill prices better than the National Best Bid and Offer (NBBO). Whether the broker clears itself or with a third-party, as well as the broker's policy on payment order flow, are two simple examples of factors that impacts execution quality. For a full breakdown, see our Guide to Order Execution.
  3. What options are available for order routing? - Important to day traders, some sophisticated brokers offer direct-market routing as well as provide the ability to take full-control of routing costs through market center rebates and fees.
  4. Are there extra charges for market data access or platform access? Some brokers will charge extra for access to market data such as level II quotes and international exchanges. This is very common with active trader focused brokers such as Interactive Brokers, Lightspeed, and TradeStation. Furthermore, these brokers can sometimes charge monthly data fees or platform fees that can only be waived if a certain commission spend threshold is met. For example, Lightspeed charges an account service fee of $100 if at least $100 in trading commissions aren't spent each month.
  5. Misc fees - Annual fees and closure fees tied to a retirement account such as an IRA, broker-assisted trading fees, mutual fund trading fees, short-term redemption fees, phone order fees, and similar all add up. IRA Closure fees typically run around $50, and are something to keep an eye out for.
  6. What miscellaneous fees are charges? Annual fees tied to a retirement account, broker-assisted trading fees, mutual fund trading fees, short-term redemption fees, phone order fees, and similar all add up.
  7. Are there extra fees for trading penny stocks or OTCBB? Some discount brokers charge extra for penny stocks (stocks under $1 per share) and pink sheets. If you like trading these types of securities, read our guide to the best brokers for penny stock trading.

Lastly, two fees that every broker charges (sell orders only) includes an SEC trading fee of $21.80 per $1,000,000 of principal and a FINRA Trading Activity Fee (TAF) of $.000119 per share. Investors can ignore these trading fees as they are the same for each regulated online brokerage and amount to no more than a few pennies per trade. For example, a 500 share market sell order of Disney (DIS) at $108.18 would result in a total fee of only $0.18 ($.12 + $.06).

Interactive BrokersFidelity OptionsHouseCharles SchwabMerrill Edge
Stock Trade Fee (flat)N/A$4.95$4.95$4.95$6.95
Stock Trade Fee (per share)$0.005N/AN/AN/AN/A
Options Base Fee$0.00$4.95$4.95$4.95$6.95
Options Per Contract Fee$0.70$0.65$0.50$0.65$0.75
Minimum Deposit$10,000.00$2,500.00$0.00$1,000.00$0.00
Overall 4 Stars 4.5 Stars 4 Stars 4.5 Stars 4 Stars

Choosing a Discount Stock Brokerage

The take-away here is this: When contemplating any broker switch or new account based on commissions alone, it’s critical to understand what type of trader you are first, then research from there. How many trades do you place per month, on average? What is your typical order size? Do you buy and sell options? Do you frequently trade on margin? Do you trade ETFs or mutual funds? These are all great questions to ask yourself.

Because, just like the brokers that shine for niche reasons, the opposite is also very true. Interactive Brokers offers the lowest margin rates, but if you trade with only cash, then this is negligible. If you only want to trade a few contracts per options trade, Lightspeed per contract rates look great, but it charges an account service fee of $100 if certain monthly activity thresholds are not met. Like mutual funds? Well, SogoTrade’s $25.00 rate appears attractive until you realize every order must be phoned in. There are countless examples, all with their pros and cons.

Discount Brokers Summary

Here is a summary of the lowest cost brokers for both stock and options trading:

Online Broker Best For Minimum Deposit Commissions Overall Rating
Fidelity Best Discount Broker Overall $0 $4.95 4.5 Stars
Charles Schwab Most Commission-free ETFs $1,000 $4.95 4.5 Stars
Interactive Brokers Cheapest Stock Broker $10,000 $0.005 per share 4.0 Stars
OptionsHouse Cheapest Options Broker $0 $4.95 4 Stars
Merrill Edge Best Rewards program $0 $6.95 4 Stars

Final Thoughts

To find out the true cost of cheap trading, don’t just trust our rankings, run the numbers yourself. Use the trading costs calculator here on the site, read our detailed commissions notes for each broker, then compare your top picks using the compare tool to make a final decision. Four-dollar lattes may be too expensive, but then $.99 brews from the local gas station are anything but delicious. In the end, it is about finding that happy medium where quality and price come together to offer you the most appetizing choice.

Related Guides

Continue Reading

All pricing data was obtained from a published web site as of 2/20/2017 and is believed to be accurate, but is not guaranteed. The taxconference.ru staff is constantly working with its online broker representatives to obtain the latest pricing data. If you believe any data listed above is inaccurate, please contact us using the link at the bottom of this page. For stock trade rates, advertised pricing is for a standard order size of 500 shares of stock priced at $30 per share. For options orders, an options regulatory fee per contract may apply.