The barrier to entry to trade these days is so low with firms providing data and trading platforms for free to all customers. There is no reason why any retail trader should be paying to use a platform or receive market data feeds. For online brokers, this is now a cost of doing business.
The only cost you have as a retail trader is commissions. And even these have been commoditised over the last decade. Now that is not to say that brokers are not going to try to squeeze a higher commission rate to the uninformed trader. I have talked to a lot of new traders lately on the topic of commissions and the fact that they are negotiable.
As many of you know reading this blog, TD Ameritrade is our preferred and recommended broker for all traders. I have been with Interactive Brokers and TradeMonster and it does not even come close to what the ThinkOrSwim platform offers. With that said I want to share a few insights on negotiating your commissions.
After helping a few traders get their commission rates lower of the the last few years I have found the sweet spot to where TD Ameritrade is willing to start a new trader until they build up some account activity.
1) $1.50/contract for option trades (no minimums)
2) $5min or $0.01/share for stock trades ($5 for 100 shares, $6 for 200, etc)
If you are opening up a new account with TD Ameritrade you get your first 60 days of trading for free, so I would wait to negotiate the commission rate until after your free trades are up.
Over time as you become more active you can go back to the negotiating table to get your commission rate lowered on the option trades and have them remove the $5 minimum for the stock trades. I personally have a $1 min or $0.01/share.
Good Luck Trading!
In The Money Trades
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Showing posts with label Stocks. Show all posts
Showing posts with label Stocks. Show all posts
Friday, April 26, 2013
Wednesday, April 24, 2013
Stay Small, Stay Out of Trouble
There is this predisposition out there that the only way you are going to make money in the financial markets is if you are trading 10 lots of options and 1000 shares of stock at the time. This is not the case, and if this is your mentality you will likely ensure yourself trouble. We have all read the stories of traders blowing up their account.
I personally think a good rule of thumb is to not risk more than 5% of your account value on any one position.
Good Luck Trading!
In The Money Trades
And 1 favor that we ask:
If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!
Friday, February 8, 2013
How do you decide what to trade?
I know one question that I get frequently is how to find what to trade. Its a hard question to answer because the answer really depends on a lot of variables. But there is probably one universal rules to follow:
1) Make sure the stock is liquid. My rule of thumb is that the stock trades at least 1 million shares a day on average. You want a liquid stock because you want to make sure you can get in and out of the stock easily. But on top of the stock being liquid you are going to want to make sure the options are liquid as well. I like to look at open interest to gauge this. If you look at the 8 closest strikes you should see a couple thousand contracts in open interest.
Other than that the sky is the limit. There are so many sources of ideas out there. They range from free to paid services. It really depends how active you want to be and what you cash flow situation is like. I personally like to come up with my own ideas, and I honestly don't like to pay for trade ideas. So I navigate towards free tools for idea generation. But with the internet this is very easy. And if you follow our advice on this blog and get a think or swim account through TD Ameritrade, you will have more tools for idea generation than you know what to do with.
I think a great place to start is to look at companies that you know. What companies do you interact with in your personal life. Write down a list of those companies and look up there stock symbol on www.google.com/finance. Do they pass the liquidity test? You might have some good trade ideas.
As I have blogged about a lot lately I have gravitated towards leap covered call positions on high yield dividend stocks. The first thing I do to identify a candidate to trade is use a free service called dividata (www.dividata.com). Its a really great tool that allows you to set filters, see stocks that are going ex-dividend soon, high yielders...etc. I really like the dividend history and rankings that it provides. After I find some candidates that peak my interest I take those stocks over to the TOS platform and look at the price chart, to decide if it technically looks like a good entry point.
If the timing looks good to enter into the position from a technical standpoint I then precede to the options tab on the platform to scope out the nearest out of the money call option that I can sell against it. Typically I am looking 1 year out on this type of position. I am looking to collect about 7-10% of the current stock price as a "cushion" or a reduction to my cost basis. I should also point out that I am targeting dividend stocks yielding 5-10% (sometimes a little higher), that have a good stable payment history of at least 5 years (preferably 10). All in this sets me up with about 12-20% cushion.
Now this is for just one type of trade idea generation. I also like to look at the popular ETF's for trade ideas. One of my go to index ETF's is the SPY, which for those of you that are not familiar is the index that tracks the S&P 500. I typically look at trading this instrument from the short side when I think the market is a bit overdone.
Other places you can get trade ideas: Tasty Trade, Think Or Swim Scans, Onn.tv, CNBC, stocktwits.com, google.com/finance, investingwithoptions.com, t3live.com.
This is only a small list of the endless pool of opportunity that awaits you.
Good Luck Trading!
1) Make sure the stock is liquid. My rule of thumb is that the stock trades at least 1 million shares a day on average. You want a liquid stock because you want to make sure you can get in and out of the stock easily. But on top of the stock being liquid you are going to want to make sure the options are liquid as well. I like to look at open interest to gauge this. If you look at the 8 closest strikes you should see a couple thousand contracts in open interest.
Other than that the sky is the limit. There are so many sources of ideas out there. They range from free to paid services. It really depends how active you want to be and what you cash flow situation is like. I personally like to come up with my own ideas, and I honestly don't like to pay for trade ideas. So I navigate towards free tools for idea generation. But with the internet this is very easy. And if you follow our advice on this blog and get a think or swim account through TD Ameritrade, you will have more tools for idea generation than you know what to do with.
I think a great place to start is to look at companies that you know. What companies do you interact with in your personal life. Write down a list of those companies and look up there stock symbol on www.google.com/finance. Do they pass the liquidity test? You might have some good trade ideas.
As I have blogged about a lot lately I have gravitated towards leap covered call positions on high yield dividend stocks. The first thing I do to identify a candidate to trade is use a free service called dividata (www.dividata.com). Its a really great tool that allows you to set filters, see stocks that are going ex-dividend soon, high yielders...etc. I really like the dividend history and rankings that it provides. After I find some candidates that peak my interest I take those stocks over to the TOS platform and look at the price chart, to decide if it technically looks like a good entry point.
If the timing looks good to enter into the position from a technical standpoint I then precede to the options tab on the platform to scope out the nearest out of the money call option that I can sell against it. Typically I am looking 1 year out on this type of position. I am looking to collect about 7-10% of the current stock price as a "cushion" or a reduction to my cost basis. I should also point out that I am targeting dividend stocks yielding 5-10% (sometimes a little higher), that have a good stable payment history of at least 5 years (preferably 10). All in this sets me up with about 12-20% cushion.
Now this is for just one type of trade idea generation. I also like to look at the popular ETF's for trade ideas. One of my go to index ETF's is the SPY, which for those of you that are not familiar is the index that tracks the S&P 500. I typically look at trading this instrument from the short side when I think the market is a bit overdone.
Other places you can get trade ideas: Tasty Trade, Think Or Swim Scans, Onn.tv, CNBC, stocktwits.com, google.com/finance, investingwithoptions.com, t3live.com.
This is only a small list of the endless pool of opportunity that awaits you.
Good Luck Trading!
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