Trade costs are no doubt on many investors’ minds. Just like paying $4 for a Starbucks (SBUX) latte every morning adds up, so does paying $7, $8, $9 or $10 per trade. For the coffee drinkers who must have their morning brew, cost can be reduced dramatically at the expense of quality and taste. This exact philosophy holds true for online trading, which we will now explore.
To find the best broker for low-cost trading, we considered all the possible scenarios. Whether the trades involved 100 shares or 5,000 shares, one contract or 100 contracts, $5,000 in equity or $1 million in equity, we assessed it all. We also analyzed the actual net costs per month for casual investors who might make 10 stock trades each month or hyperactive traders who might place 100 stock trades and 50 options trades in one month. We also considered monthly minimums, platform fees, data fees, and other relevant costs.
When all data and possible scenarios are considered, the best pick in the category of Commissions & Fees is OptionsHouse. Regular stock trades are a flat $4.95 per trade and options trades are only $4.95 + $.50 per contract. Exercises and assignments receive a flat rate commission of $4.95. There are no platform fees or data fees. The only added expense for trading with OptionsHouse is an additional $.0005 per share for stocks under $1.
However, while OptionsHouse is the best all-around deal, there are numerous scenarios in which other brokers shine. For trading straight equities in large, several-thousand share increments, OptionsHouse, TradeKing, and SogoTrade are the cheapest options. Alternatively, if trading strictly options , Lightspeed is your clear choice as each trade will set you back only $.60 per contract, with further discounts added in as you trade more volume. If you like ETFs, then go for Charles Schwab, which currently has the largest selection (214 total) of commission-free ETFs. Lastly, if automated investing for your retirement account is your gig, then Capital One Investing is your best choice, as its commission structure centers around just that.
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. OptionsHouse and Lightspeed offer 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 and TradeStation’s per contract rates look great, but both brokers charge an account service fee of $100 and $99.50 per month, respectively, 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.
To find out the true cost of trading, don’t just trust our rankings, run the numbers yourself. Use the trade calculator here on the site, read our detailed commissions notes for each broker, and 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.