There are lots of low cost online brokers out there these days, with the broker industry seeing a lot of new competition. There are discount brokers suitable for small investors and there are those that are geared more towards active investors, such as Zecco, OptionsXpress and OptionsHouse. Among these sites, there’s also that subset of brokers that consider options trading as their specialty, although they are careful to note and emphasize that their platforms also support stock, ETF and mutual fund investors.
Today, I’d like to cover one of these online stock brokers with the term “Options” in its name: OptionsHouse. And yes, it’s another brokerage that promises to offer you a ton of features for very low cost. So what makes them stand out in the sea of discount brokers out there? And how different are they from their competition, OptionsXpress?
Don’t let the word “options” scare you though. It’s true that OptionsHouse has its roots in the world of options trading, having been founded by PEAK6 Investments, which is one of the biggest options trading brokerages around. But while their main goal is to help the investor understand how to trade options effectively, they also offer a platform for stock investors who want to own stocks, ETFs or mutual funds for their core portfolio. Here’s a little bit more about them:
The Barron’s 2009 Online Broker Survey has listed OptionsHouse as the “Best For Options Traders”, with a score of 4 and a half stars. OptionsHouse is rated #1 in Trade Experience, above notable brokers like ETrade and OptionsXpress.
These awards are good, but OptionsHouse still falls a little short of more highly awarded brokers like ETrade, which just won the all around top ranking for SmartMoney’s Broker Survey for three years in a row (from 2007 through 2009), and TradeKing, which has garnered similar awards in previous years.
What may catch your eye about OptionsHouse though, is their rates. For ultra-cheap stock trades, you can’t get cheaper than a flat transaction fee of $3.95 a stock trade (online or broker-assisted). Their commission rates for options is up to 5 for $5 or $8.50 plus .15 per contract, which is better than what many other discount brokers offer, since rates from OptionsHouse remain the same regardless of how many trades you actually make.
With many other brokers, your trading fees may vary based on the volume of your transactions, and not always for the better. Thus, if you’re looking for the cheapest trading commissions, you may want to check out OptionsHouse. The only brokers that may possibly beat their rates are those that offer limited free stock trades (such as Zecco) that you’ll get if you meet certain conditions (e.g. you make a lot of trades or have a high balance).
My Review of OptionsHouse, A Low Commission Broker
Here were a few more things that stood out for me when I checked out their site.
Virtual Trading. This online discount brokerage offers a Virtual Trading environment, much like its competitor, OptionsXpress. Once you sign up for an account, you’ll get instant access to a virtual account that’s funded with fake money and you can raise your funds anytime without risk.
Products and Accounts. You can open pretty much any type of account and rollover your IRA into this firm. You also have the ability to write checks — first 40 checks are free, reorders are $5.00 for every 100 checks — and you can use a debit card. The debit card has an annual fee though, and you need a minimum of $10,000 to qualify. OptionsHouse allows you to trade and own equities, mutual funds, options, U.S. treasury bonds and listed corporate bonds. But you’ll need to do phone orders for the bonds.
Investment Platform. This broker pitches a trading and investing platform that is simple, and devoid of those extra bells and whistles that may only serve to confuse or distract you from managing your transactions. You can also customize your dashboard and screens, which I suppose adds some points for usability. Now one thing I like about certain top online brokers like TradeKing and Zecco is the fact that they have built in investment communities. OptionsHouse, like most other brokerages, hasn’t incorporated this feature into their site just yet.
Tools and Education. My take is that OptionsHouse’s tool chest is geared for more sophisticated and professional traders who are dealing with options trading. Their broker’s education resources section is also heavily focused on the subject of options, with books, guides, papers as well as learning tools, calculators, simulators and screeners available to support traders. They’ve got regular webinars on more advanced investing and trading topics that you can register for.
My opinion? If you’re a new investor who’s still learning the ropes, this is not the place for you: you’ll be much better served by a broker like Scottrade, whose focus is the average retail investor. I believe that the ideal customer for OptionsHouse is someone who already has some background with investing and trading, who’s fairly comfortable with the markets and who’s really looking for the cheapest trading fees and lowest commissions and transaction rates. But if you fit this profile and you’re watching your trading costs carefully, then this discount brokerage is one I’d consider signing up with. For more details, you can visit them here.
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