optionsxpress review

Brokerage Review: OptionsXpress


10 July,2012

If you are looking for a full-service online broker, but with discount prices, you might consider OptionsXpress. This is one of the more popular online brokerages, providing investors with access to a variety of possibilities, at a low cost. OptionsXpress has been around since 2001, and in 2011, it became a subsidiary of Charles Schwab. OptionsXpress consistently receives high ratings from publications like Kiplinger’s, SmartMoney, Forbes, and Barron’s.

Types of Accounts Offered

OptionsXpress provides you with the opportunity to open different types of accounts:

  1. Individual or Joint Tenants: You can set up an account as an individual, or as a joint tenant. Your joint tenant account can help you pass assets easily if one of the parties dies.
  2. Business Account: Create an account for trading on behalf of your business.
  3. Trust Account: It’s also possible to set up a trust account if your estate planning calls for it. You can open Regular, PSP, MPP, or Keogh trust accounts.
  4. Individual Retirement Account: If you want to save for retirement using your account, you can open up an IRA. You can, of course, open a Roth or Traditional (or Rollover) account. However, it’s also possible to open SEP and SIMPLE IRAs.

When you open your account, you should realize that you have options related to your finances. You can open a cash account, or a cash/margin account. It’s also possible to open a futures account. Since they offer a number of possibilities, you can involve yourself in futures trading, as well as trade on margin, if you meet the requirements.

One of the great things about OptionsXpress is that there are no maintenance fees for your account. You also don’t need a minimum balance to keep your account open. You will need a minimum deposit to open a cash/margin account, but there is no deposit required if you want to open a cash account.

Investment Options and Fees

As the name implies, you can trade options. It’s also possible to trade penny options. The brokerage also provides you with the capability of trading futures, stocks, bonds, mutual funds, and ETFs. There are a number of different fee structures, depending on how large your order is, and what you plan to trade. But, here are the basics of the commissions you can expect to pay with this brokerage:

  1. Options: If you trade 1-10 contracts, you end up paying a flat rate of $12.95. If you trade more than 10 contracts, though, the price is $1.25 per contract. That’s the “active trader” rate, though. Those who aren’t considered active traders pay a $14.95 flat up to 10 contracts, and $1.50 per contract for more than that. The same prices apply when you trade spreads, straddles, and combos.
  2. Penny Options: These contracts start at $0.50 per contract, with a flat $4.95 rate if you trade 1-10 contracts.
  3. Futures: For the most part, futures contracts start at $6.99 per contract. However, the more you trade, the lower the price. If you trade more than 1,000 contracts a month, you only pay $2.99 per contract. You can check for the breakdown.
  4. Options on Futures: When you decide to trade options on futures, you can start out paying $12.99 per contract. However, you can pay as little as $5.99 per contract if you trade in high volumes.
  5. Stocks: There is a flat $8.95 charge per trade. This is higher than some brokerages that charge lower fees, but the other pricing is fairly competitive at OptionsXpress. ETFs carry the same fee as stocks, since they are traded as stocks on exchanges.
  6. Bonds: These are $5 per bond, but there is a minimum order of $9.95 when you trade them, so you have to buy at least two at a time when you purchase bonds.
  7. Mutual Funds: When you trade mutual funds, you will pay $9.95, plus whatever the load fee is, if applicable. And, of course, mutual fund trading means other fund costs.

Since you can trade on margin, it’s important to understand how much that will cost you. Margin interest rates start at 8.25%, and drop down to 6.00%. The larger the amount you borrow, the lower your interest rate. Before you trade on margin, it’s important to understand the risks associated with it. You have the chance to boost your returns, but trading on margin will also magnify your losses.

Other Features and Benefits of having an Account

OptionsXpress provides a number of other features and benefits. One of the most interesting benefits is the free broker-assisted trading. Few brokerages provide that service for free. On top of that, they have a great education section. You can receive trading education in options, stocks, futures, ETFs, and anything other product they offer. Free webinars are also available, along with a virtual trading platform. This allows you to see how the tools are used, and then put that knowledge into practice before you actually risk any of your own money. The virtual trading platform allows you to see how your strategies work in real time.

OptionsXpress features streaming charts, so you are able to see what is happening in real time. You can customize your charts in order to base your decisions on what’s important to you. There are more than 100 different technical indicators to choose from. You can also use the powerful trading tools available with OptionsXpress to screen investment opportunities by various characteristics. Other trading tools include a trade calculator, position analyzer, volatility view, and advanced chart patterns.

Like many other online brokerages, OptionsXpress has a mobile app you can use. You can trade right from your smartphone. The brokerage is compatible with iPhone, Android, BlackBerry and Windows. This provides you with the ability to access your account and charts, and perform trades, from anywhere via your phone.

Bottom Line

The main drawback with them is the higher cost of stocks trading transactions. However, for many investors, that isn’t much of a problem. If you are an advanced trader who likes to trade futures and options, OptionsXpress can be a great choice. You have a wider selection of investment possibilities, and, other than the stock transactions, this brokerage is very competitively priced.