Commission Free trading. Trading for free $0 trades in this video we are going to discuss how each a TD
Ameritrade and Schwab have now fired the first and probably the final shots
regarding free trading so I think it was two days ago around October 1st to 2019
Schwab came out and said that they were cutting all of their ticket prices and
their Commission's to $0 options were then going to be 65% TD Ameritrade then
followed and said that they were going to follow and match the terms of Schwab
and then I believe today which i think is October 3rd etrade mentioned that
around starting October 7th they were also going to reduce all of their
Commission's to $0 now this is significant primarily because I think
that it's a good strategic move for Schwab because I think Schwab generates
around 8 percent of its total revenue from commissions and etrade and I and TD
Ameritrade generate substantially more so this is going to be a shifting
business model it's fantastic for the retail trader and this actually is going
to be much more valuable and it and for many people I think it's going to
introduce trading and remove one of the hurdles from trading because remember if
you're thinking about investing in real estate which has this tremendous amount
of fees now you can essentially trade options for free like why would you ever
give up the liquidity and the no transaction fees that are involved in
options trading and you can make anywhere from like 30 to 50 percent a
year whereas with real estate you're gonna have to pay a substantial amount
of taxes there are a lot of transaction fees there's uncertainty there are taxes
and repairs and maintenance and potentially bad tenants etc but I think
that this is great for trading because it's going to remove one of the hurdles
now trading was already extremely cheap personally I was able to negotiate with
E Trade 395 per trade plus 10 cents per contract so I'm wondering if I'm only
gonna pay ten cents a contract that would be amazing that we pretty much
like trading for free I know the e trade is offering 65 cents per contract but
I'm wondering if they're just going to reduce the 395 that I was paying it
charge me ten cents a contract which would be fantastic they'll probably end
up saving me I don't know maybe like five hundred dollars a year it's not
really that much because I make less trades now than I did a few years ago I
remember a few years ago I spent around $1,000 or $1,200 on commissions but now
I spend a lot more because they only make around one or two trades a week but
in any case I just want to tell you that for Schwab e Trade and Schwab e Trade
and TD Ameritrade commissions as of I believe October 7th are going to be cut
to zero options commissions are still gonna be around 65 cents a contract even
though for each trade I only spend I only pay 10 cents a contract I think
eventually they're going to be for free you should always negotiate with your
brokerage before signing up or even right now you should call your brokerage
or you can chat with them and try to negotiate a better deal to reduce and
get the the Commission's to zero if they're not already zeroed out and also
to get your per contract charges as close to zero as possible and again I
think this is gonna be fantastic now there are going to be other ways
that the brokerages are going to make money they are going to lay people off
to compensate for the reduced revenue that they're bringing in but there are
going to be other ways like for example what they can do is they can increase
the fees that they charge you so it would be like data fees or if you cancel
your account and you have like the transfer out instead of charging you
like zero dollars they can charge you like a hundred dollars there are other
things that they can do which are kind of sneaky so instead of paying you like
2% interest on your cash balance they can not pay you anything of your cash
balance and as a result they can keep that incremental 2% now these are things
that investors and traders don't really take into account but over the long term
when these brokerages have billions of dollars and in some cases tens of
billions and sometimes like fidelity or Vanguard like trillions of dollars of
money in their disposal during an incremental 2% of money on their or you
know 1% of money 1% cash return on all of their assets is a huge deal so always
make sure that your brokerage pays you interest on your cash balance they can
also increase the amount of fees that they charge for
margin interest so instead of spending we're sort of charging like fifteen
percent they can charge you like thirty percent they can also get pay for order
flow so they can get paid for diverting more money to the market makers then you
know to one particular market maker as opposed to another so there are a lot of
things that they can do in order to compensate do I think that they're going
to be able to compensate for the full loss the revenue no but I do think that
as an educated consumer you have to look at all the fees you have to make sure
that the fees are not going to eat you up and they're not going to eat into
your returns and I definitely think that the brokerages are going to increase the
fees make sure that they're paying you money and interest on your cash balance
but overall this is an incredible sign and you should be able to negotiate with
your brokerages to get the rates further to decrease the rates further from sixty
five cents a contract again I pay ten cents I have a large account but at the
same time you should be able to negotiate around you know even if you
don't have a large account you should be able to go she ate around 20 cents per
contract with no Commission's so this is a great day for trading you'll be able
to save more money I think this is also going to encourage more people to be
active and it's going to encourage more people to trade options for stocks it
really doesn't matter because no one I mean trading stocks there's no strategy
involved you're not really taking control and you're not being active and
you're not being aggressive in taking a control over your portfolio by buying
and hold something I mean at least buy something and then sell some cover calls
against it but there's virtually no situations where you're better off
owning stock as opposed to selling a put I guess the only situation would be a
situation similar to like January of 2018 where the market pretty much went
up like every single day or also January 2019 where the market was up
tremendously in that situation because when you sell a put you're only limited
to keeping a hundred percent of the premium that you receive it would be
better to actually own the stock but let me just tell you that 99% of the time
you were better off selling puts as opposed to actually owning the stock it
is more capital efficient it's safer you have a safety net we were able to
mitigate the risk we're able to manage the
position better and it's overall it's going to yield to much larger returns so
this is a great day this is a great month for options trading that options
trading essentially is free now and I think it's fantastic please like this
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