(12-15-2013, 07:30 PM)NilesMike Wrote: With 5 contract transactions, I assume you are paying a per contract commission and not one based on size. What is the assignment/exercise fee on the ones that are called away, if I may ask?
If it works for you, I'm not one to quibble. just too much work for too little gain for me while generating too large of a percentage going toward trading fees.
I use Schwab, maybe not the cheapest but I have other accounts there and they have a bricks and mortar that I can drive to as well. The brokers that are lower cost are really enough to matter at my volumes plus they lack a local office that I can walk into with issues rather than sitting on the phone or using some live text chat on the computer.
Stock trades cost $6.95 in or out so getting called just $6.95.
Options - it depends. If you combine transactions and do a buy/write all in one shot you pay the stock commission of $6.95 then you pay $0.50 per contract. This means that a 1,000 share buy with a CC sell in the same transaction would cost $11.95. If you get called out add another $6.95.
If you already have a stock that you hold and you are just selling contracts You pay like you are doing a buy/write. The initial commission just doing a CC is the $6.95 + $0.50 per contract. So if you already have a 1,000 share position then 10 contracts will cost you the same $11.95 as the buy/write all in one shot. Combining a buy with a write negates one of the $6.95 charges is all.
So if you ran a buy/write, or selling 5 contracts on an already held position, with 500 shares and 5 contracts that were called away and assuming a $20 share price you would see the fees taking about this much: $6.95 commission (combined) + $2.5 (options cost) + $6.95 when called out = $16.40 total transaction cost. $16.40 / 500 shares = $0.0328 per share. So if you wanted to net say $0.20 per share premium you would need a premium that was at least $0.24 or higher.
Per 1,000 shares your cost per share reduces to $0.0189 per share.
Of course, sometimes the SEC or some other fee gets added but that is typically just quarters here and there. For example - a 5 contract option sell had $0.02 per contract as some added fee (not broker related). Could have been SEC fee or maybe some market maker fee. Not sure but they don't really impact your costs enough to matter.