Why We Strongly Recommend Options-Friendly Brokerages for All Option Accounts

I’m concerned that some investors using the “Monthly Income Machine,” as well as those who are not doing so at this time, are definitely leaving too much money on the table if their accounts are not housed at an options-friendly brokerage firm.

These are the criteria – listed in order of importance as I see them – that make a brokerage “options-friendly.”

And let’s be clear, if your brokerage is not options-friendly, it is almost certainly costing you money!

  • Margin policy on Iron Condors (CRITICAL- See below).
  • Commissions.
  • Online Platform (user-friendliness for order entry, live price and news data, in-depth analytical resources, training material, account status information, etc.).
  • Options-Knowledgeable People (on the other end of the line when you call to place a trade by phone or have a question or a problem).
  • Prompt Reply to E-mails or Phone Calls.
  • Same commission for telephone and online orders.
  • Absence of “inactivity fees.”
  • Practice Accounts – to familiarize investor with the online platform, and for practice trades without risking any actual money.

Note: An options-friendly brokerage should also meet the criteria enumerated above that are relevant for stock orders as well. Stock trading criteria are not on the “list” because firms that meet the options criteria will almost always meet the relevant criteria for stock trades too.

Margin Policy re: Iron Condors – Why it’s critical to your profits

This puppy is definitely critical. Specifically, we’re talking about how the brokerage firm treats the Iron Condor – a type of trade that is often an important component of the “Income Machine.” The condor involves placing both a Call Spread and a Put Spread on the same index, stock, or ETF in the same expiration month.

An options UN-friendly brokerage demands that you employ margin for both parts of the trade.

An options-friendly brokerage, on the other hand, recognizes the fact that it’s absolutely impossible for the underlying stock to wind up in-the-money at both sides of the trade on options expiration day. (Basic physics: you can’t be in two places at the same time.) Accordingly, at an options-friendly firm you only need to have margin coverage for one side of the trade.

Why is this critical? Because if the firm requires two margins, it cuts your rate of return, i.e.. your return on investment, in half!

Here are three I recommend as meeting the options-friendly criteria.

As of this writing, they meet every requirement of mine for option friendliness:

  • Schwab
  • TDAmeritrade
  • Interactive Brokers
  • TradeStation


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