ChoiceTrade Commission Free Options Trades
Online discount broker ChoiceTrade recently announced a new program called Zero-Commission Options for options traders. Starting October 2010, you will be able to trade equity and ETF options for zero commission during options expiration week. Expiration week is the week ending with expiration Friday, which is the week before the third Saturday of each month. Here is a summary of this program:
- Zero-commission option trading, once a month, for one week during options expiration week
- A maximum of 500 option contracts can be traded, per household, at the zero-commission rate each month.
- Program includes single-leg and multi-leg trades (spreads).
- Only equity and ETF options qualify.
- Index option trades do not qualify for zero commission option trades. Index option trades will be charged at the normal options commission of $5 per trade, plus $0.55 per contract.
- An account is eligible if the account holder has been qualified to trade options.
Basically, you pay $5 commission for each online stock order, which is slightly higher than commissions charged by TradeKing ($4.95/trade) and Zecco ($4.50/trade). The commission for options trades is the standard commission plus $0.99 per contract.
Since I don’t trade options, this offer probably won’t help me that much, at least for now. If you are interested in using commission-free options trades from ChoiceTrade, here are some Qs and As from the broker to help you understand the program better.
1. Will all customers qualify for Zero Commission Options Program?
No. Only customers who have been approved for trading options will qualify. There are five levels of option trading that can be assigned to individual customers:
LEVEL 1 Approved to trade covered calls
LEVEL 2 Approved to trade calls and puts, plus all level 1 approved strategies
LEVEL 3 Approved to trade debit spreads, plus all level 2 approved strategies
LEVEL 4 Approved to trade credit spreads, plus all level 3 approved strategies
LEVEL 5 Approved to open (sell) “naked” option positions, plus all level 4 approved strategies
Option trading levels are approved based upon investing goals, option trading experience and other financial suitability factors.
Levels 1, 2 and 3 may be transacted in either cash or margin accounts; for Levels 4 and 5 you will need a margin account.
2. Does the Zero-commission program apply to trading stocks?
No. The Zero-commission program applies only to trading options.
3. Can I apply for options trading capability if my account has never been approved for options trading?
Yes. If your existing account is not authorized to trade options, you must fax or email a completed Options Agreement form to ChoiceTrade for review.
4. Can I trade weeklys?
Yes. Weekly options are included in this program.
5. Will spread trades qualify for zero-commission trades?
Yes. The zero-commission program applies to both single-leg and multi-leg option trades made during options expiration week up to a total of 500 contracts traded during the week.
6. Will all my trades qualify for zero commission trades if I open and close a position during the same week?
Yes. It does not matter whether you are opening or closing a position as long as it is during regular options expiration week. Trades made outside regular options expiration week will be subject to the regular option commission rate of $5 per trade and $0.55 per contract.
7. What happens if I exceed the limit of contracts eligible for zero commission?
If you exceed the 500 contract limit, only the first 500 executed contracts will qualify for zero commission options. The balance will be subject to normal commissions. If you trade a total of 600 contracts in the week, for example, the first 500 contracts will be charged at zero commission and the last 100 contracts will be subject to the normal option commission rate of $5 per trade, plus $0.55 per contract.
8. Will assignment and exercise rates be zero?
No. There is a $25 fee to exercise or assign an option position.
9. Is the rate calculated based upon when I place an order or when my order is executed?
Zero commission is applied when an options order is executed. If you are previewing an order, it is possible the estimated commission will be underestimated (at zero) since you may have another limit order in the system that has not be executed at the time you previewed your order and the new commission was estimated. Previewing an order, or placing an order, does not guarantee zero commission. Actual commission is calculated when the order is executed.
10. Will virtual option trades (paper-trade accounts) indicate zero commissions during options expiration week?
11. When does this program expire?
No expiration date has been determined by ChoiceTrade although it reserves the right to cancel or amend this program at any time.
12. If I don’t use my 500 contracts limit one month, can I carryover the balance to the next month?
No. Each month starts with a fresh 500 contract limit.
13. Is there anything special I need to do to participate?
No. All option-enabled accounts are automatically eligible.
14. Can I combine this program with other special pricing programs?
No. This program will be void if you are participating in any other special pricing program related to options.
I have looked at ChoiceTrade before when they offered account opening bonus. The offer has long expired, but you can find more about the broker in my ChoiceTrade review post.
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