After spending quite a while looking at different online brokers, I think TradeMonster might be the one I’ll choose. Its commissions ($7.50/trade) are higher than TradeKing and Zecco (and barely higher than Scottrade), but I pay a lot less in commission every year than I do in margin interest. Trademonster’s margin interest rate is super-low, around 3.5% for $0-50,000. This will save me hundreds and hundreds of dollars per year over Scottrade. The cost in commissions will be a bit, but I’m estimating to save money overall. For a heavy margin trader that doesn’t day-trade, this is a pretty good deal.

1. Stock quotes in different tabs interfere with eachother. You’ll be reading about ADBE in one tab, and click to change the stock chart, and all of a sudden you’ll be looking at the chart for MSFT but it will still say ADBE at the top! This is really horrid, and I’m pretty sure I’m going to switch because of it.
2. The charting settings don’t seem to be saveable. I never want to see “Mountain” charts, only Candlesticks. I have to change this every single time. There’s a seperate popup window chart, but I hate popup windows.
3. The margin rates aren’t great – 7.5% for the amount I need. TradeKing is a full 1% less.
4. They don’t show your total daily percentage or dollar change in the positions pane – just the total gain in dollars and percent. I want the change for today! Scottrade had this and it was color coded too! This is not a hard feature to implement!
5. Their streaming quotes thing is pretty crappy – like, worse than Scottrade’s Java thing. And if I want the good one, I have to pay money. Lame!
6. They have a maximum character limit of 16 on password.  What possible reason is there for this?
7. Extremely slow transfers into the account. My request was processed the 20th, and it won’t be cleared until the 29th. Scottrade was instant! They would credit your account before the funds cleared once they verified your balance with your bank – it was awesome.

So, I think I might start the transfer process today.

Zecco is my new favorite discount brokerage.  They offer $4.50 trades for stocks and options, as well as $0 trades if you execute more than 25 trades a month or have more than $25,000 in your account.  This is huge, as it basically eliminates a big part of the cost of personal investing.  I highly recommend switching from whichever brokerage you’re using now.

They have a really nice user community interface that allows you to see what other users are doing in real-time, and how their portfolios are performing.  You can also opt to share your performance with others, though I have this turned off currently.

I managed to move my entire account from Scottrade just using a web browser and email (of course, I had to take a picture of a paper document I signed and send in an image of it).  But the ability to do this and avoid fax machines is very convenient.

I really like the options strategy builder.  It allows you to see a real-time plot of how different straddles, strangles, naked and covered options work.  It’s 100% customizable – you can plug in anything you want.

The only issue seems to be the margin rates, which are a lot higher than its competitors.  But if commissions are the main part of your cost, definitely consider Zecco.

Also, I could double that money buy selling an out-of-the-money call at my desired profit point – sure, this would be limiting my profit, which is normally unlimited, but I generally sell when I make 20-30% anyway, so why not make money on options when this doesn’t happen (which occurs more often)?

Update: I was wrong, I want to buy the puts or sell in the money calls. Selling in the money calls is a much better plan, since I can make a little premium going in, and still be protected from downside. Here’s a whole article about it.

I got burned by options a couple years ago, and have stayed away ever since.  But in the last few days, I’ve been learning how to manage risk using options, especially by using spreads.  I decided to try out some spreads today in my optionshouse practice account.

WARNING: If you are not familiar with options, the next part is going to be gibberish.  Use Google to find a good resource on educating yourself about options if you are at all interested, and please use a virtual account to try it out before putting real money in the market.  Cheers.

2 of them are Bull Call Spreads, which means buying a call option on a security at a realistic strike price out-of-the-money, and at the same time selling a higher-priced out-of-the-money call.  What ends up happening is pretty awesome – a lot of the cost is cancelled out since you’re buying and selling a contract, but not all of it since you’re buying the less risky option.  If the security goes down in value, you and the person you sold to lose, but your losses are less than they would be just buying a call.  On the other hand, if the security rises in value, which one who enters this spread assumes will happen, but not enough to bring the sold option into the money by the expiration date, you keep your profits.  The best part is that even if the sold option goes into the money, it doesn’t really matter as long as you keep your call around as long as they do.  If they exercise early, all the better, as you can take your profit in safety.

The other spread I’m trying is an Iron Condor.  To explain this, you need to understand what a Bear Call Spread is and what a Bull Put Spread is.  I’ve linked both of these, so I suggest you read them, especially the examples (that’s how I learn).  Now that you know that, imagine combining them.  This is what’s known as an Iron Condor.  Basically, instead of being bullish or bearish on a security, you are banking on it staying in some range.  You can manipulate this range using the strike prices of the options you buy and write.

For Example

Here’s a graph from my new favorite discount broker, Zecco:

What’s happening here is an Iron Condor (slightly modified for an upside move).  Maximum profit is obtained from the 104-112 range.  If the final price falls much outside this range, you’re going to incur a loss.  It’s best to do this on stocks that have very little volatility – like indexes.

Conclusion

We’ll see how this goes virtually, and consider trading it a bit in real life, just for kicks.

Google

Fibo 50% and upward trendline should help this go up a bit, assuming Android continues to get market share.

Atwood Oceanic

These guys are in a lateral channel between the 61.8 and the 38.2 Fibo lines.  Buying around $25 looks like a win.

Cintas

This looks good – a bounce off the 38.2 at the same time as a bounce off the uptrend.  Also, the RSI is getting back into buyable territory.

Intel

At less than $20, this looks pretty good.  It’s also about to hit long-term support, as well as the 50% Fibo.

TEVA Pharmaceuticals

This company makes a bunch of medication.  And look at that RSI!  It’s also had a perfect bounce off the 38.2 line, and is flirting with the 50% line.  I think this one has a bright long-term future with the mass retirement coming up.

Hillenbrand

They make coffins.  How can you go wrong in the next 20 years?

Take Two Interactive

These guys make Grand Theft Auto and a bunch of other games.  As more and more adolescents continue to play more and more video games, this stock should soar.  Also, it’s really beaten down right now, just bouncing off of major support, and it’s extremely oversold as indicated by the RSI.  Buy!

YUM Foods

Oh man.  I could go for some KFC right now.  Or maybe some Taco Bell.  Guess what – they’re both owned by one company, Yum Foods!  It’s in an upward channel right now, but currently isn’t a good buy as it’s nearing a peak again.  Wait for it to drop to channel support and buy.

This has made me rethink “buying American,” which seems to be a big movement in today’s society. If it is more expensive for me to buy from an American company, and I do it anyway, along with tens of thousands of other consumers, what are the actual effects? That company doesn’t go out of business, yet some foreign company with cheaper equivalent products may, or at least it will lose profits, resulting in the increased unemployment in that country and a decrease in buying power of that country, affecting American exports. If the option to buy the alternative is lost, the cost of the product to consumers increases, hurting working families in America. The employees of the American company will keep their jobs instead of moving to other industries, which is seen as the motivation behind the choice to buy American. But, the unseen result is that there is less American money in the pockets of the foreigners, money that has no purpose other than to be spent in America. Therefore, by buying American, you are helping that single company at the expense of the minuscule loss to every American company that exports its products outside the country. In reality, it doesn’t really matter if you buy American or not, since that money will probably not spend long in foreign circulation before it is re-used to buy American out of necessity. The power of electronic circulation of currency these days is incredible.

Hypothetically, if I buy my Honda Civic instead of a Chevy Volt, what’s the difference? When I purchase the Honda new, I am putting a few thousand dollars in the pockets of a Japanese company. Dollars don’t work over there, so they need to change them into something else. They have a few options:

• They can convert it into Japanese Yen, whose exchange rate today is 1 yen per 0.009101 U.S. dollars by selling the currency to an American entity. This simply decreases the American holdings of the foreign currency, and injects the money right back into America.
• They can convert it into Japanese Yen by selling it to another foreign country on a currency exchange, or by selling it domestically to a currency trader. This probably happens to some extent, but it just represents one more extremely fast electronic hop through the global investing ether.
• They can convert it into holdings in a US company, bonds, commodities, homes, or other US-based securities. This helps our economy, allowing our companies to function, maintaining American employment directly.
• They can loan it back to US entities and collect interest in dollars, which have to go through this process again (yes, I realize that bonds fit here, but I feel they fit better in the previous bullet). Eventually, these all have to end up back in the pockets of Americans, and even lift the burden of risk from all American lenders. If these loans are defaulted upon, it was simply a bad investment by the foreign investor, whose product and money we have now!
• Finally, they can simply buy American. Our exporters will benefit greatly by the increased spending, and will buy products being produced in America for lower prices than they can be found in Japan, necessarily adding to the efficiency of operation of the world market (otherwise, the exporters would go out of business).

Note also that investing in foreign currency is a gamble. It is definitely possible that a foreigner may sell us a Honda Civic today for $10,000, and 6 months from now inflation of the money supply (the M3 that the Fed doesn’t publish anymore, not the CPI, which is open to interpretation) will drive the purchasing power of those dollars lower, meaning by buying that car, we actually cheated the manufacturer out of some amount of buying power. Therefore, if the car company wants to continue being profitable, it cannot keep its holdings in American currency for more than the short term, meaning it has to offload it, the most logical place being back to America, or to a Japanese currency trader, who will do the same.

All in all, I would almost encourage buying foreign to get rid of these worthless pieces of paper as quickly as possible. Let the foreigners deal with our ruined currency.

I started trading options about a week ago, and made a little profit on Boeing. Redhat started taking off today, and I might buy a call on that. Watch Redhat!

Stock up if it goes past $21! It could really zoom. The support is built up long term. I signed up for an options account with Scottrade today. It will allow me to:

• Buy puts and calls to open
• Write covered calls

It’s too bad they don’t offer naked put writing and selling to close. I would have liked to play the game of just trading pure options without ever exercising them.

It looks technically promising. We’ll see how that turns out.