Good Day Rookie Bloggers! We are switching things up again this week as there have been some new developments with the discount brokerages that we use. As most of you are probably aware Charles Schwab is purchasing TD Ameritrade and is basically becoming a giant brokerage firm. We don’t know how all this will shake out just yet but it is something that we will keep a keen eye on and update as we get new information. Before this event, there was the dropping of the commissions by firms such as Schwab and TD Ameritrade as well as a few others.

This was very good for a lot of traders and investors alike but did nothing for other traders depending on their own individual circumstances. To elaborate, the reason we started down this rabbit hole in this blog is that not all traders, namely some of our community members, are being treated equally. That was the beginning premise of this blog series and still remains true now despite the lowering of commissions for the brokers in the United States.

In this blog series, we tried to show an avenue to get around these challenges and it was only partly successful in my estimation. We started going through how to use Interactive Brokers in this blog series because as any Canadian trader probably already knows or will soon we are prohibited from using most American discount brokers.

Interactive Brokers gives Canadian traders an alternative to the more expensive brokers that do provide service to Canadians. It is not without its challenges as I mentioned at the start of the blog series. I tried to explain how to use the platform that would give most who use it some semblance of proficiency. I think we definitely accomplished some of that, however, there is new information that has come to light recently that I feel I must share as I don’t want our members to be subject to the same pitfalls that I have found.

The recent pitfalls I speak of are problems with fills on certain order types. I have spoken to a number of members who have run into issues regarding the filling of orders from IB and I personally hadn’t really gotten hurt by the fills in Interactive Brokers until two weeks ago. I had used several different order types in IB and had decent success with those order types. I went over these order types in the blog series, I would say reviewing those blogs would be a good idea as I can only give a synopsis of that here. The order types that I mentioned in the previous blogs are the SNAP PRIMARY and SNAP MARKET orders both while using a condition, typically a price condition.

I had used those orders quite successfully many times without a major issue. The fills were never perfect but it didn’t affect my profits or my ability to get out of a trade. That was until two weeks ago, I put a trade on SQ which is a very liquid stock. I used a SNAP MKT order with a condition. The condition was that once the stock hit the target price my trade would be closed. This order is supposed to go to the middle of the option price and then close on a market order. I have used this order type many times before and always gotten a reasonable fill but not on this day. The fill I got was half of what the same price was on another broker!! This took my profit down by approximately 90%. This is why we must be very careful what order types we use as this had not happened before but can still happen. I also found a similar issue with the SNAP PRIMARY order type which is supposed to snap to the bid or ask price depending on buying or selling and then adding an offset. I got a brutal fill on another trade as well. I contacted IB and got no reasonable answer as to how these orders really work or what happened in this case.

The hard part of this is that IB doesn’t really have an order that will split the difference between the price of an option consistently, or at least I haven’t found one yet. So the moral of this story is that even though we can get lower commissions from a certain broker doesn’t mean there isn’t a cost to using that particular broker.

I have my favorite brokers that I use and although the cost is high in comparison to some others I have to weigh the cost of bad fills vs higher commission costs and on any given day one can win out over the other and that is why I keep multiple brokers in the stable.

I am going to do one more follow up to this blog series as I am looking to get some traction on making things fairer for all traders and I may be looking for some help in doing just that from the members of this fine community, stay tuned for what comes next!

Also, check out the short video below for a rundown of the order types and the pitfalls I found.

Be Well All,

Coach Holmes