Last update: July 2021

Trading commissions have long been touted as the cost of doing business. These pesky costs are a necessary evil, a burden that must be borne if you wish to place bets on the Street.

Fortunately, the trajectory of these unavoidable charges has been lower for decades.

If you want to dig deeper into the history, here are two articles I recommend by Ben Carlson:

• Trading Costs & The New Market Averages
• The Great Fee War of the 2010s

And if you want more insight on how brokers can still profit from your trading via payment for order flow, here’s a good read:

• Charles Schwab is Cutting brokerage fees to zero, but that doesn’t mean it’s free

Here’s my take.

It is stock traders, not options gunslingers that should be dancing in the streets. If you didn’t catch wind of it yet, stock & ETF commissions were pushed to zero, but options commissions were not. No, you derivative dabbling gamblers still have to pay up. The cost of entry is less, sure, but not by much.

Previous to this week’s watershed moment, a broad swath of brokers already offered uber low commissions for options traders. Interactive brokers was at 70 cents per contract. Tastyworks was around 65 cents, and ThinkorSwim was at 75 cents (for me, at least).

And what, pray tell, is the cost now? What bounteous blessings have fallen into the laps of options lovers across the land?

Well, if you were paying a competitive rate before, then you got coal in your stocking.

65 cents per contract is the new number.

Now, I know many of you probably weren’t paying 75 cents for TOS, so if you were around $1.25 or $1.50 per contract, then don the tap shoes and start a shakin’. Congrats for your windfall.

The Biggest Winners of All

Without a doubt, the biggest winners are stock traders swinging smaller accounts, say sub-$10k. Paying $10 round-trip for a stock trade when your portfolio is a few thousand bucks is a total buzzkill. It makes it virtually impossible to move the needle. Most traders in this position churn their accounts until they either add more money or move into options trading where the commissions are at a much lower percentage of the potential profit.

Three cheers for competition and technology. Of all the forces in the world, these two deserve the credit for our ability to now place trades for free.

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