STEP 4: The Business Setup – Choosing the Right Partner
With advancement in technology, the options trading business can be easily setup with a few clicks of the mouse. Welcome to the online world of trading.
Equity trading is a serious business because it involves a lot of money – your money. It can build wealth and can also destroy wealth. Either you make money from the market, which belongs to someone else, or you lose your money to the market, which will benefits another trader. So please take it seriously because most traders and investors do not. So if you are serious, would you trust your business dealings to just about anybody? I hope not!
A business that does not have reliable partners typically will not succeed for the long term unless a new reliable partner is quickly identified. In the options trading business, brokers are our partners. As such, we would have to identify and be very selective in appointing the brokerage house to help us run this business.
With so many brokerage firms out there, it can be quite a tough and confusing for many of us. In fact, choosing the wrong broker can be expensive.
So we have prepared an easy way to shortlist these brokers. A good “business partner” should have:
Attractive commission rates – understand if it is fixed or if it depends on the number of trades. Low commission does not mean it is good.
High availability on their website – since almost all transactions are executed online. Understand contingency as well when website is down.
Fast Execution – a good opportunity may be gone if not executed fast.
After Hours Trading – if you like trading longer hours.
Sweep Facility – a good broker would automatically take your available cash to have it placed in a money market to generate interest.
No hidden fees – many brokers have all sorts of endless hidden charges. Do not take this nonsense.
Powerful trading Tools – like streaming real time quotes, screeners, stock charts, etc.
Wireless trading facility – most of the time for day traders
Ability to execute complex options trades – many brokers provide options trading but this is not good enough!
A good stock broker may not be a good options broker because options trading are relatively new. Although stock brokerage firms offer options trading, they are still behind in many of the services offered by brokerage firms that specializes in options trading. Once you understand options trading, which has more than 20 different trading strategies, stock trading looks like child’s play.
When selecting a brokerage firm, select the best to prevent any heartbreak later on. We have worked with several options brokers and, in our opinion, http://www.optionsexpress.com and http://www.thinkorswim.com are the best around. These two options trading firms meet the requirements above while many have failed to impress. Before proceeding to the next step, start working with the right partner. It only takes a short while to open a new account. This is an important decision.
Stay tuned for STEP 5 – Arm Yourself With Options Trading Knowledge
Copyright 2005 William Tan