prancingbull.com

After 5 years of having an account with RBC Dain Rauscher, I have finally closed it out. I realized that at this point in time having a full service broker wasn’t right for me. I first opened the account when I was 18 because I wanted to invest in some stock. The first and only stock transaction I did with them was purchase 20 shares of Microsoft. I was pretty excited when I made the trade, but that soon changed when I found out what the trading commission for it was. It cost about $65 to make the trade. When you factor that out, you find that the stock will have to rise $6-$7 before you make any money. That made me pretty upset, but I didn’t sell because then I would have eaten $130. So I hung onto it ever since.

I got really excited when they paid their one-time $3 dividend. I was mostly excited because the dividend ($3 x 20 = $60) was almost enough to cover my commission to purchase the stock. I never really paid a whole lot of attention to the account because there was just one stock in it. A year or so later I was looking at a statement that came in the mail. When I looked at it I noticed that there was nothing in the cash account. I knew that there should have been at least $60 in there plus a smattering of small dividends plus a bit of interest from the cash account. This was a bit upsetting to say the least. The next day I called in to talk to “my broker.” Of course the broker was not available, so I end up getting passed around from secretary to secretary and finally end up with someone who sounded like they hadn’t worked there too long. I told her what happened and she said that she would look into it and give me a call back.

After about three days of playing phone tag during my lunch I finally found out what had happened. Apparently if you do not have over $100,000 in your account you are charged a $100 annual maintenance fee. When you have only ~$500 in your account that comes out to be a 20% deduction. She did seem excited to tell me though that since I only had ~$70 in cash assets in the account they only charged me that and wrote off the rest. How nice of them.

After this incident I decided to close out my account and transfer it to Fidelity. For some reason I got charged $112.98 for the transfer. I guess that is the closing fees associated with closing out an account. That seems kind of ridiculous for transferring 20 shares of stock. Between the $65 purchase price, the $112.98 close out fee and the $20 sale price, I am going to have to sell Microsoft for $9.90 more than what I bought it for to break even.

I guess there are a few lessons to be learned from this:

1. High priced full service brokers only make sense if you have a ton of money
2. If you are doing all the research to buy and sell stocks, you shouldn’t be paying a premium to do it.
3. Know the fee structure of a full service broker before you get into one. Otherwise the fees will eat you alive.

Overall I think it was a decent learning experience. Buying that first 20 shares is what really got me interested in trading. I don’t think that I would be as active into my trading today if I hadn’t started out this way. Although it may look like a wasted $270, but in the end I learned a lot about how these companies work. If you have a lot of money and just want someone to do all the work for you, a full service broker may be right for you. If you are just starting out and don’t mind doing a bit of research, then a low priced broker like Fidelity, Scottrade or Schwab would likely be the better option.

I know I wrote a review earlier about my trading account with Optionshouse.com, but I thought that I would add some screen shots to go along with the review.

Many of these screen shots will be too large to fit into the blog properly, so if you click on them you will be able to see the full size version.

This first screen shows the options chain view. In this view you can see the bid, ask, change, volume and open interest. If you click on any of the call or put prices a black box such as this one will pull up and allow you to choose many different trade options depending on what you want to do. The screen is actually much larger, but I wanted to just show a snippet to give an idea of what the chain view looks like. One nice feature of this view is that it refreshes every five seconds and flashes a different color for each option that changed in price during the last five seconds.

The second screen showes the options ticket. This is where you can initiate your trades. It also gives you the choice of either doing one trade at a time, or you can add different legs to the trade as well. A nice feature that is shown on the bottom of this image is that the total cost of the trade automatically updates each time you alter your trade.

In the third screen, you can see the watchlist which is located on one of the sidebar tabs. The watchlist is nice because it allows you to be able to see all of the stocks you are most interested in. One downfall of the watchlist is that it has to be refreshed manually. While this may be a nuisance if you need to have the most up to date quote, I can see how it would put a strain on the site’s bandwidth if it were in real time. Either way, it is still a nice feature.

I will admit to being a terrible options trader, but I can see how this site would be a great trading platform for an experienced trader, especially with the fixed commission structure.