Now that you have read Millionaire Next Door and adjusted your life to become a part of the club saving at least 21% of your income. It is time to open the right brokerage account for your trading style.
I have used TD Ameritrade and Interactive Brokers. However, you can do just about the same trades with Charles Schwab, Robin Hood and Fidelity. The broker chosen will largely depend on personal preferences. I would recommend having at least $25,000 in the brokerage account before trying to use option trading strategies due to trading fees and commissions.
TD Ameritrade has a great user experience, plenty of research resources and an easy to use trading platform.
I use Interactive Brokers to manage individual bond positions (all done through their trading platform instead of having to call the trade desk) and low margin rates. This is where I use a small amount of leverage on my 50% stock / 50% individual bond portfolio. This account stocks are focused solely on property and casualty insurance companies. It will be diversified across the best of breed insurance companies with market cap less than $50 billion until I can identify the next Geico and concentrate into a position with the potential to quickly (a decade or two) by a factor of 100 to 400 times investment. (IB margin rates start at less than 5% verse close to 10% for TD, CS, and Fidelity)
For option trading you will need your broker to approve at least level 2 for covered calls and level 4 if you want to sell covered puts. Covered call strategy is when you buy shares of stock and at the same time or some time after you sell a call option at strike price at or above the current market price. (Please note that each option contract represents 100 shares of stock so you are required to purchase 100 shares of stock before selling any option contracts)
When you sell a put option you are given the buyer the right but not the obligation to “put or assign” you the shares of stock at the strike price of the option contract. It is ok to be confused at this time, we will go over many examples and define all the terms as we go along. Every broker calls the strategy slightly differently. If you ever become confused by the terms see http://www.cboe.com/learncenter/glossary.aspx.
Until next time.
Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.
Posted from my blog with SteemPress : https://sweerch.com/2020/04/18/picking-a-brokerage-account-us-investors/
I recommend Fidelity. No trading fees and tons of options.
Happy Saturday.
Thanks for your input. Sometimes small fees are worth it.
I the non commission free version of IB for individual bond buy and small margin balance. I am more than willing to pay $1 to $5 commission for a multi year hold and have margin costs that are half that of Fidelity. 9-10% margin fee at Fidelity is murder.