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Stock Trading Commissions You Should Know About

Sept. 2, 2014
Brokers, Investing
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There’s no way to avoid paying commissions for stock trading, but there are ways to find the lowest rates possible. Commissions and fees can eat away at your profits, and if you lose money, you’ll still have to pay. Lower commissions make it easier to cut down on your losses and get the most in return.

When you first open an account, you’ll have to pay a minimum opening balance requirement ranging from $0 to $10,000. Many discount brokerage companies will charge a flat rate commission per trade, but others charge per share or, occasionally, a percentage for buying and trading stocks. Other costs you may incur with your brokerage account include fees per contract for options, real time data fees, inactivity fees and interest on margin.  

Cost per stock trade 

The cost of a stock trade is either a fixed price per trade or price per shares traded, typically ranging from $5 to $10. Even if you don’t plan to trade very often, costs can add up. Some firms base the cost per stock trade on the size of the trade – the number of shares or principal value. Currently, one of the lowest costs per stock trade is offered by eOption, with $3 per stock trade. OptionsHouse, TradeKing and MB Trading also offer low fees at $4.95 per trade.

Fees per contract for options 

An options contract allows owners certain rights – not obligations – that can be used during a specific period of time at the owner’s discretion. There are two kinds of options known as call options and put options. A call option allows a holder to buy a security for a fixed price – also known as the strike price – for a specific period of time. Likewise, a put option gives the owner the right to sell a security at the strike price for a specific period of time. Options, while favorable for those who want versatility and flexibility in buying and selling, are also highly risky.

ChoiceTrade offers some of the least expensive options trading at $5 per trade plus $0.15 per contract with an account minimum of $2,000. Lightspeed offers a low $0.60 commission per contract for accounts with a higher minimum of $10,000.

Real time data fees

Though it’s less popular to charge extra fees for real-time data, some brokerage firms still include the charge. TradeStation, for instance, charges $16 per month to receive real time data. The biggest brokers – ETrade, TD Ameritrade and Schwab – include the service for account holders.

Account maintenance Fees 

Some brokers charge fees for maintaining inactive accounts. While it doesn’t charge an annual fee, TradeKing charges an inactivity fee of $50 if both a holder’s combined account value of household accounts is less than $2,500 and if no commission-charged trades were executed in the past 12 months. Other brokers, such as TD Ameritrade, Scottrade and Schwab, don’t charge any account fees. 

Margin rates 

Margin rates are the interest rates charged by the brokerage on loans investors may borrow from the brokerage to fund investments. The rates on this kind of loan can vary significantly among brokerages. Rates are set according to the base rate and the size of the debit balance. For example, because TD Ameritrade’s current base rate is 7.75%, the interest for debit balances under $10,000 is 1.25% above the base rate, while debit balances over $999,999 have an interest rate 1.50% below the base rate.

To compare brokerage firms and find the lowest fees to fit your specific needs, you can use NerdWallet’s Brokerage Comparison Tool.

Monitoring stocks photo via Shutterstock.