1/15/08

TradeKing Review

TradeKing Regular Individual Account Review

The Good:


1. $4.95 a trade for limit, stop, and market orders; $4.95 a trade plus $0.69 per option contract. Trades execute quickly.

2. Great tools for options traders, including a Profit/Loss Calculator, which calculates your profit from rising option values, an Options Calculator, which calculates volatility and risk, subject to your criteria, a Probability Calculator, which determines the probability of target stock prices in the future, and an Options Screener. These are provided by iVolitility. If you have a Zecco account, you should be familiar with them.

Moreover, TradeKing makes things faster and easier by letting you do multiple transactions on the same page. For example, let's say you want to write a covered call. At most brokers you will have to go to a couple of different places on the site, to buy the stock and to sell the call. At TradeKing, you simply go to the Options Trading menu and click on Covered Call. You do everything in one place at the same time. In addition to covered calls, they have faster ways of doing protective puts, spreads, straddles, strangles, combos, butterflies, condors, and collars. You can also trade Fixed Return Options.

3. If you don't know what all these are, there's an Education Center for new investors, with a few pretty good demos and tutorials on option trading.

4. Customer service is still good, but seems to be deteriorating. They always pick up the phone during business hours during normal market conditions. When things become a little crazy their phone lines are jammed (see comments below). Should you email them, TradeKing responds quickly, usually the same day. They used to respond the same day to emails sent over the weekend. Now I have to wait until Monday. The live chat feature is another way to talk with a customer service rep. It usually takes less than a minute to get a hold of someone.

5. Free dividend reinvestment on stocks and ETFs, but see #2 below (the not so good).

6. Wide selection of mutual funds and fixed income (CDs, various bonds). (CDs have to be purchased over the phone.)

7. In addition to the regular, low yielding cash fund, TradeKing offers three different cash sweeps that have higher yields, but see #3 below (the not so good).

8. Unlike most other brokers, TradeKing offers an ACH withdrawal option. This is much faster than requesting a check.

9. Forums, blogs, and other user generated content is available. You can post your own stuff, or get trading ideas from others. Some TradeKing users have elected to have all their trades posted. It can be interesting to watch their progress, or follow them, should they have a good track record.

10. TradeKing offers check writing and debit cards for qualified accounts.

11. If you follow a newsletter and buy the stocks it recommends, TradeKing offers to make these trades automatically for you for some newsletters, should you want to.

12. People seem to really love the Maxit Tax Manager, a tool that tracks gains, losses, and other information to help you with your taxes. (My own experience with this program has not been very good, as the information the tool provided me was wrong. This is probably the result of my having transferred some stocks into the account from another broker).

13. Transferring from another broker to TradeKing is a quick and painless process. They frequently have promotions where they reimburse you the transfer fee your other broker charges.


The Not So Good:

1. Real time quotes are provided for active traders. If you trade only once in a while, real time quotes show up only at trade preview screens.

2. If you want to reinvest your stock dividends, you have to contact customer support. You have to tell them for which stocks you want your dividends reinvested. Should you decide to stop having your dividends reinvested, you also have to contact customer support. It would be much easier if TradeKing had a mechanism like Firstrade, SogoTrade, or Sharebuilder, which lists your positions, and with a simple click, lets you choose whether you want to reinvest dividends for each position separately.

3. If you want to use one of TradeKing's three cash sweeps, you have to contact customer support.

4. No physical location to visit in person, if you prefer that sort of thing.

5. The ETF and stock screeners and stock research tools could stand to be better. MSN's free screener is much better.

6. The site can be a bit difficult to navigate at first, but you get used to it.

7. You can only have one linked bank account at a time for ACH transfers. This can be a pain if you like to fund your TradeKing account from more than one bank. Each time you want to do it from a different bank, you have to delete the one listed, add the new one, and then wait 5 days for it to be authenticated. It's easier--and faster--to send a check.

8. No instant verification of the funding bank account for ACH transfers. You have to wait 5 days.

9. No load mutual funds are $14.95 a trade. While cheaper than many other brokers, this is still rather expensive.

The Bad:

1. The site becomes noticeably slower when the markets experience unusually high volumes. September 19, 2008 had a quadruple witching (lots of different options contracts expiring). Some TradeKing customers could not access the site or contact customer support (see comments below). I only experienced problems at the end of the day. This can be catastrophic for someone looking to unwind lots of contracts on expiration day. No doubt thousands of dollars were lost on 9/19/08.

2. I have experienced execution problems with options a few times. My limit order matched the ask price, but the order was not executed on a few occasions.

3. I have also experienced a glitch when attempting to buy fixed return options. These are cash settled options invented by TradeKing's CEO, where each contract is either worth $0 or $1 at expiration. I tried to buy several GE "finish higher" calls. My order was rejected. It said I didn't have enough account equity to buy the underlying shares if the contracts were exercised. But these are cash settled options (that is, I could either lose the amount I paid, or I could have my account credited with $1 per contract), and I had enough money in my account to buy them.

4. 10/6/08 While I tried to change one of my option orders, TradeKing became inaccessible, and stayed that way until market close.
Any broker can work great when the market is peaceful. What makes one broker better than another is how it performs under stressful conditions. TradeKing, it appears, is not up to it.

The Bottom Line:

Given at least two site outages on very important trading days in two months, I can no longer recommend TradeKing at this time.

Updated: October 6, 2008

This TradeKing review will be updated at least every six months.

Are you already a TradeKing user? Please share your experience with potential customers by posting a comment.

17 comments:

  1. This comment has been removed by a blog administrator.

    ReplyDelete
  2. This comment has been removed by the author.

    ReplyDelete
  3. This comment has been removed by a blog administrator.

    ReplyDelete
  4. This comment has been removed by a blog administrator.

    ReplyDelete
  5. This comment has been removed by a blog administrator.

    ReplyDelete
  6. This comment has been removed by a blog administrator.

    ReplyDelete
  7. This comment has been removed by the author.

    ReplyDelete
  8. This comment has been removed by a blog administrator.

    ReplyDelete
  9. This comment has been removed by the author.

    ReplyDelete
  10. This comment has been removed by a blog administrator.

    ReplyDelete
  11. This comment has been removed by a blog administrator.

    ReplyDelete
  12. This comment has been removed by a blog administrator.

    ReplyDelete
  13. This comment has been removed by the author.

    ReplyDelete
  14. This comment has been removed by the author.

    ReplyDelete
  15. This comment has been removed by a blog administrator.

    ReplyDelete
  16. This comment has been removed by the author.

    ReplyDelete
  17. This comment has been removed by a blog administrator.

    ReplyDelete