Fidelity Review

The Good

1. Relatively easy to use website. It might take a while to get used to, but everything seems to be in a logical place. If you cannot find something, there is a handy search box at the top of each page. Account history is detailed and easy to find.

2. Tons of research tools. These include common stock, preferred stock, closed end fund, exchange traded product (ETFs, ETNs, etc), mutual fund, bond, and option screeners. Most stocks and ETPs have lots of fundamental information (earnings, dividend growth, analyst rating, earnings estimates, all of the commonly used ratios [PE, price/book, etc]). There's also a tool that compares and suggests similar ETPs. You can compare them by fee structure, performance, liquidity, and so on.

Fidelity also provides research reports by Morningstar, S&P, Ned David Research, Zach's and others on both stocks and funds (including closed end funds). The options section of the website provides S&P reports for covered calls and calendar spreads on most of the widely held stocks as well as on those S&P thinks provide the best potential return based on the risk.

3. International trading. Fidelity enables its clients to trade foreign stocks in 17 different markets and in 13 different currencies. More information is here. Some things to note are that margin is not available for these transactions, there is no short selling, and order instructions like “all or none” are not available. Commissions are charged in the local currency. At the time of writing the average is around $25 per transaction, or $50 for the round trip. There are also currency exchange fees, which range from 0.2% to 1% of the transaction, depending on the transaction's size. Be aware that foreign stock trading involves not only the risks associated with stock ownership but also currency and political risk.

4. 24/7 live customer support. If you want to talk to customer service on the phone, you can call at any time. In my numerous calls I've never had to wait, whether it was during the trading day or late on a weekend. The phone operators are friendly. I've also found them to be more knowledgeable than representatives at other brokers. If you want to talk to them about a condor or diagonal spread they'll know what you're talking about without having to put you on hold, or quickly transfer you to someone more knowledgeable than themselves.

Fidelity is also pretty good at making followup calls to make sure you're satisfied. That doesn't mean you will always be satisfied, but they do try. If you hate the phone, you can use instant messaging. When I tried this feature I had to wait a few minutes before someone responded. Fidelity also responds to email, but as you would imagine this takes longer.

5. Competitive commission rates for domestic trades. Online stock trades are $7.95 while phone orders are $12.95 and representative assisted orders are $32.95. Options are an additional $0.75 per contract (so the total fee for buying one option online, for example, is $8.70). Bond and CD commissions range from none to 2% of investment amount, depending on the type. More detailed information can be found here. Note that the link is a PDF document.

If you've been a customer for a long time, have lots of trades (at least hundreds per year), and/or have a large account, Fidelity will offer you lower rates if you ask them. They say that this is determined on a case by case basis, so lower rates are not a guarantee (but it never hurts to ask).

6. ActiveTraderPro. Fidelity has a few pretty good streaming programs: ActiveTraderPro, which you install on your computer, a browser based version, and OptionsTraderPro. They offer streaming quotes, level 2, real-time charting (with many technical analysis tools), complex options orders (which can tell you your max gain and loss), streaming options quotes, and news from around two dozen sources (including Market Watch, Dow Jones, Business Wire, MidnightTrader) that can be set to report only on your holdings or on stocks on your watch list. You can set up a number of watch lists and edit what you want displayed, from your gains and losses, to quantity of shares, to day's and year's price ranges, to options Greeks.

The platforms are pretty stable. They disconnect sometimes (the desktop based one is more prone to this) but I haven't had a crash in over a year. Fidelity doesn't charge anything for its streaming platforms, but in order to use them with full functionality you must make at least 120 trades per rolling year. That comes out to $954 per year.

7. Wealth-Lab Pro. This platform allows you to do back testing as well as to design your own trading system (or just use or customize one of the presets). It is available to customers who make at least 120 trades per year and have at least $25,000 in assets at Fidelity. More info is available here.

8. Free dividend reinvestment. You can specify, for your entire portfolio and for individual holdings, whether you want to reinvest the dividends or not. Note that new holdings are automatically set for dividend reinvestment based on the status of the last holding you bought. That is, if you buy a stock and mark it for dividend reinvestment, the next stock you buy will automatically be marked for dividend reinvestment. If you don't want to reinvest dividends in the second stock, you will have to change your preference. If you do so, the next stock you buy will not be marked for dividend reinvestment as a result (so if you want to reinvest the third stock's dividends, you'll have to change your preference for it).

9. Lots of different order types: contingent (if x criterion is met, then y order is placed), multi-contingent (if x happens, and at the same time y happens [or y happens], place z order), one cancels the other (if A order executes cancel order B; if B order executes, cancel order A), and one triggers the other (if x order executes, place this second order).

10. Various different choices for money market accounts, including tax free core cash options.

11. A very wide selection of mutual funds.

12. A decent selection of 30 iShares ETFs that have no trading fees. The caveat is that, as with mutual funds (and all iShares ETFs), you have to hold them for 30 days before they become margin eligible. (Most other brokers have commission free ETFs too. For example, TD Ameritrade offers over 100 ETFs, and unlike Fidelity, includes other issuers, like Vanguard.)

13. Fidelity has lots of physical locations if you want to talk to someone face to face or have a professional manage or help you manage your portfolio.

14. Check writing is available.

The Bad

1. Slow order execution. Suppose you're an active trader. You are watching a very liquid stock or ETF drop and you are fairly certain it will bounce off $50 per share, go past $50.30, and then head below $50. You want to buy 1,000 shares at $50.02 and sell at $50.30. Let's say you're dead on about the stock's movement. In an ideal world you would make $280 minus commissions. More often than not at Fidelity you wouldn't make any money because your order to buy at $50.02 wouldn't be executed.

Quite often nothing happens even when a stock trades below your bid. Whether your order is executed often depends on how long the stock you want to buy stays at a certain price. The shorter it stays at a certain price, the less likely your order is to be executed. I've often had my order executed after the stock fell through my bid and returned to it. For example, I wanted to buy something for $100 per share. I placed a limit order for $100 per share when the stock was $100.25. The stock fell to 99.95 per share. My order wasn't filled until after the stock rose back up to $100 per share. This can be very frustrating. (This happens with options orders too, especially if you include "all or none" instructions).

2. Stupid error messages that prevent order placement. Say you place a limit order to buy a stock. As you are doing so, the stock drops below your bid. Any normal broker would just fill your order at the current market price—you were willing to pay more, so you should be happy with a lower price. What usually happens at Fidelity, however, is you receive a message telling you that your bid is higher than the current price of the stock. So you have to change your order lower, but now the stock is higher and in all probability you won't be able to buy it for your originally intended price for the rest of the day, or ever. This problem occurs most frequently with contingent orders (for example, you place two orders at the same time: buy 100 shares of XYZ for $100 per share, and if this order executes, sell 100 shares of XYZ for $102.50. If XYZ is below $100 when you try to place the order, you will get an error message).

3. No execution at all. One of the great things about Fidelity is the different multi-leg option orders it offers. The trouble is that these are very rarely executed.

If you are initiating a net debit position, the order ask can be well below your bid and your order still won't be executed. If you're initiating a net credit position, the order bid can be well above your ask and your order still won't be executed. It just hangs there. Fidelity blames the CBOE or the market makers. I don't know whose fault it is, but it really stings when the order is finally executed at your original bid or ask when the current market rate would have given you a better deal.

For example, suppose you want to write a covered call by buying 100 shares of stock at $100 per share and selling one call for $5. You want your net debit to be $95 per share. The stock might fall or the call might rise so that the market ask becomes $94.80. One would expect that your order would've been filled by now. Most often it's not. And when it is, even if the ask is $94.80, your order will be filled for $95. This doesn't happen all the time, but it happens enough that it's far easier to just do separate orders—one to buy the stock and one to sell the call. You pay a higher commission, but it's far likelier that your orders will be executed.

Here's a screenshot to illustrate. In the screenshot, I'm attempting to buy 100 shares of Baidu and write a call on it of a net debit of $90.50 per share. That is to say, in the screenshot I've placed an order to buy 100 shares of BIDU and sell one call. Now I'm waiting for it to be executed. Notice that the current market bid for BIDU is $99.28 and ask is $99.30. The current market bid for the call is $8.85 and the ask is $9. And again, recall that the order I've already placed is for a total debit of $90.50.

If, instead of the multi-leg order, I bought BIDU at market, I'd pay $99.30. And, if instead of the multi-leg order I'd sell the call at market, I'd get $8.85. This would result in a net debit of 90.45. My order is for $90.50--I'm willing to pay $0.05 more than the market ask, but my order isn't filled.

Here's another screenshot. Above, I'm trying to sell a straddle on IWM, the ETF that tracks the Russell 2000 index. The net credit I want to receive is $2.11. As you can see in the screenshot, the net bid is $2.12, but my order hasn't been filled. In other words, I'm trying to sell something for $2.11, buyers are offering to pay $2.12, and Fidelity isn't executing my order. This order was never filled.

4. Glitchy order placement and replacement. Let's say you are long or short an option and you want to roll it to a future month. For example, suppose you sold 10 puts that will expire in 30 days and you want to buy these puts back and sell 10 puts of the same strike and on the same stock that will expire in 60 days. You go to the multi-leg trading screen, select the roll option order, enter in all the information and hit preview. It will work half the time.

The other half you'll get a weird error message about how it's an invalid order, one of the option symbols doesn't exist, or something similar. When this happens it is sometimes possible to place the order anyway, the error message notwithstanding. Other times it doesn't let you proceed to the next screen. A way to get around this is to place the order via the spread order screen: in the example above you would buy to close the 10 puts for the front month and sell to open the 10 other puts for the later month. It's the same order, but since you didn't specify that it's a roll, it'll let the order go through just fine.

Now let's say something like #3 above happens, where your ask is lower than the current market bid. Let's say you wanted a $1 credit on the roll and the current bid is $1.10. You decide to cancel and replace your order with a credit of $1.10 (because from prior experience you know that if your order is ever executed it will be for $1, regardless of the current market price). You go to the cancel and replace screen. There you have to re-enter the number of contracts you are trading (in our example 10 of each) and your credit/debit (in our example you change the credit from $1 to $1.10). So, in effect, all you are really changing is your net credit in this example. All of the option symbols are already entered for you and you cannot change these even if you want to. Nevertheless, half the time after you hit preview you will get an error message stating that one of the option symbols is invalid or doesn't exist. So you have to either try again (it might work eventually, despite what Einstein said about insanity) or cancel the entire order and start from scratch. There is a similar problem with contingent orders when you attempt to change the trigger price for one of the events.

These have been problems for a very long time. Fidelity should be aware of them, as people do complain (I know I have), but so far they've done nothing. If you complain enough someone with a high sounding rank will eventually call to apologize and offer you some free trades.

5. Not many shortable stocks/ETPs. Delta neutral and bearish traders beware. If you short sell stocks and ETFs note that these can be quite limited. For example, while you can almost always short SPY (SPDR S&P 500), you usually cannot short IWM (iShares Russell 2000), even though both are widely held, very liquid ETPs. Most of the widely held stocks can be shorted, but if you are looking to capitalize on a company in trouble, chances are there will be no shares for you to borrow. If your trading strategy involves shorting, look to another broker.

The Bottom Line

With its research tools, bond, stock, ETP, foreign stock, and mutual fund offerings, along with free dividend reinvestment, relatively low commission rates, and good customer service, Fidelity is great for long term investors and infrequent traders.

Despite its robust active trading platforms, however, Fidelity isn't very good if you are a frequent trader. There is really no point in having complex option orders and various stock trading tools if your orders are not executed in a timely fashion or for the best price. Fidelity needs to hire some decent computer programers.

SogoTrade Review

SogoTrade Regular Individual Account Review

Here's the Good

1. Cheap trades. As of writing, it's $3 a trade with the standard plan, and $1.50 a trade with the premium plan, which costs $10 a month. If you make seven or more trades a month, you're better off going with the premium plan. Depending on how many trades you make per month, this is comparable to Sharebuilder's and Zecco's pricing.

2. Automatic scheduled investments allow you to buy fractional shares. SogoTrade lets you schedule when you want your plan to start and how often you want to invest a certain amount. (Note that there is a $100 minimum per scheduled investment, but not per stock. For example, you can invest a total of $100 split among a number of stocks--not that this would be wise, considering the commissions you would pay in such a case.) According to Sean Muir, PR person at SogoTrade, automatic investments can be scheduled for any day the market is open. For some reason, though, all my automatic trades happened on Tuesdays.

3. Free dividend reinvestment. SogoTrade lets you decide for which stocks you want your dividends reinvested.

Update 12/6/08: SogoTrade has terminated their automatic scheduled investments, factional share purchases, and automatic dividend reinvestment program. All existing plans will be canceled on 12/31/08, and all fractional share holdings will be sold (commission free) on 1/6/08.

4. Great customer service.

Live chat with customer support: It's really easy to find, with a link displayed prominently in the upper right corner of every page. I used this feature several times on several different occasions, to ask silly questions about future features, legitimate site navigation questions, and the like. Each time, I was answered right away. It took the customer service rep about 1 minute to respond every time. The answers were always helpful.

Email: I emailed support with lots of silly questions, some of which required lengthy explanations. During business hours (SogoTrade is open from 8 A.M. to 9 P.M. Eastern Time on weekdays, excluding holidays), the average response time to my email questions was under an hour. I never had to wait more than two hours. Emails sent over the weekend were responded to on Monday morning. The answers were always relevant and helpful.

Phone: Someone picked up right away each time I called. They were friendly and helpful.

I am interested to see how this goes as SogoTrade grows its customer base.

5. No maintenance/inactivity fees.

6. Easy to use site layout (for the most part--I had some difficulty finding out how many free trades I had left, as well as the stock screener).

7. The hypothetical portfolio tool lets you paper trade stocks and ETFs.

8. Streaming real-time quotes for stocks on your watch list. (As of writing, it does not appear that you can make trades in the streaming quotes window.)

The Not So Good

1. (Note that this may no longer be the case. See users' comments below.) Opening an account takes some time and can be a bit of a hassle, compared to other discount brokers. Here are the steps required, from applying for an account to being able to place a trade:

a. Apply for an account online. Answer the usual questions that all brokers ask. This took me about 10 minutes.

b. Once you submit your application, you have to wait for an email from SogoTrade, approving your account. In my case, I started in the early afternoon, and got the email in the early evening. This took about three to four hours.

c. After receiving the email, I had to print and fill out an account signature form and an account funding form. These are simple forms and took a couple of minutes to complete. The account signature form asks for a copy of a driver's license or some other official id, like a passport. I have a copier at home, so this took me another minute.

The account funding form asks for a voided check. If you want to use your savings account to make deposits into Sogotrade, you have to make a copy of or print out a monthly statement. The entire process took me less than 10 minutes, but it may take longer in your case, as you might not have a copier/printer handy.

d. If you want to make deposits into SogoTrade online (this is the fastest method), you have to get your bank accounts verified. Entering your bank account information takes a couple of minutes at most. SogoTrade then makes two small deposits into each bank account, which you have to verify by logging on to your bank's site (or whatever method you use to view your statements) and entering the information at SogoTrade's site. In my case, this happened the next day. If you start this process on a Friday, you might have to wait for Monday or Tuesday. As of writing, SogoTrade does not provide instant account verification.

e. At some point after c., above, you have to mail the forms you filled out, along with your voided check and a copy of your id. Unlike other brokers, SogoTrade does not as yet accept faxed versions of these documents. (But see comment below, where user was able to fax all documents.) You cannot make electronic deposits into your SogoTrade account or trade until these documents are received and processed.

Sogotrade's office is in New York City. I put my envelope into a mail box practically at SogoTrade's doorstep. It was a week before I was able to initiate a deposit. If you live farther away, I imagine it will take longer. There is also the issue of sending your identification, bank account, and broker information through the regular mail. Do you feel safe doing so?

f. Once your forms are received and processed, and you have verified your bank account online, you can initiate a deposit. This takes at least two business days. That is, if you initiate the deposit on Monday, you will be able to trade with that money on Wednesday at the earliest.

I was able to place a trade 11 days after I applied for an account.

It's not that much of a burden, but compare SogoTrade's account opening process with TD Ameritrade's: apply for an account online, verify your bank information, make a deposit, trade. It took me 15 minutes, and I never had to leave the computer.

2. The stock screener is hidden away, and is the bare minimum in terms of power. I had to look through the site map to find it. You're much better off using a free one, like Yahoo's or MSN's.

3. The ETF screener is just as bad as the stock screener.

4. You can't specify a limit price for automatic investments. They're made at market price.

5. No options trading. SogoTrade plans to offer option trading at some point in the future.

6. No mutual funds. SogoTrade currently does not have plans to offer mutual funds.

7. Automatic scheduled investments can only be scheduled by time, and not by amount. For example, at Sharebuilder, you can set your automatic investments to occur when you have enough money for the transaction in your account. Say you want to invest $500 in GE. When your account balance reaches that amount, Sharebuilder buys GE. SogoTrade does not have this option yet.

8. No pre-market/after market trading.

9. The research section seems to be an impoverished version of MarketWatch.com.

10. No physical locations to visit, should you want to talk to someone face to face.

11. There is a $50 fee to transfer your account to another broker.

12. $500 minimum to open account.

13. No fractional share purchases or free dividend reinvestment.

The Bad

1. Terrible yields on cash, and no money market cash sweep options. SogoTrade does not, as of writing, plan to offer cash sweeps.

2. Any free trades that you earn can be used only for real time orders. Automatic trades incur the regular commission ($3, or $1.50 if you use the premium plan).


Bottom Line

SogoTrade is a relatively new discount broker that has the potential to be one of the best in the future. It has great customer service, and offers cheap trades. The broker can appeal to buy and hold investors as well as day traders.

SogoTrade has some problems, but they are mostly in the lack of features area (options, in particular) rather than poor execution. As more features are added, the broker should improve.

If you are content with a similarly priced broker, there is not much reason to move your account to SogoTrade at this time. Nevertheless, you may want to open an account to take advantage of the current free trade offer. As of writing, SogoTrade offers 100 free trades for 30 days when you open an account with $500 or more. You can also earn 25 free trades for every person you refer to SogoTrade.

This SogoTrade review will be updated every six months, or as SogoTrade adds new features.

Updates

11/10/08

SogoTrade will soon roll out a stock streamer. Sean Muir, who does PR work for SogoTrade, alerted me to it. Here are my thoughts.




Good:

• Sleek design.
• Easy to navigate, intuitive interface.
• Can input number of shares you own and at what price you purchased them, so you see your profits and losses in real time.

Where improvements can be made (the finished version will no doubt address some or all of these):

• While it is very aesthetically pleasing, a black background with white text can strain the eyes. Personally, when looking at something like this too long, I see afterimages when looking elsewhere. This may or may not be a big deal to users.
• It doesn't appear that one can add or subtract fields. For example, Bid/Ask sizes aren't shown, nor are the last trade sizes or last ticks. These fields do not appear to be available. Also, say I don't want to see a field, e.g., the volume field. It doesn't appear that I can remove it.
• The symbols are arranged alphabetically. That's great. But what if I want to arrange them in my own way? It would be nice to be able to sort the stock list by each field, and by the order in which the symbols are entered.
• While once a second updates are probably fast enough for just about everyone, this can be faster. Scottrade's streamer, for instance, updates much faster.
• When switching from the basic to profit/loss view or vice versa, the streamer resizes to full screen. If you're working with multiple windows, this can be an inconvenience. (I'm using Firefox on Linux, so this may not be an issue with Windows and Internet Explorer. I'll try it out on Windows XP and Vista at a later time. I don't currently have access to a Mac.)
• It would be nice to see the major market indexes updated in real time on the same page as the stocks. As it is now, you have to click on the Market icon, which opens a new page and shows the market indexes on a five minute delay. This isn't a big deal, as SPY and DIA can be added to the streamer, but it would be nice to see the market indexes right away, without having to click or open a new window.
• To trade from the screener, you have to click on the row of the stock you want to trade, and then click the Trade icon at the top. Or, you can right click on a row and then click on Trade. It would be easier if there were a little trade icon right next to each row, so less clicks would be involved. Better still, conveniently placed buy and sell icons would make things even faster.
• Here are the icons: Trade, Chart, Research, News, Market, Active, Share, and Settings. Clicking most of them results in a new window or tab being opened. Clicking others, (e.g., Share--where you can email yourself or a friend) opens a new page in the same tab. You have to press the browser's back button to get back to the streamer. The share feature basically sends an advertisement for SogoTrade to the emails you specify, along with the message you compose. It doesn't seem to send anything about individual stocks, so perhaps this icon should not be placed with the others.
• Stocks on the Pinksheets don't seem to be available.

Overall, I am impressed. The streamer is a welcome addition to SogoTrade's platform. I can't wait until options are offered. If the trades are not too expensive and execute well, I will likely move most of my trading to SogoTrade.


SogoTrade review last updated 12/06/08

Do you already use SogoTrade? Help others by posting a comment.

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.

Review: Scottrade Individual Account

Regular Individual Account

Here's the good:

1. If your bid price is between the bid and ask, your order is executed with lightning speed. You confirm your limit order, go back to your account home page, and notice that it's already been completed.

2. You can buy OTC stocks

3. There's a large selection of mutual funds, bonds, CDs, and preferred stocks.

4. Depending on your starting capital, $7 a trade is not too bad.

5. They have a lot of physical locations, so you can always stop in to talk to somebody.

6. Check writing from your cash balance if you qualify.

7. Decent free research--there's a pretty good stock screener, and many stocks have either Reuters, S&P, or Second Opinion Weekly reports.

8. Real time stock quotes, and a streaming ticker (there's also a streaming Java chart), along with a Java based order entry window (for quick orders). It's very simple in design and easy to use--my favorite thing about Scottrade. Images are below.



9. Free account transfers.

10. Depositing money into your account is now same day. It used to take three days. This is a big improvement.

11. No account minimums or maintenance fees (but to open an account you need $500, $2000 for margin, and $25,000 for day trading).

12. Your order history is easily accessible. Just enter the ticker symbol and the date range, and everything is displayed for you (today's orders are displayed in history tomorrow--that is, there is a one day delay for your most recent transactions).

The not so good:

1. No automatic dividend reinvestment, and no fractional share buying (except for mutual funds). If you want to reinvest your stock dividends, you have to make a regular trade, and pay commissions.

2. If you want to take your money out and you don't have check writing whereby you can write yourself a check (only the first 50 checks are free), you have to request a check from Scottrade or a wire transfer. You can call or request the check online. This takes time, from Scottrade writing the check, to sending it, to you having to go to the bank to deposit it. (You can visit a branch and pick up a check, but depending on your location this may be a hassle). The wire transfer costs $20. In other words, there is no free electronic funds transfer to withdraw your money in the same way you deposit it.

3. If you want to buy certain foreign OTC securities, you have to do so through a broker over the phone or in person, which is more expensive. Also, see the bad below.

4. No multi-leg orders. For example, suppose you want to buy a stock and at the same time write a call on it, specifying a net debit. You can't do this with Scottrade. To do a covered call or protective put, you have to make two separate transactions. If you want to do an option spread, you have to make as many transactions as you have legs. As prices tend to wobble around, you might get a bad deal on one of your legs as you're placing orders separately.

5. No naked calls or (even cash secured) puts.

Scottrade does offer multi-leg orders and the ability to write naked options through its OptionsFirst platform, but you must apply for this separately. It is a new account with a separate login. For all intents, OptionsFirst is like another broker unaffiliated with Scottrade (they don't know anything about it at the physical locations).

6. Options are expensive at Scottrade: $7 a trade plus $1.25 per contract. Want to buy 10 contracts? That's $19.50 in commissions to buy, and another $19.50 to sell. There's also a $17 dollar assignment fee if your option expires in the money (most other brokers just charge the regular commission for buying and selling stock).

The bad:

Customer service is terrible. Everything is designed so you would either come in to a physical location, or call someone at a physical location. If you don't like it or are too busy for the phone, and email is easier for you, good luck.

You may have to wait a week or more for a response. When it comes, it's something vague and does not answer the question. Or, someone leaves you a phone message, requesting you to call back. You call back, only to get that person's voice mail. One of the drawbacks to having a physical location is that when a customer comes in, the customer representative can't answer the phone--or, if he or she does answer the phone, the visiting customer is left unattended.

Customer service also does not seem to be very knowledgeable. When I inquired about whether I could do a multi-leg order, specifically a covered call or a "buy-write" (I wanted to know if I could buy a stock and sell a call on it at the same time), the person I spoke with had to put me on hold three times to go ask her manager because she did not know what a covered call was. In the end, she said, "why do you want to do it all in the same transaction? It's the same commission separately."

Yes, it is, but there are reasons why one would want to do two or more transactions simultaneously. Let's say I think a call is mispriced. Say stock XYZ is trading at $100 on January 15, and the 80 strike call, which expires on January 16, is trading for 20.50. I want that $0.50. I want to buy the stock for $100, and have it called away from me for $80, while I keep the $20.50, for a profit of $0.50. Doing a buy-write (buying stock and selling a call simultaneously), in leg one I'd buy 100 shares of XYZ and in leg 2 I'd sell to open 1 January 80 strike call contract. Then I'd specify a net debit of $79.50. If my order is filled, $7,950 leaves my account, and I get 100 shares of XYZ and -1 call. Provided the stock stays above $80 a share through the next day, it will be called away, and $8,000 will be deposited in my account. If the $0.50 difference disappears while I'm placing my order, either because the call drops in value or there aren't any willing call buyers, my order expires, and I don't lose anything.

Now suppose I have to do two separate transactions. I buy the stock for $100, and then enter a new order to sell the call. During this time, the stock price will change, and so will the call. If the call now sells for $20, there's no point for me to sell it, and I'm stuck with the stock. It may also happen that no one wants to buy the call. Once again, I've already bought the stock, which I don't even want. Now I might have to sell the stock for lower than I bought it. The entire purpose of the transaction was to get the $0.50; I don't want the stock. If I have to do two separate transactions, things may not go my way, making it too risky to try without multi-leg orders. This is to say, with a multi-leg order I know exactly how much I'll pay if my order is filled, and if it's not filled, I lose nothing.

I tried to explain this to the customer service representative. After putting me on hold to go ask her manager, she once again said that I'd end up paying the same commission. I understand that options are confusing for many people, but someone working for a broker that offers options trading should be able to follow along.

I mentioned in a previous post that I used my last free trade to buy DuPont. My girlfriend did the same in her Scottrade account to buy the Jim Rogers RICI Agriculture Index. My free trade worked. Hers did not, leaving her account with a small negative cash balance. I immediately emailed customer support, notifying them of the error. Several days later, Scottrade sent an email about the negative balance, requesting a deposit and threatening to sell stock.

First, as this is not a margin account, the cash balance should never have been negative. If there was not enough money to complete the trade, it should not have been allowed. The trade was allowed because the $7 trading fee was not included, as it should not have been since it was a free trade. Second, Scottrade completely ignored the email. We replied, reiterating the error and requesting a $7 refund. When Scottrade got around to replying, they said that the free trade was unavailable that day, but was available on the following day, the $7 fee stood, and they again threatened to sell stock (and charging another $7, no doubt) if a deposit was not forthcoming.

Now, $7 is no big deal, but it's the principle of the matter. That trade wouldn't been made through Scottrade if we thought it wouldn't be free. We are firm believers in having broker commissions at under 2% of the trade, and usually go for under 1%.

The Bottom Line

If you're a regular trader with a lot of money, you'll no doubt like Scottrade. The trades are super fast, and stock order fees are relatively cheap. Bigger clients might get better customer service. I wouldn't know. I don't recommend Scottrade.

Free Trades

If you don't already have a Scottrade account you may be wondering about how to get free trades. Scottrade customers can refer others to Scottrade, and in return, Scottrade gives both the referrer and referee 3 free trades which expire after 6 months. I don't recommend Scottrade, but if you'd like to open an account and get 3 free trades, find my email link near the top right corner of this page. Send me an email with Scottrade in the subject line, and I'll be happy to refer you using your reply address.

Scottrade Elite

Scottrade Elite is a platform, which you download and install on your computer, available to all Scottrade Customers who have $25,000 in account equity or over. It comes with many neat features, including a backtester and streaming charts you can draw trendlines on. You can even view a streaming chart tick by tick. It's comparable to Fidelity's Active Trader Pro (which I like very much and have been using recently--a review will be posted in the next few months) and TD Ameritrade's Command Center 2.0 (review coming sometime this year).

Scottrade Elite is very customizable and intuitive to use. It has no faults that I have noticed. One bad thing is that you have to pay a monthly fee for Nasdaq Level II quotes.




This Scottrade Review was last updated on January, 13 2009.

More information is always better than less. Click here for analysis on any stock, commodity, currency, or ETF.

ING Direct Sharebuilder Review

Regular Individual Account

Here's the good:

1. You can buy fractional shares. You just specify the dollar amount. This means that you can invest any amount you like, no matter how much a share costs. For example, you can buy $200 worth of Berkshire Hathaway (BRK-A, over $100,000 a share).

2. For automatic investments (based on a schedule or by amount, i.e. you pick which Tuesday of the month to invest, or you specify how much to invest and when you have this sum in your account Sharebuilder invests it for you), in the Basic plan the commission is $4 a trade. The Standard plan, which costs $12 a month, gives you six free automatic investments per month. Each additional investment is $2. The Advantage plan, for $20 a month, gives you 20 free automatic investments per month. Additional investments are $1 each. Depending on how many investments you're planning to make per month, each plan has its advantages and can dramatically lower your costs.

3. Deposits into your account take about 1 business day if you make them electronically.

4. For automatic investments, you can buy shares with funds from your bank account without any extra fees; you don't have to have money in your Sharebuilder account.

5. There are no fees for taking your money out, and once the initial hold is gone (usually 3 days after your deposit) you can take your money out within a day. E.g. if you have cash in your account and want to transfer it to your bank account, if you do it before 5 P.M., you'll have the money the next day.

6. Free dividend reinvestment if you choose to have it. You have a choice for every dividend paying stock whether you want to automatically reinvest dividends.

7. No account minimums or inactivity fees. As of November 2008, there are no IRA maintenance fees (used to be $25 a year).

8. Sharebuilder now offers mutual funds (although a very limited selection so far).

9. You can trade options (but this is expensive).

10. Free real-time quotes. (Thanks to the anonymous commenter below for alerting me to this change.)



The not so good:


1. You can't specify a limit price for automatic investments. They're made at market price.

2. Automatic investments are only on Tuesdays, and you have to place your order by Monday afternoon.

3. There is an initial hold of a few days after every deposit, so you can't have your money back right away.

4. The site is a bit hard to navigate.

5. Express funding for mutual funds and real-time trades, unlike for automatic trades, costs $5 (unless you have an ING Electric Orange bank account).

6. Customer service is somewhat slow, at least with email. It takes from 24 to 48 hours to get a response (unless you write them on Friday, in which case you probably have to wait at least until Tuesday), and some of the responses I've received were form emails having nothing to do with my question.

7. Transferring your account to another brokerage costs $50 and takes up to 30 days. Transferring individual securities to another broker costs $10 each (but $50 maximum--for example, it's $50 if you transfer 5 stocks or 20.) Unless your commissions at the other broker are free, this is cheaper than selling the stocks in Sharebuilder and buying them at the other broker.

8. While automatic investments cost $4 (or less, depending on your plan), you have to make a real-time trade when selling. That's $9.95 (but better than the $15.95 it used to be).

10. The research section of the site is not as good as it can be, but getting better. It must be noted that Sharebuilder is not a broker for traders. The tools it offers are for buy and hold investors.


The bad:

1. Execution is much slower than other brokerages. The one position I sold went through my limit price (I saw real-time quotes on Scottrade) a couple of times before the order was executed.

2. The number of different stocks, ETFs, and mutual funds that you can buy is limited.

3. No bid/ask displayed for real time trades.

4. No bid/ask for options trades.

5. Where's the symbol lookup for options?

Bottom line:

An ING Sharebuilder individual account is great for buy and hold investors who use dollar cost averaging by investing small amounts on a regular basis. Just make sure to keep the commissions under 2% of your order. Sharebuilder is terrible for traders, as the execution is bad, and the fees will eat you alive.

This review will be updated periodically. Sharebuilder is getting better. There have been significant improvements since ING bought it. Let's hope this continues.

Updated December 28, 2008.