My Review of OptionsHouse Online Discount Brokerage Account 2011

OptionsHouse is an online brokerage services that offers low cost options and stocks trades to its large client base of investors or traders. As one of the known discount broker, they also provide low cost stock trades and other financial services (checking & Debit card) for their customers. To trade stock, it only cost $2.95 per trade. It also offers various investing tools such as Risk Viewer, Call Spread Investigator, Covered Call Investigator, Put spread Investigator, Streaming charts and news, Probability calculator, Profit & Loss Cal, Stock Screener and Volatility Charts. It also provides a mobile platform for various smartphones such as iphone, blackberry etc.

Please also check my other brokerage account review such as Fidelity, Zecco, Just2trade, Scottrade, E*trade and more.

OptionsHouse was founded and created by PEAK6 Investments based in the Chicago, IL area. PEAK6 Investments is one of the largest options-trading firms in the U.S.According to the OptionsHouse website, OptionsHouse was born and raised in the heart of the options universe with a goal of introducing the public to the tools and the trading platform developed by those who trade options for a living.”

It currently uses Penson Financial Services, Inc. as its clearing firm to hold the client asset. For protection, OptionsHouse is a member of SIPC & FINRA.SIPC protects against the insolvency of a brokerage firm, but does not protect against market loss. It will cover the securities of customers of its members up to $500,000 of which $250,000 can be cash and supplemental coverage by Penson Financial Services insurance up to $150 million ($2.15 million cash).

The following is the standard pricing or commission fee of Optionshouse brokerage account:

• Products: Stocks, Options, mutual funds, treasury & corporate bonds
• Market Orders: 2.95 per trade
• Limit Orders: 2.95 per trade
• Broker-Assisted Orders: $2.95 per trade
• Mutual Funds: $9.95 per trade for no load fund; additional fees for load funds
• Options: $8.50 + $0.15/contract or $1.00 per contract
• Minimum to Open: $1,000 (Cash) & $2,000 (Margin)
• Account Maintenance Fee: $0.00
• Account inactivity fee: $0.00
• IRA Closing Fee: $15.00
• Some Other Fees: Wire Fees: $15.00 per transfer.
• Outgoing ACAT: $50.00.
• Maximum Margin Rate: Based on proprietary base rate
• Extras: Check writing available. Debit cards are available at a fee for certain accounts.

Opening account is straight forward; you just need to fill the online application through OptionsHouse website. You can open various account types such as individual, joint, custodial, and Individual Retirement Accounts (IRA) either traditional or Roth. Other accounts types are: Corporate, Roth IRAs, SEP IRAs, Traditional IRAs, Joint, UTMA, UGMA, Trusts, Partnerships, Investment Clubs, and Educational IRAs. For individual account, they may require you to submit driver license identification copy. The application only takes about 10-15 minute. Once you are done, you’ll need to wait for their approval. Then, you can setup how you want to fund your account.

As many typical online brokerages account, there are 4 different ways to fund your OptionsHouse account:

1. Wire Transfer – usually can be done same business day
2. Transfer an account from other brokers .This will take more than 10 business days
3. Mailing a check will take 5 business days
4. Electronic Transfer (ACH transfer) will take up to 2 business days.

You can also apply for check writing privileges by submitting PenFlex Account Application. The checking account is only available for any accounts except retirement, pattern day trading, irrevocable trusts and custodial account. Check-writing privileges are free, as are the first 40 checks ordered. (Check re-order fees are $10.00 for every 100 checks). I thought the checking account is rather expensive compare to regular checking account from bank or credit union.

For International or Foreign investor or non US resident, Optionshouse hasn’t supported non-US resident account at this time.

What I like about OptionsHouse is its flat commission structure. Also, it is an online discount broker with straight forward commission pricing.

For stock trades, OptionsHouse's flat rate stock trade commission of $2.95 per trade is amongst the top 5 of cheapest of any current online broker. For penny stocks which trade under $2.00 that do not have options, there is an additional $.005 per share charged. This same $.005 per share rate is also applied to any OTCBB (pink sheet) stocks. The $2.95 rate applies to any sized order up to 50,000 shares. If over 50,000 shares then the order will be split into two or more and an added $2.95 commission will be charged for each 50,000 shares. For after hour trading, there is no additional charge as well whether it is a pre trading hour (before 9:30 AM EST) or post market hours (after 4:00 PM EST).

You also can place the following order:

• Market order
• Limit order
• Stop Loss order
• Stop Limit order
• Market on Open order (MOO)
• Market on Close order (MOC)
• Limit on Open order (LOO)
• Limit on Close order (LOC)
• Trailing Stop Loss Order ($ or %)
• Conditional order

For options trading, OptionsHouse has two different commission plans for options trades which will be used automatically depend on the way you trade options. The first structure plan is a designed plan for less active investors or small investors, costing $5 for up to 5 contracts. There is a $1 additional fee per contract for any sized order over 5 contracts. The second plan will kick in with charges around a $8.50 base rate per trade with a $.15 per contract charge for 10+ contracts per trade. Active investors or options traders will find this second plan to be very appealing due to its low per contract charge. For each exercise or assignment in a given position, there is an additional $5.00 fee. If trading options in SPX, VIX and OEX amongst several others, there is an additional fee of $.35 per contract to offset exchange fees. The options trading will be favorable if the customer is trading more than 10 contracts or more. Please see below table.

Previously, OptionsHouse used to charge a simple $9.95 flat rate for unlimited contracts. This was discontinued to give less active investors a more competitive rate.

For mutual funds, OptionsHouse also offers mutual fund trades for $9.95 per trade. There are an additional fees for a loaded fund.

Pros

• The commission is one of the lowest with $2.95/trade flat fee for stocks trading or ETF trading
• Also offers two structure of flexible commission plans for options trading
• There is variety of useful tools for options traders.
• Offer Pre and after hour without any additional fees
• There is no account maintenance fee for IRA account
• Trader can place MOO, MOC, and conditional order
• Also offer free trial account

Cons

• There is no real time stream on Watchlist
• Stock charting capabilities are very basic.
• No software trading platform at this time
• No Forex and futures trading
• No foreigner investor or trader support currently

Customer’s complaints from research

• It doesn’t offer 1040 support with Gainskeeper. This makes it difficult to track trade during tax period.
• It doesn’t show any margin equity used per position
• Issue with cash account such as IRA account.
• It also charge other fees such as a worthless security fee and a "FINRA Trading Activity Fee"

I would recommend Optionshouse to everyone. OptionsHouse delivers with ultra competitive flat commissions of $2.95 per trade and quality trade tools for options traders. Also don’t let the name fool you, Optionshouse is not for options trader only. The brokerage doesn’t have any account balance minimums, no volume requirement and no minimum number of trades requirement to get these low commissions. It is also one of the best discount brokerage for IRA account whether traditional IRA or Roth IRA.

OptionsHouse mainly offers a standard web based trading platform and a mobile application. The mobile app is typical in nature and supports iPhone, BlackBerry and most other smartphone handsets.

OptionsHouse offers a competitive service in almost all areas. Many beginner as well as advanced investors or traders can use the stock and options trading platform easily without any hassle. The research tools are not perfect but there are some interesting tools designed especially for options traders. Commissions and fees are some of the lowest in any online discount brokerages and the margin rates are highly competitive. In my opinion, OptionsHouse is an excellent choice for all types of investors.

New commission for OptionsHouse - $3.95 per trade

The following is the email I got from OptionsHouse. Looks like more brokerages will add commission due to low trading volume for past 2 years. The current customer will be granfathered with the old commission rate of $2.95 per trade.

On Thursday, January 13th, 2011, after market close, we will Introduce a new stock commission rate of $3.95, for new customers. And, as a valued customer, I’m pleased to inform you that your existing $2.95 stock rate will not be changing.