Monday, November 8, 2010

online discount brokers, part 6: OptionsHouse

So as I mentioned a few times in the previous parts of this series, among the online discount brokers I checked out thoroughly was OptionsHouse -- and I'm leaving them for last because (spoiler...!-) they're the one I ended up with.

Their user interface, while nowhere as complex as Interactive Brokers', is definitely not as slick and neat-looking as Zecco -- and, alas, it's all clunky old Java, not spiffy new Web 2.0 - ish Javascript, HTML, and CSS... no use of multiple browser tabs the way a pure Web solution offers -- a session is one separate browser window with "simulated" pop-ups on it.

The harshest criticism I could offer of OH is that their UI looks a lot like what it might if I had designed it: full functionality, working pretty solidly (except that occasionally a pixel or two at the borders may go missing...), but pretty "bleah" looks, and especially a surfeit of information that can feel overwhelming at times (besides mediocre graphical aesthetics, that's part of why I've never been and never will be a good UI designer: no intuition for what information the user might want at a certain time and an "when in doubt, show more large tables of numbers" attitude;-).  Alas, I don't even like using interfaces I designed myself, even less ones designed by others in the same engineery, un-designy spirit!-).  [[On the plus side, I'm now going to be part of a beta test phase for a new generation of interface intended to be more customizable and usable]].

Other minor criticisms I can extend to OH include the peculiar limitations of their separate "tools" -- the profit analysis one seems to only deal with simple options (the ones you don't need a tool to help check, in other words -- none of the fancy combinations!-), the ones for exploring put spreads and call spreads only deal with a very small set of ETF rather than arbitrary optionable stocks, &c.  (I can do such analysis myself on a spreadsheet or the like of course, but why bother to offer tools that look like they might be useful and then hobble them like that...?-).

I personally don't miss the social networking approach that Zecco focuses on so much, because I do my investment-related social networking on (including paid services -- actually, after years as a satisfied customer of various Motley Fool paid services, I've just upgraded to the Motley Fool's "all you can eat" "Duke Street" premium offer which gives me access to every service on the site); but I know that my wife Anna does miss it (as well as the Twitter support offered by Zecco but not OH).

But -- this is just about all that I can criticize about OptionsHouse after trying them pretty intensively recently.  Their sign-up forms and procedures are, overall, the simplest, and their customer service the most courteous and efficient, that I had ever yet met in a lifetime of having to deal with brokers, banks, &c; the site's functionality, while (as mentioned above) not attractively presented, I've found complete and quite satisfactory; their training materials (webinars &c) quite useful.

I like their commissions (it would be nice if it was easier and faster to switch between the two rates of options commissions, the one that's optimal up to 10 contracts and the one that's optimal for 10 contracts and up [[they both end up as $10 commission for trading exactly 10 contracts!-)]], or even better if the two were merged into one with a seamless switchover at the 10-contracts point... but, I so rarely trade more than 10 contracts at a time, that it doesn't really matter much to me!) -- maybe not quite as low as Interactive Brokers' in many cases, but lower than Zecco's, Merrill Edge's, and just about anybody else (I did spot a few offerings that came in even lower, but's cover of those definitely doesn't make them attractive -- none get the 5 stars there that OptionsHouse, Zecco, and a few costlier brokers, do!).

And, OH's commissions are very simple to figure out (the reverse of IB's, where you may have to worry e.g. about orders that add liquidity versus ones that drain it (???), and even simpler than Zecco's and Merrill Edge's "X free stocks trades per month if you meet a set of conditions, otherwise Y but Z if T unless U..."...;-).  Stocks at $2.95; options (on the cheap-up-to-10 schedule) at $5 (plus $1 per contract over five).  That's all, and it really is refreshing (OK, there's a "first 100 trades free" special offer to further sweeten the pot for newcomers, but if you trade very actively you know from the start that said quota won't last you all that long -- it's just a nice little extra bonus for newcomers, as are the alternatives of getting reimbursed for wire or ACAT fees,  or getting a free year of the Wall Street Journal... I picked the "100 free trades" special offer over the others, simply because, at $295 in savings, it's worth more than the alternatives;-).

Now that one of the new Motley Fool paid services I've just subscribed to ("MF Alpha") focuses on a balanced long-short portfolio (kind of like a hedge fund, but you do your own trading and there's no 2-and-20 nonsense, just a fixed yearly fee whatever size portfolio you're trading!-), I was worrying about OH's ability to find stocks to borrow for a short sale -- I had never done shorting before (even though I know all about the theory, and how long-short mixes are supposed to statistically outperform!), and the discussion boards for MF Alpha and MF Big Short are full of stories of people having trouble borrowing shares from shorting, from such big-name brokerages as, say, ETrade (MF Alpha recommends IB because of that -- plus, I suspect, the fact that the people doing the recommendation are professional, full-time investors and traders!-).

So I checked this out with a few example short sales (drawn from MF Big Short's recommendations) -- specifically a couple of firms that others had had trouble shorting recently on other brokers -- and I'm much less worried now, since everything went as smoothly, seamlessly, and trouble-free as it possibly could.  (Looking forward to actively shorting for the first time in my investing life, actually!-).

So anyway, I'll be sure to let you all now if there are any further developments -- for now, I feel really satisfied about OptionsHouse (and if you don't hear anything for me for a while you can take it as meaning that the satisfaction level remained constant!-).

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