If you're a trading professional, I'm sure you've already heard of Interactive Brokers -- no other brokerage service I've ever heard about comes even close to matching them for depth and breadth of offerings (including, in particular, powerful Application Programming Interfaces -- APIs -- to let you design and implement your own interactive or automated trading platforms -- if, of course, you can afford to hire a few good Java or C++ programmers, otherwise, don't bother:-).
As a kind of a "side line", they also support individual investors... though most of the time it kind of feels like a "second thought" (it probably was, come to think of it) glued on top of their main business model of serving extremely sophisticated professional needs with a dazzling variety of possibilities and the most complicated (even though probably the cheapest in most cases) array of pricing models I've ever heard of in my life.
I have to admit -- in the end, they intimidated me; just picking and choosing the specific set of options that I wanted to buy (including for example various kinds and levels of more or less real-time information on their site, each priced in complex ways...: nothing is really simple and bundled in their worldview!-) scared me off, not to mention the lurking issue of "how will I figure out how much I'll be paying in commission each time I trade -- am I enhancing or depleting liquidity, does that matter to pricing depending on what exchange or set of exchanges I'm trading on, etc, etc...?".
I may have missed out on a good thing -- maybe. I've just joined Motley Fool's new "Alpha" service (I've long been a happy customer of some subsets of the Fool's services, and this one eventually convinced me -- a hedge-fund-like long-short real-money portfolio service, open for a very limited time to a small set of high-net-worth [[but perhaps not qualifying for an actual hedge fund]] investors, but with a fixed yearly fee [[no 2-and-20 nonsense there!-)]] and complete disclosure of the trades and their rationale, for you to replicate yourself in your own portfolio -- worlds apart from the typical hedge-fund advisors that just want you to blindly trust them with investing your own hard-earned, hard-saved cash!-)... and now I wonder if I should have signed up with IB.
You see, though decades of experience as an investor, I had actually never placed one short sale in my life -- before today (Saturday), when I tried one on my currently favorite online discount broker, just so I can check come Monday morning if it's triggered properly. But MF Alpha is a long-short portfolio -- a big part of its attraction, of course. I'm quite familiar with all the theoretical results (and practical confirmations) about how long-short strategies can outperform "pure" ones in both good markets and bad ones, as well as with every detail of how short sales are actually handled, margin requirements, and so forth... I'd just never actually put any of this theory into practice (hey, my family kept taunting me for years because, as a kid, before actually trying to make paper planes, I bought and studied a book about their practical and aerodynamical issues...!-).
So, MF Alpha strongly recommends Interactive Brokers -- not just because of their dirt-cheap commissions and margin interest (my currently favorite broker is almost as good in these respects, as well as really much simpler!-), but specifically because IB appears to excel over all other brokers in actually getting hold of (a loan of) the stocks you're selling short, while even well-known names such as ETrade have had problems with this crucial issue in the past. Alas, not having ever been a short seller before, that is one issue I never thought to check...! (And when I was choosing my new broker, I had no idea yet that I'd be doing some short-selling so soon!-).
Ah well, let's hope I've been lucky this time. But, if you can deal with the complexity that scared me off, and are really keen on substantial short-selling (or trading on all sorts of weird international exchanges, something Interactive Broker is the only cheap service to offer, that I know of), do give them a try (and let me know how well it's working, though I'm sure plenty of my MF Alpha co-members, currently busy opening their IB accounts, also won't fail to enlighten me;-).
But I, for once (as I should be more often), was humble, and in the end the choice for me boiled down to two simple, good, cheap online discount brokers: Zecco and OptionsHouse. More about them (and how things ended up for me) in my next couple of posts!
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