Casual trader or investor would not be worried about getting much discount on the brokerage bill. Once you are doing part time options trading or professional options trading you’re should definitely look at reducing your brokerage charges.
As a professional trader, your capital required is not much but brokerage could lead to a reduction on your return on investment. On yearly basis, while calculating the brokerage amount paid during the year for a trading amount of around Rs. 25 Lakhs it would vary around Rs. 3Lakhs to Rs.5 Lakhs and this is not a small amount.
This kind of amount on your total amount used for trading could definitely bring down your return on investment. By paying this kind of amount as brokerage definitely you can’t expect this huge return on investment and this would also bring down your capital if your trading strategies are even performing moderately.
3 Ways to Reduce your Trading Brokerage
1. Discount Broker
If you are finding your yearly billing to high first you can discuss and negotiate with your current broker to bring down the brokerage charges. Most of the brokers will agree if you are part time trader or professional trader with huge volumes. Perhaps if he is not getting convinced then try changing your broker and switch to a discount broker.
Some of the Popular Discount Broker
You can discuss with the broker about the free tools they are offering and also other features and benefits. This could definitely save your bill to a considerable level.
2. Avoid Over Trading
Many new traders suffer for an excessive daily trading disorder. We were definitely not immune to that but there was no one to tell us the same. Certain strategies require a lot of activity and continuous monitoring its best advised to stay away from such strategies unless they are very highly profitable. Always keep an eye on the possible brokerage of the trade before entering it.
Most importantly especially while dealing with option strategies people tend to adjust and then over adjust. Most of the options strategies are repairable but at times certain options trading decisions go wrong which many people end up over adjusting.
3. Avoid Exercising In the Money Option
A lot of charges are levied when In the Money option is exercised. Avoid such a situation by keeping a track of all your options strategies especially if you are maintaining an options portfolio.
The best way to avoid such a situation is to continue the contract with next month or try to close the trade few days before the expiry date. Usually, the Gamma risk just a few days before the expiry increases to a very high considerate level.
4. Use SPAN Only Margin Account
This is a bonus.
Most people are not aware that you can negotiate with your broker for Span Only margin account.
This is much better alternative than leverage.
But in the meantime, here’s a tip you can use right away. Discuss with your Broker the options of using pledged Liquidbees for Margin money.
Go Look at your Trading Strategy Now.
Take out every reason why you were fearful of your high Brokerage account.
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