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Investing

eOption Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

While many online brokers have their roots in the pre-internet era, eOption joined the fray in 2007. This late entry may have allowed the company to target an underserved area — the deep discount niche — and then pursue it ferociously. That’s been a boon for traders looking for the lowest possible costs, particularly in options, where eOption offers almost unimaginably low commissions. And fees for other types of securities are notably cheap, as are the broker’s margin rates. All in all, eOption is a broker for cost-conscious investors that delivers what it promises.

eOption
Visit eOptionSecuredon eOption’s secure site
The bottom line: The broker eOption should be on the short list of every cost-sensitive investor, especially high-volume options traders.

  • Extremely cheap trading commissions, particularly on options
  • Limited research and educational offerings
  • No commission-free ETFs or fee-free mutual funds

Who should consider eOption

Investors who are hyperfocused on trading commissions should have eOption among the top contenders for their new account. The broker’s stock commission is among the best around, and its meager charge for options should have options traders lining up outside to get in. While low costs would be an attractive feature for beginning investors, eOption really is a broker for more experienced hands given its lack of research and educational resources and the dearth of fee-free funds.

eOption fees and features

Option trading fees
  • $3.00 / trade + $0.15 per contract
Stock trading fees
  • $3 per trade
Amount minimum to open account
  • $500; $25,000 for international accounts
Tradable securities
  • Options
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $60 full account transfer fee
  • $50 partial account transfer fee
  • $50 yearly inactivity fee if fewer than two trades or less than $10,000 in credit or debit balances
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • SEP IRA
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Mobile appiOS, Android
Customer supportPhone, Email

Strengths of eOption

  • Low trading costs: Like Just2Trade, eOption focuses on keeping trading costs low for investors, and the broker is tremendously good at it. Stocks and ETFs trades cost just $3 a pop, and that’s about as cheap as you can go. In this respect, eOption undercuts virtually all the usual broker suspects with their high-powered ad campaigns. Additionally, mutual fund investors will shell out just $5 per trade, whereas some other brokers charge a fee in the double digits.
    Options traders should rejoice even more. The broker charges a base fee of $3.00 and then just $0.15 per contract. That’s much better than Just2Trade, and it compares very favorably to the rates at discount broker Interactive Brokers, where there’s no base fee and a fee of $0.70 per contract. This pricing structure means that once a client reaches just six contracts on a trade — a very low threshold — eOption is already cheaper. While Interactive Brokers’ per-contract fee declines as low as $0.15, it requires the client to trade more than 100,000 contracts a month to reach that level. At eOption, however, every client receives its low pricing from the first contract.
  • Low margin rates: eOption offers some of the lowest margin rates in the industry, and that’s a boon for more experienced traders who can effectively use margin loans. As is standard in the industry, the interest rate declines as the margin balance increases, with the rates bottoming at balances over $1 million. It’s another way eOption focuses on low costs.
  • Auto-trading: Something not typically found in a broker is the ability to automatically trade based on recommendations from investment newsletters. But that’s what eOption offers. Clients identify their newsletter and then authorize eOption to trade a specific amount of the stock or option, either buying or selling, depending on the recommendation. Newsletter recommendations are sent directly to eOption, which executes them without any further effort from the client. Clients can change the trades at any time. The service costs modestly more — $5 per stock trade or $5 plus $0.15 per contract for options — than eOption’s headline rate, but that still looks like an excellent value for the service.

Drawbacks of eOption

  • No fee-free investments: Sure, eOption offers the standard range of Stocks, Bonds, ETFs and Options, but it does little for investors who want no-transaction-fee mutual funds and commission-free ETFs. Investors looking for ETFs will pay the same standard $3.00 commission, which is still quite cheap, to be fair. Investors on the hunt for fee-free mutual funds are out of luck and must pony up $5 a trade.
  • Account fees: For a broker that’s so focused on low costs, eOption really hits clients with additional fees, including the nearly extinct inactivity fee. Here, the broker charges a $50 yearly inactivity fee if fewer than two trades or less than $10,000 in credit or debit balances. A partial account transfer costs a pricey $50, while a full transfer is $60.
  • Limited research and education: New investors looking for guidance and investing research will be disappointed with what eOption offers, which is very little. That’s the trade-off for such low trading commissions, of course. Investors who need these elements would be better off trying out a full-service broker that is well-known for its research and educational components, such as Charles Schwab or Merrill Edge.

Is eOption safe?

Although it’s a relatively new player in the online broker space and less well-known than some larger rivals, eOption has the same coverage from the Securities Investor Protection Corporation (SIPC). The SIPC guarantees that investor assets up to $500,000 (including a cash-only limit of $250,000) will be returned. The broker’s clearing firm, Hilltop Securities, also holds excess coverage, protecting an individual account up to $25 million.

These coverages don’t protect an account from investment losses but rather safeguard the account in the event that the brokerage is unable to return the assets.

Final thoughts

If you’re a stock or options investor and have some experience — so you don’t need extensive guidance — eOption could be a great choice. That’s especially true if you’re trading high volumes and really need to minimize costs. In this respect, eOption delivers on its promise, putting it among the industry’s low-cost leaders.

But if you’re a beginner and need the research and education that typically is provided by a full-service broker, you should consider rivals like Charles Schwab and Fidelity Investments. Both provide what many beginning investors need at a modestly higher per-trade fee and also offer commission-free ETFs, another favorite of new investors.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James F. Royal, Ph.D.
James F. Royal, Ph.D. |

James F. Royal, Ph.D. is a writer at MagnifyMoney. You can email James here

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Investing

Nadex Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Nadex is not a broker but an exchange for those looking to use derivatives — think binary options — to make short-term bets on the stock market. In fact, it’s the first and largest legal U.S. exchange for binary options, and its name is an acronym for the North American Derivatives Exchange. For traders looking to try binary options, Nadex should be at the top of their list.

Nadex
Visit NadexSecuredon Nadex’s secure site
The bottom line: Nadex offers a service that allows traders to make short-term bets on the market while taking a cut of the action on each transaction.

  • Extensive educational offerings for traders
  • Expensive trading commissions
  • Risky and limited investments

Who should consider Nadex

Nadex allows access to some of the highest-risk, highest-reward trading in the market — binary options. Binary options probably are not appropriate for beginners or those looking to build long-term wealth in the stock market. But Nadex makes it easy to get started with a $250 account minimum, well within the range to attract new investors.

If you’re interested in placing an all-or-nothing bet on how an asset might trade later that day, then binary options and Nadex might be for you. You’ll have to be willing to handle a lot of risk, however, because the chance of losing substantial money is high.

Not familiar with binary options? They allow traders to make side bets on the market over a short time frame, even hours. For example, one binary option bet could be whether a certain stock is trading at more than $50 by 11 a.m. The price on a binary option is always between $0 and $100, and the payout is either $0 or $100.

There are only two potential outcomes:

  • If the option meets the condition (“more than $50”), it’s worth $100 and the seller must pay the buyer any difference between the sales price and $100.
  • If the option doesn’t meet the condition, it’s worth $0 and the seller gets to keep any money received from selling it. The buyer loses any money invested.

Nadex fees and features

Amount minimum to open account
  • $250
Commission$1 per contract, capped at $50 regardless of the number of contracts
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 ACH transfer fee
  • $25 wire transfer fee
  • $0 inactivity fee
Account types
  • Individual taxable
  • Trust
Customer supportPhone, Email
Mobile appiOS, Android

Strengths of Nadex

  • Extensive educational offerings for traders: Nadex does a good job of providing a lot of information for traders and would-be traders. The company explains its offerings, including binary options and more complex products such as touch brackets and call spreads. Also included are webinars and videos on how to trade as well as trading news and analysis from third-party contributors. Nadex really tries to get you comfortable with its offerings and how to use its trading platform. And if you’re not quite ready to give real trading a go, you can test out the platform and process by signing up for a free demo account.
  • Low account minimum: Nadex requires a low $250 initial deposit to get started. That’s not a high hurdle, though frequent traders will want to have more in their accounts given the all-or-nothing aspect of binary options.
  • Easy to fund: Nadex couldn’t make it easier to fund your account. You can use the automated clearing house (ACH) to move money from your bank, or if you’re in a hurry, you can get started in minutes by using a debit card. There are no fees for either method, though you also can wire the cash, which may incur a charge from your bank.If you’re ready to cash out, you can transfer your money back to your bank for free using ACH or via wire transfer for $25. Money cannot be withdrawn using a debit card.

Drawbacks of Nadex

  • Limited offerings: While Nadex allows you to bet on many different kinds of markets — including stock index futures, forex, commodities and even economic events — you’re always making a yes-or-no bet on whether a certain thing will happen. Will an index be above a certain level by a certain time? Will gold be trading higher than $1,200 by 1 p.m.? Nadex offers something that isn’t really investing but rather short-term speculation. And it’s the same kind of bet over and over again, always with a winner and a loser.Binary options differ markedly from traditional options, where the kinds of positions are much more extensive and the expirations are much longer. If you’re looking to get started trading traditional options, check out how to trade options.
  • Pricey commissions: At first, it may seem like Nadex charges a low price. After all, it asks just $1 per contract, and Nadex even limits that commission to $50 on any single purchase. So whether you purchase 60, 100 or 200 contracts, you’re paying only $50. Of course, if you sell the options before expiration, there’s the same per-contract fee there too. But there also can be fees when the option expires. If the option is in the money — meaning you won the bet — then you’ll need to pay another $1 per contract as a settlement fee, with no cap. If you lost the bet, you don’t owe any settlement fee.A fee of $1 sounds cheap, but in terms of the percentage of the total cost of the option, it isn’t. With binary options, prices are always between $0 and $100 per contract. So with fewer than 50 contracts, at a minimum, a buyer would pay at least 1% of the purchase price (for a $100 contract) and frequently much more.For example, at $50 per contract, the expense is 2% and at $33, it’s about 3% of the total investment. Those fees are huge in percentage terms, and they get even worse for the option’s winner, with another $1 fee on the back end of the trade.
  • Risky investments: Binary options are by their very nature risky trades. They’re all-or-nothing bets on a short-term move in some asset. The short-term nature of the options means that traders are simply guessing where the market will move in the next few hours. That’s less investing than betting.

Is Nadex safe?

Nadex is an exchange, not a broker, so it doesn’t have a need for the kinds of guarantees traditionally offered by brokers, such as coverage under the Securities Investor Protection Corporation (SIPC). However, as a contract market, Nadex is regulated by the U.S. Commodity Futures Trading Commission (CFTC). It’s one of only three markets legally offering regulated binary options in the U.S., and it’s the largest.

CFTC regulations require client assets to be held in segregated bank accounts, and Nadex stashes them in high-quality banks such as BMO Harris and Fifth Third Bank. Both banks are FDIC-insured, meaning that assets are guaranteed up to $250,000. Of course, any money you put at risk through trading can be lost in its entirety.

Final thoughts

Nadex certainly isn’t for everyone, especially for investors who want to build long-term wealth. But if you’re a trader who is willing to trade the high risk for the potential high reward, Nadex could be the place to go. Plus, the low minimum and easy-to-fund account get you in the market quickly. But watch out for the commissions, which take a higher percentage of your bets than it seems.

If you’re looking to trade more traditional kinds of options and do so cheaply, you should check out eOption, which offers some of the most competitive prices in the market. Another good choice here is Interactive Brokers, which offers an all-around good experience for active traders.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James F. Royal, Ph.D.
James F. Royal, Ph.D. |

James F. Royal, Ph.D. is a writer at MagnifyMoney. You can email James here

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Investing

Charles Schwab Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Charles Schwab has been known as a discount broker for decades, and its online brokerage outfit maintains that reputation. But don’t think just because you’re not paying a lot that you don’t get a lot. For a competitive trading fee, you’ll receive great customer service, solid execution, an easy-to-navigate website with a sophisticated trading platform and a wealth of research and educational tools. It’s really hard to go wrong with this venerable broker.

Charles Schwab
VISIT CHARLES SCHWABSecuredon Charles Schwab’s secure site
The bottom line: With competitive pricing and excellent tools, Schwab is a great choice for any level of investor.

  • Trading platforms and tools for every level of investor
  • Excellent customer service
  • Low trading fees

Who should consider Charles Schwab

Schwab is going to do right by any level of investor. Beginners should love its extensive educational resources and its responsive customer service, while advanced investors should love its sophisticated trading platform. All investors will love its competitive pricing, with the benefits of a full-service broker.

Cost-conscious investors should love Schwab not just for its trading fees but also for its research and plethora of commission-free ETFs and no-load Mutual funds. Anyone looking for a complete experience at a bargain price will feel right at home here.

Charles Schwab fees and features

Current promotions

500 free trades with a qualifying net deposit of $100,000

Stock trading fees
  • $0.00 per trade
Amount minimum to open account
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $50 full account transfer fee
  • $25 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Solo 401(k) (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Ease of use
Mobile appiOS, Android
Customer supportPhone, 24/7 live support, Chat, Email, 346 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases

Strengths of Charles Schwab

  • Competitive trading fees and no minimum: Schwab makes it easy for those with little coin to get started in the investing game. Schwab’s pricing at $0.00 per stock trade (and $4.95 plus $0.65 per contract for Options) puts it right at the standard for low-cost full-service brokers. Plus, its $0 account minimum means you can get rolling with even less. That’s a solid deal for all the other extras Schwab provides, including research and a professional trading platform. Compare that pricing to Fidelity at $0.00 per trade, while TD Ameritrade, E-Trade and Merrill Edge sit higher at $6.95.
  • Extensive research and educational tools: Speaking of research, Schwab offers a lot of it. From market commentary to stock screeners, advanced charting to Schwab stock lists, the broker offers many resources that allow you to ferret out interesting stock ideas. All of that is aided by stock pages with news, press releases and SEC filings to help you with your primary research. You’ll also receive free research from Morningstar, Ned Davis, Credit Suisse, CFRA and others. It’s a wide range of well-regarded reports. Meanwhile, those just getting started will benefit from online courses and modules that get you up to speed on how to invest.
  • Customer service: Need someone on the phone at 3 a.m.? Schwab can handle that. The company offers phone service 24 hours a day, seven days a week. But if you don’t need that level of service, Schwab also offers web chat and email. Plus, while Charles Schwab is known for its discount online service, the company also has more than 340 branches around the U.S.so you can stop by for a full consultation. You really can interact in any way that works for you.
  • Low-cost funds: Schwab has done a lot over the years to make investing low-cost, and its current selection of exchange-traded funds (ETFs) and mutual funds follows that tradition. The broker offers more than 250 no-commission ETFs, and these funds have no early redemption fees. You won’t have to guess which funds are covered, either, as the broker provides an easily searchable list that helps you sort for the kind of fund you’re looking for and provides details on the expense ratio and performance.Schwab doesn’t stop there, offering around 7,300 no-load Mutual funds . These funds are sold without a sales charge (otherwise known as 12b-1 fees). But Schwab makes Mutual funds even more investor-friendly by offering more than 4,000 with no transaction fee. So these are all savings that can be rolled into your investments.
  • Sophisticated trading platform: Schwab’s basic trading platform is completely serviceable — offering smooth, no-frills order entry that works if you’re entering a one-off order or not trading frequently. But for advanced traders who need efficiency, Schwab also offers a more robust platform, StreetSmart Edge. StreetSmart Edge is available on the web or as a downloadable app, and it includes free streaming data, a customizable trading layout and tools. It also provides the ability to expand the platform to multiple monitors. The app provides a stream of CNBC, and an all-in-one trade ticket allows traders to enter multiple order types and securities in just one window. Real-time news and screeners allow you to hunt for profitable ideas, while real-time trading alerts let you move on an idea immediately.

Drawbacks of Charles Schwab

  • Difficulty qualifying for new account bonus: While many brokers offer a nice bonus for any new trader, with Schwab you’ll have to deposit $100,000 to get it. But then Schwab rolls out the red carpet, with 500 free stock or Options trades that are good for up to two years. Still, for that kind of deposit, you can sign up for 100 free stock trades every month from Merrill Edge, though without Options trades. However, there is a more modest bonus available: If you can get a friend to refer you to Schwab and you open a new account, you can pocket a $100 bonus.
  • Pricey foreign stock trades: Pricey stock trades might not be a deal breaker, but if this is a must-have for you, then you’ll be better off somewhere else. Schwab charges at least $100 or 0.75% of the principal, with no limit, on stock trades placed directly on foreign exchanges, and you won’t be able to place an online or automated phone order. It’s important to note that this pricing does not include foreign stocks traded on American exchanges. However, if you’re looking to buy a foreign stock on the over-the-counter market, you’ll need to cough up an additional $50 foreign transaction fee, though you can place these trades online or via automated phone order.

Is Charles Schwab safe?

Charles Schwab has been around since 1971 and numbers 11.5 million active client accounts. Plenty of investors trust Schwab because it’s done right by them, and they’ve entrusted the company with about $3.4 trillion in assets under management. The brokerage is a member of the Securities Investor Protection Corporation (SIPC), which protects investors’ assets up to $500,000 per account (including up to $250,000 in cash only) if the brokerage is unable to return the assets. Investors still can lose money in the market, of course, because those investments are subject to risk.

Final thoughts

For a very reasonable trading fee, investors receive the full gamut of research, customer service, trading platforms, low-cost funds and a well-organized web interface. While many brokers are trying, it’s difficult to beat the total package that Schwab offers investors, and it’s simply hard to go wrong.

Schwab ranks among the best of the full-service brokers, and its most comparable peers include Fidelity Investments, Merrill Edge and TD Ameritrade , though the latter two charge higher trading fees.

Open a Charles Schwab accountSecured
on Charles Schwab’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James F. Royal, Ph.D.
James F. Royal, Ph.D. |

James F. Royal, Ph.D. is a writer at MagnifyMoney. You can email James here