OptionsXpress Review

If it is a basic but robust options trading solution you are looking for, OptionsXpress could very well be the platform of choice. This was my first serious options trading platform. Overall, I found many good resources for researching potential trades, maintaining a watchlist, placing orders and managing positions.

OptionsXpress is largely a web-based trading solution. That has both advantages and disadvantages. The primary advantage is that it is accessible from anywhere you have web access. The key disadvantage is inherent in the basic limitations found in most web interfaces. There's just a limit to what you do to provide a sophisticated interface via the web browser.

That said, OptionsXpress has worked hard to overcome many of these barriers and I've seen steady improvements being made over the years I've been a customer.

Update (4/28/2009)
OptionsXpress announces that they will acquire Optionetics, a well known company offering investment education in stocks, options and futures. This is a significant move as they attempt to compete in a world of online brokers offering increasing value to their customers. Good education is a critical component to the success of the retail investor.

Trading platform

When I am using a trading platform, I look for several categories of tools to help me be more efficient and productive as a trader.

  • Tools to research potential trades
  • Charting tools to help me do technical analysis
  • Tools to analyze a potential trade
  • Tools to place a trade
  • Tools to monitor the trade
  • Reporting tools

I'll spend a little time on each of these.

Tools for researching trades

These days, I prefer to trade the major indices and ETFs as opposed to individual stocks. However, it still helps to have tools that can give me an idea of where other people (including institutions) are putting their money.

The 'Research Center' is chock full of information about current market action, summaries of gainers & losers, up coming earnings announcements, economic announcements all from one dashboard.

The one area I wouldn't mind seeing more information on is on sector rotation. Being able to view what sectors are showing relative strength on a daily, weekly and monthly basis would be very helpful in choosing the right ETF.

Charting tools

The ability to do charts, for me, is a critical component of any platform. When I first started with OptionsXpress, they offered a couple of different charting solutions, but their interactive charting solution was licensed from a company called Prophet.net. They offered a Java-based interactive charting solution that was pretty powerful.

Several years ago, OptionsXpress rolled out their own charting solution, which is also Java-based. I was initially concerned that this would mean giving up many of the charting features I had come to depend on, including drawing support and resistance lines, fibonacci retracements, boxes and ovals. While I did lose some features like the ability to draw boxes, most of my expected features are still there.

A few other features that are important to me on the charting tool include the ability to display additional studies like stochastic and MACD, as well as being able to have my watch list available to just double-click to see the chart.

All of these features are available in the new charting tool, although they still have a way to go to catch up with the features of the JavaCharts or new ProphetCharts.

Trade analysis tools

When I was first learning options strategies, I found having a tool that could quickly give me an idea of my potential profit and loss was a huge benefit. In OptionsXpress, this tool is called the Trade Calculator.

OptionsXpress Trade Calculator
You simply enter in the components of the trade, the number of contracts for each and it will both graph and list out an analysis of how the trade will perform. A recent feature is the inclusion of a probability calculator that can help determine the probability of the stock or underlying landing between two points by expiration. While this is not a guarantee, it can help determine the odds of a particular trade (with selected strikes) being successful.

Update (4/2/2009):
A recent update to the OptionsXpress tools is the addition of a MyOX page under the 'Account' tab. This offers a nice way to create a kind of custom dashboard. One of the coolest parts of this is the 'probability calculator' window.
OptionsXpress Probability Calculator

This is a really cool research tool for trades like vertical spreads or iron condors. If I want to know the probability of a strike price I'm considering expiring worthless, I just enter in the information. Many of the fields are pre-populated with current information once I enter in the stock symbol. Then, all I need to do is choose the price point for the strike price I'm looking for and the days to expiration and the rest is calculated. In this case, I may be trying to determine the probability of having a short 50 call expiring worthless with 43 days to go until expiration. There would be a 75.64% probability of expiring below $50.

Order entry

Another key area for me is how easily I can place a trade and do it without making mistakes. This platform gets reasonably high marks for the latter but not so high for the former.

What I mean is that being a web-based interface, it is still a bit clumsy at being able to put on more complex trades like calendar spreads, short vertical spreads, diagonal spreads and iron condors. It takes several web screens before a trade can be entered, including viewing the options chain, choosing the right strategy to view (particularly with calendar spreads), preview the order and commit the order.

OptionsXpress Order

One nice thing is that there is a options chain view that allows me to set up an order by clicking in the box. One click to choose a 'buy' and two clicks to choose a 'sell'. It's still a slow process, but the good part about this is that it can help assure more accuracy of the position before placing.

There have been a couple of recent additions to try to improve on the area of order entry. The first is the addition of a new trade wizard. As you would imagine, the trade wizard takes you through the steps of placing a trade by asking questions. If you are new to placing options orders, this may be worth investigating.

The second addition has been around a while longer. It is a Java-based trade platform called Xtend. While not a full fledged trading platform, it does improve somewhat the ability to enter trades

That said, I still find order entry to be the weakest part of the platform.

Trade monitoring/management

Right up there with trade analysis and research tools is the quality of the trade monitoring and management. It is really important to me to have a dashboard where I can quickly assess my positions The OptionsXpress positions summary is actually quite versatile. I have the ability to view my position any number of ways.

One view they offer that is important to me as an options trader is the position and portfolio greeks. I like to be able to see what my individual position greeks are, as well as how my greeks look for my portfolio as a whole. This helps me ensure I don't get to over balanced with positive or negative delta, vega or theta.

In addition to standard views, the account positions page on OptionsXpress supports a fair degree of customization as well as offering the ability to manage the position (i.e. close, roll, etc) with quick links. As a result, it is a lot easier to get out of the position than it is to get in.

Reporting tools

The final are that I find important as a trader is the ability to run reports on the results of trades or month/year end performance. OptionsXpress has some really nice reporting tools to give me quick insight into where I stand. One nice feature is the ability to match opening and closing trades so I can see profit/loss on individual positions.

Update 8/30/2009

As with many options brokers, OptionsXpress continues to add new features and broaden support. On recent addition is the support of mobile devices. Now, you can download a mobile trading platform for the ipod/iTouch, Blackberry, and Windows Mobile devices.

Another very exciting addition is what looks to be a full blown trading platform. Unlike some of the other platforms I've seen, this one isn't Java based, but rather is based on a newer multi-platform technology called Adobe Air.

While still in a beta status right now, the features I've seen are looking very good. Above is a quick snapshot of the platform. There is a ton of flexibility in the layout. Setting up a complex order like an iron condor or a calendar spread are much easier than with the web platform. Stay tuned as this platform develops.

Order routing

When placing an order, I get offered NBBO (National Best Bid and Offer), however I don't get to see which exchange the price comes from, nor can I select which exchange to route the order to. I also don't have the ability to calculate the theoretical price of the spread. That said, the orders are routed quickly and depending on the limit price I may be submitting, I'll get a fill rather quickly.

If I place trades from the Xtend platform, I at least get to see prices coming from the various exchanges.

Support

OptionsXpress provides help pretty much any way I'd like to have it. They offer live chat, a call in support line and online help with frequently asked questions.

I have even had them call me one time because I put in an order that didn't make sense. They just wanted to make sure I really wanted to place the order as routed. Fortunately I was able to have them cancel it right there on the spot.

Setting up a new account is really quite easy. OptionsXpress has defined trading levels that define what is allowed to be traded. I found it relatively easy to be granted level 4, but most people will only require level 3, which allows the trading of spreads.

OptionsXpress offers a reasonable amount of education to the trader. This comes in the form of textual material on the basics, taking a trader all the way from beginning options to being able to trade various kinds of spreads. In addition, there are a number of recorded web tutorials on the use of the platform.

They also provide occasional webinars on relevant topics to traders, such as how options are priced, how to trade a particular strategy like the calendar spread and so forth. Unfortunately, I've not found where these are archived so if you missed the webinar, you have to wait for the next one to be given.

One final area worth mentioning is that OptionXpress provides a virtual trading account where one can paper trade. The experience is very close the the real thing and allows me to try out strategies without committing real dollars to the trade. The challenge is to treat it as a real trade. I sometimes find it difficult to keep track of both real and virtual trades.

Commission

I put commission last because while it is important to me, it isn't the most important thing. Depending on trading style, commissions can eat into my profits in a significant way. OptionsXpress has changed their commission structure over the time I've been with them. Today, they have a 'per contract' commission but that comes with a minimum 'per trade' price.

A person who trades less than 30 contracts a quarter will pay a $14.95 per trade minimum with a $1.50 per contract fee. What that means is if I put on a 2 contract vertical spread, there will be 4 total contracts traded. The $1.50/contract fee would only make that $6 but at that point, the $14.95 would apply.

As it works out, once you trade more than 9 contracts in any combination, the $14.95 minimum would be exceeded by the $1.50/contract rate. However, now that number of contracts can be in any combination. A 5 contract vertical spread has a total of 10 contracts for a total trade cost of $15.00. A 3 contract iron condor has a total of 12 contracts for a total trade cost of $18.00. Yet a 2 contract iron condor would be only 8 total contracts and would cost $14.95 (the minimum fee).

Overall, this isn't a bad commission structure if you trade larger contract sizes. Over trading can get to be a bit costly though.

Summary

Overall, OptionsXpress is an options brokerage designed for the serious options trader. They have the ability to accommodate the novice all the way to the experienced trader. I have found them to be a very nice brokerage to work with as they strive to provide a full suite of services and capabilities to their customers. I would however have reservations if I were a very active trader.

Key Strength: Account management/maintenance - reporting, slicing and dicing is one of the stronger parts of this brokerage. A very close second would be the dazzling array of tools for researching a trade.
Key Weakness: Order Entry - I'd really like to see more improvements in the way various orders are entered. More complex spreads can be quite cumbersome to enter.
Note: We may see this aspect improve with the new OX XTend2 platform.



[?] Subscribe To This Site

XML RSS
follow us in feedly
Add to My Yahoo!






























Newsletter Subscription

Name


Email

I keep this private



Subscribe now to receive your free promotional package.