# How a Low Commission Broker Can Increase Option Spreads Profits by 50% or more

Many options traders tend to overlook the effect of commission charges on their overall profit or loss. It's easy to neglect the lowly \$15 commission fee when every profitable trade nets you \$500 or more. Hey, it's only 3% right?

Let's find out the answer by taking a look at a simple example using bull call spreads.

Suppose you make 10 bull call spread trades, where each trade has a maximum profit of \$500 and a maximum loss of \$500. Let's say you are a decent trader using a trading system with a win rate of 60%. This means that for every 10 trades you make, 6 are winners while 4 are losers. For simplicity's sake, let's assume that you win or lose the maximum amount for each trade. So, for the 10 trades, your overall profit is (\$500 x 6) - (\$500 x 4) = \$3000 - \$2000 = \$1000.

Now, when it comes to calculating your trading cost, EVERY SINGLE ONE of your 10 trades will incur commission charges.

Let's say you are using an options broker that charges you a minimum of \$15 per leg per trade.

At \$15 per leg, entering each of 2-legged bull call spread will require \$30. Total commission charges for entering all 10 trades will be \$300. That's not all. Don't forget that the profitable bull call spreads will require closing transactions in which you will need to buy/sell-to-close both the call option positions. With 6 profitable trades, that means another \$180 in transaction fees. Hence, your total trading cost is \$300 + \$180 = \$480!

That takes away a whopping 48% off your trading profit!

When you implement option strategies with even more legs such as condors and butterflies, the commission charges are even higher.

So, even if you are a skilled trader with a win rate of 70% or more, you are still better off finding a low- commission broker if you are still paying a minimum of \$15 per trade. Today, there exist online options brokers that charge as little as \$5 per trade while still providing excellent trade execution and user interface. Using the above example, you could have increased your profit from \$520 to \$840 - or 62%! - simply by switching to a low cost options broker.

## Recommended Low-Commission Option Broker

Of the many low-cost options brokers out there, we recommend OptionsHouse as they offer the most excellent combination of cost and usability.

Get up to \$600, plus 60 days of commission-free stocks and options trades when you open an E*Trade account with \$10k or more.

Your new trading account comes with a virtual trading platform which you can use to test out your trading strategies without risking hard-earned money.

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