How to save on brokerage commissions when trading futures and options?
In spite of the fact that commissions of American brokers for transactions in the futures market are not so great and are included in one minimal step of contract quotation, at active trading they can grow to a considerable sum which sometimes completely overlaps a small profit or considerably increases a loss. Naturally, any trader making more than a dozen trades a day is faced with the question of optimizing and reducing these unwanted, but unavoidable costs.
There are several ways to reduce the fees incurred in futures trading and options on the exchange. Below we will talk about brokers on the futures market in America and Europe, but for Russian brokers can work most of the above principles. So, how to save on commissions?
1. Less trading
The first tip lies on the surface - the fewer trades, the lower the fees. However, for individual traders, it can lead to real savings. It is better to make a small number of reliable trades than to rush through orders at the first suspicion of a change in the market situation. The same applies to irrepressible desire to constantly decrease or increase the position. Users of automated trading systems can be advised to reconfigure their parameters so that trading robots are triggered less frequently, but on more reliable signals. Rejection of 10 Buy and Sell trades futures when working on the international futures market can save up to 100 dollars.
2. trade more
This advice is the opposite of the previous one, but for some people it can work too. It is based on the fact that many brokers use a tariff schedule, depending on the client's trading turnover. For example, a broker may work on the following tariffs: "Up to 300 contracts per month - $5 per contract; 300 to 1,000 contracts per month - $4.5 per contract; 1,000 to 3,000 - $4 per contract; and so on. If you average about 7 full trades per day - that is, you make 14 buys and sells per session - then you are making 294 trades per month (at 21 working days). Then it makes sense to make some more trades, even just formal and not aimed at profit, so that their number exceeds the level set by the broker. In our example, one extra trade per week is enough to make the number of trades more than 300. In this case at the end of the month you will pay $1470 commission for 294 traded contracts, and $1359 for 302 contracts.
3. Ask the broker to reduce the commission
It sounds amazing, but a simple appeal to a broker has worked several times before my eyes. A client, quite actively trading on the market, wrote a letter to the American broker, in which he said literally the following: several competitors (there were specific links to tariffs) have lower commission and he would very much like not to go to them, but the commission is the only thing that does not suit him in his current work with the broker. Not always, but a few times the broker met the client halfway, by way of exception transferring his account to another category. The broker, in fact, it is not so difficult to do - the standard commissions for all new accounts are prescribed by default, but they can be set manually for each individual account. Of course, this is more applicable to small and little-known brokers, rather than to the whales of the market, for whom one private client means little.
4. Change broker
When you opened an account, you certainly considered several offers from different brokers and chose the most convenient and profitable one. But if a year or more has passed since you started working, it's possible that the market access conditions have already changed dramatically for the better, and you have remained on the old rate. Try to see what kind of commission other brokers are offering at the moment. Maybe your broker has new offers as well. Maybe it makes sense to change your broker or just switch to a different plan.
5. Switch to other tools
Some U.S. brokers charge different commissions for regular, mini and micro contracts. Futures and options commissions may also vary. Since all of these contracts may be based on the same underlying asset, it may make sense to work with the most economical of them.
6. Refuse unnecessary services
Your trading platform may have various paid options and modules connected by the broker by default that you do not use. This might include access to option trading, add-ons for advanced technical analysis, and news subscriptions from news agencies. You can also change your trading platform to a more budget-friendly one. This tip does not directly apply to brokerage commissions, and yet, avoiding such unused services can help you save a significant amount of money in your account each month.