Trading Commisions
Commissions may appear to be a minuscule expense. Most traders neglect them, but if you add them up, you are likely to find that your broker ends up with much of your profit.
A brokerage firm may charge about $20 to buy or sell up to 5000 shares. If you have a $20000 account and buy 200 shares of a $100 stock, the commission of $20 comes to one-tenth of one percent. When you sell those shares and pay another commission, the cost of brokerage rises to approximately two-tenth of one percent of your equity. Trade like that once a week, and at the end of the month your broker will have earned one percent of your account, regardless of whether you made money. Keep going like hat for a year, and your commission cost will rise to 12& of your equity. That is a lot of money. Professional money manager are happy with 25% annual returns, year after year. they could not generate them if they had to pay 12% annually in commissions.
Options strategies
A brokerage firm may charge about $20 to buy or sell up to 5000 shares. If you have a $20000 account and buy 200 shares of a $100 stock, the commission of $20 comes to one-tenth of one percent. When you sell those shares and pay another commission, the cost of brokerage rises to approximately two-tenth of one percent of your equity. Trade like that once a week, and at the end of the month your broker will have earned one percent of your account, regardless of whether you made money. Keep going like hat for a year, and your commission cost will rise to 12& of your equity. That is a lot of money. Professional money manager are happy with 25% annual returns, year after year. they could not generate them if they had to pay 12% annually in commissions.
Options strategies
