Interactive Brokers Review Part 2

 

Following on from an earlier post, I wanted to do a more in depth review of Interactive Brokers. As I mentioned here I have been extremely happy with them since making the switch from TD Ameritrade. You should seriously consider switching to them, read on to find out why.

Interactive Brokers, or IB as they are commonly known, were one of the early players in the electronic trading sphere. They currently offer trading capabilities on just about any market with a very technically advanced trading platform known as the Trader Workstation. So far, I have only used the platform to trade stocks and options, so that will be the focus of this article.

Let’s take a look at some of the pros and cons of Interactive Brokers and review some of the features available on their platforms.

PROS

* The most obvious benefit of IB that springs to my mind is the commissions. IB have really low commissions on stock and option trades.  You’ll be looking at around $1 per contract for options.

* As mentioned above, their trading platforms are very advanced, so you are able to easily enter complex option spread trades as one order.

* The reporting is amazing, and goes in to great detail (sometimes almost too much), in terms of your account, trade history, fees, commissions and profit and loss.

* Security is another great benefit of using IB, as each account has the option to add a security token in order to greatly decrease financial fraud or your account getting hacked into.

* One thing that most impressed me about IB, was the ease in which you can open an account. I have had some pretty bad experiences with other brokers in the past with opening or transferring account, but with IB it was a breeze. Once I transferred my account from E-trade to TD Ameritrade and the process was an absolute nightmare that took over 2 months, during which time my positions were frozen and I couldn’t close any of them out. With IB the process took about 1 week and the other great thing is that I did it 100% online. All the forms can be filled in online and even signed by typing in your name. This was amazing as i really hate filling in pages and pages of documents which is usually what it takes. They are also one of the few brokers that allow residents of the Cayman Islands to open an account. Probably not that relevant for most people reading this, but yay for me!!

* There are a number of regular free webinars. There are a multitude of recorded webinars and each month there are around 6-7 live webinars.  I’m sure I don’t know half of the things I could be doing on the system. There is also a trader’s university so you can educate yourself in trading new asset classes or instruments.

* Most mainstream brokers such as TD Ameritrade, Scottrade, E-Trade and Charles Schwab are focused mainly on the US markets, whereas with Interactive Brokers you can trade global markets.  With IB you can trade stocks, options, forex, bonds, futures, commodities, warrants, structured products and mutual funds from the one account.  In total there are over 90 global markets you can trade.

* IB also provide excellent research for those traders looking to get involved in the commodity markets.

CONS

* Given that IB’s platform is fairly advanced and geared more towards professionals, it can perhaps be a bit daunting and confusing for a lot of retail investors. Thankfully, as mentioned above there are a lot of free tutorials and live webinars.

* From my experience their customer service has left a little bit to be desired. They do have a live chat support system, but occasionally it can take 5-10 minutes for someone to join your chat and even then they may not be able to answer your question.  I have had a couple of instances such as this where I waited for an extended period of time, only to be transferred to another chat room as the customer service agent didn’t know the answer.  When he moved me to the other room, the chat froze and I had to close it down.  This has happened to me 2-3 times.  I guess this is the compromise you make for a low commission structure.

* For non-IRA accounts, the minimum deposit to open an account is $10,000.  This may prove to be restrictive for some people especially those just starting out.

* IB’s charting package, while sufficient, does not have the class and sophistication of other packages.  It has all the bells and whistles you need, but it is just not quite as slick as the charting packages offered on other platforms such as Think or Swim. However, one great feature of the chart package is that you can place trades and set stop loss levels directly on the chart screen with 2 mouse clicks. It’s really easy and allows you to get in and out of trades super quick, which is great if you are looking at doing some day trading.

* As another compromise for the low fee structure, there tend to be a lot of other expenses that are charged by IB.  These can be things such as order cancellation fees, but they do also charge for certain types of market data and news services.

* This isn’t a huge issue, but sometimes the Trader Workstation, which is a Java application, can take a little while to load.

Trader Workstation

This is the main trading platform at Interactive Brokers, although they also have a slightly easier to use WebTrader platform. You are able to place virtually every type of order through their software and their system is excellent at tracking trades in your portfolio. The main feature of the Trader Workstation is speed. The platform was designed for quick placement of trades with programmable “hot keys” and one-click order entries. You are also able to trade stocks, futures and options from the same platform.

Ratings

Value for money – 5 Stars
Platform usability – 4 Stars
Platform functionality – 5 Stars
Customer Service – 3 Stars

Overall – 4.5 Stars

Conclusion

If you’re a moderately experience trader, I think you will love Interactive Brokers. Beginners may find it a little difficult, but given the amount of Webinars and the detailed help section on the website, you should be able to get the hang of it fairly quickly. There is a lot of functionality that is not available on many of the mainstream brokers and the commissions structure is probably the best you will find. Overall, I highly recommend them.

Leave A Reply (9 comments So Far)


  1. Craig
    3 years ago

    Wow, great info, very detailed. I had not heard of Interactive Brokers before. I’m currently with E-Trade, how easy is the process of moving over existing holdings? Would I have to sell all my positions?


  2. Pat Grace
    2 years ago

    I don’t use CHAT with them but I have called them a good many times and always found them to be very helpful and polite.


    • Gav McMaster
      2 years ago

      Thank Pat. I haven’t called them often, maybe I will have to try that next time.


  3. Pat Grace
    2 years ago

    I don’t use CHAT with them but I have talked with them many times and they were always very good and polite.l


  4. Tbaylx
    2 years ago

    If you trade option spreads there are no cancellation fees. Ie an Iron Condor would not be subject to a cancellation fee. If you trade single strikes then you will be charged to modify/cancel your order.


  5. Ray Lin
    2 years ago

    I actually found the commission to be on the high side, especially when you are taking liquidity. I would use optionshouse or eoptions if you want to save on commissions.


  6. plusactive
    1 year ago

    I’m new to IB and their commissions are very confusing. I tried a narrow butterfly trade on SPX with total of 40 contracts. I’m supposed to receive USD500 in credit but my account change show only USD50 credit. Which means the fees comes to usd450??


    • Options Trading IQ
      1 year ago

      Hi plusactive,

      That commission seems much too high so there must be something else going on. Can you send me a screenshot of the trade log? info@optionstradingiq.com

      Also, what was the bid / ask spread? Did you enter it as a limit or market order?


  7. Wlodek
    2 months ago

    I’ve verified Interactive Option broker terms of trading. All my withdrawal requests cancelled by broker.
    Stay away from that crap company !

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