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Saturday, March 22, 2014

The Best Online Brokers of 2014

Rising stocks are everywhere: They’re on your desktop, your laptop, your tablet, and, increasingly, your phone.

Small investors can rightly complain about lots of things, but they can’t gripe that the historic 173% five-year gain of the Standard & Poor’s 500 was out of their reach. It has literally been at everyone’s fingertips. Online brokerages estimate that, on average, 15%-20% of retail trading now takes place on mobile devices, most of them Apple products that aren’t much older than the bull market. The thinking among brokerage executives is that investors use their smartphones to track the market and place trades during the business day, but once the sun sets, the tablets come out. Tablets give users more real estate on which to manage their portfolios, learn about the markets via streaming video, conduct research, and think up tomorrow’s trades.

"It’s clear that the devices we use, and the ways that we use them, are fundamentally changing, and that provides investors with room for growth, limited only by the creativity of the tools we provide,” says Ram Subramaniam, president of Fidelity Investments’ retail brokerage business.

IN RESEARCHING Barron’s 19th annual ranking of the best online brokers it was clear to us that personalizing each client’s trading and investing experience, regardless of time or location, was becoming a reality. It’s more than just hardware. Our top brokers let you customize everything from your trade ticket to your portfolio analysis reports, speeding you through placing orders while helping you—understand your gains and losses.

The entire article, and supporting tables, can be found here:  The Best Online Brokers of 2014

Published in Barron’s, March 17, 2014. 

Posted by twcarey on 03/22 at 01:16 PM
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Saturday, March 08, 2014

Fidelity Helps Traders Plan Exit Strategies

The firm’s online brokerage unit has integrated new software that helps frequent traders plot their escape. Also, TradeStation and Interactive Brokers.

Fidelity has just launched new software designed to help active stock traders get off at the right exit.

“We spent time with traders in their workplaces and in our labs, and what came up over and over is that people are good at identifying an entry point,” explains Ram Subramaniam, head of the firm’s brokerage unit. “But,” he adds, “when it came to getting out of a trade, things got a lot looser.”

As a result, Fidelity has created Trade Armor, which has been integrated into Fidelity’s Active Trader Pro, a downloadable program for the firm’s most frequent buyers and sellers. It helps guide them through various exits by tapping into its graphical layouts and technical tools.

The Trade Armor graphs display price support and resistance levels for a stock, along with your entry price (if you already have a position). You are led through the process of setting up a closing order, including placing bracket orders, in which you create a profit target or stop-loss level at which you want to sell.

When entering a new position, you also can set up the exit order and have the target prices displayed on the graph with triangular flags. You can modify your exit order by dragging the flags up and down the price chart. Those exit orders aren’t sent to the market until the price hits the right marks and can be executed. Otherwise, your exit orders would be out there for much of the world to see.

TRADESTATION HAS MADE major changes to the way its customers can develop and share tools they’ve created.

The online broker’s newly launched TradingApp Store ( lists a variety of technical-analysis tools, order-placement utilities, pairs trading, and charting tools that can be downloaded and added to your TradeStation platform. The firm sponsors a TradingApp contest that lets other TradeStation customers rate the available apps. Some apps are free, such as Exhilaration ETF, a trading strategy that buys when an exchange-traded-fund price pulls back and then exits, hopefully with a profit, after a few days. Others carry a subscription (which mostly range from $20 to $100 a month), such as Solidus Time Sales Pro, which identifies large volume trades, useful for active futures, stocks, and ETFs. Usually $20 a month, this app carries an introductory monthly price of $5.

What I find interesting about the TradingApp Store is that those who are conversant in TradeStation’s programming suite EasyLanguage can generate a little extra income by sharing their tool with others. TradeStation has had ways for its developers to share the tools they’ve written, but the store makes it much easier to sort through them and find what you want. And other customers will pay for the app, which TradeStation then deposits into your account.

Investors with more than $100,000 in assets at the broker now get the $99.95 monthly platform fee waived. That makes it accessible to less frequent traders.

INTERACTIVE BROKERS, Barron’s No. 1 online broker last year, has added some new wrinkles, especially for options traders.

The new Strategy Builder generates a multi-leg option order as you click on prices displayed in an options chain. As you click on the contracts you want, the tool recognizes the strategy you’re creating. For instance, if you buy a March call on Microsoft (ticker: MSFT) and sell an April call, Strategy Builder will identify that as a calendar spread, and let you further analyze the potential profitability before actually making the trade. The firm has also added the ability to create a delta-neutral options strategy with one click of the Delta Hedge button. This will add an appropriate-size stock leg to the strategy to make it delta-neutral, which is intended to balance out the effects of price changes as markets move.

You can pore over options strategies in IB’s new Option Strategy Lab, which lets you look at potential profit and loss based on your forecast for a stock’s price or volatility. You can enter “ Tesla Motors’ (TSLA) stock price will increase 20% by March 14.” The Lab lists the possible strategies that could profit from your forecast. You can then weigh them before making the trade. You can take that forecast even further in the Probability Lab, which lets you pit your forecasts against market probabilities, and build potentially profitable spreads graphically. Not bad.

Published in Barron’s, March 3, 2014. 

Posted by twcarey on 03/08 at 12:01 PM
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Friday, February 14, 2014

Where to Profit From Volatility

Options analytics firm Livevol joins broker ranks.

Options traders are a key market for most online brokers, primarily because they are much more active than investors who focus on a few stocks and some mutual funds. So it’s no surprise that analytical platforms for options traders have proliferated over time.

One of those analytical platforms, Livevol Pro, is offered as an add-on product by a number of online brokers, including tradeMonster. However, Livevol in the past year has been expanding its offerings to include trading. Its brokerage customers can trade options, of course, as well as stocks, and use the Livevol analytical platform for free.

Livevol has been around since 2009, with several available platforms. Livevol Core, for $79 a month, offers over 80 live market scans to help identify potential trades. You can modify the built-in scans, which identify volatility and technical events, to create your own personalized scanners, and flip through market sectors using a wide variety of volatility statistics. Livevol Pro, which includes advanced charting as well as tick-by-tick pricing updates, also lets you build skew charts displaying the volatility of each strike price by expiration date, that utilize two years of history. You can scan for covered calls, cash secured puts, iron condors, protective puts, and a variety of vertical spreads, as well. This platform is $300 per month.

Or you can sign up for a Livevol X account and get all of these tools for no additional charge beyond relatively low commissions. Utilizing proprietary technology, the Livevol platform efficiently handles enormous amounts of data. The options montage page displays live data as well as historical data; the platform is designed to optimize the flow of live information so that the historical displays don’t slow it down.

“As our name suggests,” says Catherine Clay, Livevol’s CEO and an alumna of options market maker Timber Hill, “volatility is something we spend a lot of time on.” Volatility tends to flatten during rising markets, but it displays spikes during market declines, even brief ones. Clay notes that the company’s proprietary technology powers a VIX-like calculation on every underlying stock that is optionable, looking at hypothetical 30-day, 60-day, and 90-day volatility. Historical volatility is also displayed for all optionable securities.

Livevol X is a platform that you download onto your computer. The layout is easily customized, and can be spread over four monitors. You can keep track of the time and sales of the options trades going through for the stocks on your watch lists, which gives an interesting picture of where traders believe the market is going.

The options montage, which Clay says is the focus for most of the firm’s customers, lets you play around with implied volatility so you can build your own model of an option’s price. “If you think you know where volatility is going, we can show you the theoretical price,” says Clay. You can create simulated positions in the montage and assess the risk as well as the trade’s impact on your portfolio’s profit and loss.

Livevol has skew charts built in, which usually look like a sideways smile--though some traders call it a smirk—as volatility is typically lower for the higher strike prices. But you can find skew charts that appear abnormal for a variety of reasons, such as a potential buyout or an upcoming earnings announcement. Abnormal skew can indicate a profitable trading opportunity, and Livevol lets you build a trade ticket directly from a skew chart.

Livevol’s trades are executed through Interactive Brokers, though you never see its interface. Portfolio-performance analysis can be monitored by underlying stock, expiration date, greek calculation, and a variety of other measures. If you have a lot of positions, you can organize them into folders and perform your analysis on a subset. You can also sort your portfolio by highest to lowest profit, or delta, or pretty much any other measure you can think of.

Commissions are on the low end of the market at $0.0065 per share for stocks (minimum charge of $1.50) and $0.65 per options contract (minimum of $1.50 per leg). Since Livevol clears through Interactive Brokers, they extend IB’s very low margin interest rates that currently range from 0.5% to 1.57%. You can get portfolio margining with an initial account funding of $125,000; to maintain it, you must maintain equity of at least $110,000.

There is no separate mobile platform for Livevol X, though, so these extensive options scanning tools aren’t exactly something you’d want to peek at on the road.

Published in Barron’s Online, February 10, 2014.

Posted by twcarey on 02/14 at 10:00 AM
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