Saturday, April 02, 2011

OptionsXpress Gives Schwab a Leg Up

The smaller firm will bring better options tools and the possibility of integrated futures trading.

Charles Schwab’s $1 billion offer last week for midsize optionsXpress seems like a good move for the online-brokerage giant. The all-stock deal should allow Schwab to update the options tools on its Website and to integrate futures trading, helping it stay relevant in a very competitive technology race. The firm is choosing to buy the technology rather than build it, and also gets the chance to absorb optionsXpress’ nearly 400,000 accounts.

Charles Schwab’s (http://www.schwab.com; ticker: SCHW) recently released StreetSmart Edge platform, available only to frequent traders, is a huge improvement over the firm’s Website when it comes to researching and trading options (see “A Peek at Schwab’s New Trading Site,” Barron’s Electronic Investor, Dec. 20, 2010). However, the Street-Smart Edge tools aren’t incorporated into the Web platform.

OptionsXpress (http://www.optionsxpress.com) was a pioneer in bringing options-strategy searches to the retail trader, and rose to prominence on the strength of its tools. More recently, optionsXpress customers have been able to trade futures as well as stocks, options, mutual funds and bonds; this trading technology will be a welcome addition to the Schwab suite. Currently, Schwab customers have to open a separate account with the firm’s Lind-Waldock affiliate if they want to trade futures, which we’ve regarded as a pain. Schwab officials emphasize there will be no changes in the optionsXpress platform.

In Barron’s recent ranking of online brokers, optionsXpress garnered four stars out of a possible five, while Schwab merited 3½ ("Making the Right Connection,” March 14).

Unlike after many recent mergers, optionsXpress customers could see their trading costs drop once the firms are merged. Currently, Schwab charges $8.95 for stock transactions, $1 less than optionsXpress.

Although a group of optionsXpress (OXPS) stockholders, hoping to increase the price, has filed suit to block the sale, I would be surprised if this deal didn’t go through. The two firms appear to be following in the footsteps of TD Ameritrade’s (http://www.tdameritrade.com) takeover of one of our electronic favorites, thinkorswim. The latter was allowed to maintain a separate identity, although that could change later, when the clearing operations merge.

If you’re an optionsXpress customer (not stockholder), what are your concerns about this takeover, if any? If you already have accounts at both Schwab and options-Xpress, which one do you prefer? Let us know at electronicinvestor@yahoo.com
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A FREE IPHONE APP called Chaikin Power Tools was just launched. It provides trading signals on approximately 5,000 stocks. The app lets you set up your own watch list or select from a built-in industry list. If you pick, for example, conglomerates, you’ll see recent prices (20 minutes delayed) for the companies in the group, plus a proprietary Power Gauge which gives you a bullish (green), bearish (red) or neutral (yellow) signal. Clicking on a gauge provides additional detail, plus the ability to view a graph and see some basic information about the company. It’s free, and it’s fun. Check it out.

IN OUR RECENT READER MAIL was an inquiry about how to synthesize various financial Websites when seeking information on a particular company. We were tipped to the site http://stocks.overthefalls.com, which brings together pages from 14 different financial sites such as Yahoo! Finance, Seeking Alpha and Zacks for a chosen ticker symbol.

The service is free, and offers a very stripped-down interface. You type a ticker into the search box, click on the “Go” button, and wait a few seconds—how many depends on the speed of your Web connection. The content from each of the sites can be seen by clicking on the appropriate box on the left margin.

You’ll be introduced to some Websites, such as StockTA and J3, that you might not have seen before. StockTA offers technical analysis of stock-price movements, while J3 gives you a breakdown of a stock’s institutional ownership. If you don’t want to bother loading content from one of the sites built into the search, you can uncheck the box with the word “enabled” to the right. That can cut the time it takes to make the pages ready to view.

It’s a little bit buggy, however. I found that I had to close the browser window and reload overthefalls to get a different ticker symbol to load correctly. In addition, most of the ticker symbols I checked out eventually loaded the Seeking Alpha page—if I didn’t click on anything. Still, it’s an interesting little tool, and you can’t beat the price.

SEVERAL READERS HAVE ASKED if there’s a Website that can help them find preferred stocks, as they attempt to generate more income from their portfolio. One resource is the Preferreds Online site (http://www.epreferreds.com, which is run by the same group that publishes Bonds Online (http://www.bondsonline.com).

One intriguing feature of this site is the Relative Value Indicator, which shows whether the stock you’re mulling is cheap or pricey when compared with similar kinds of stocks. The site also shows historical credit ratings of the companies issuing the preferred stock. It’s a subscription service that will set you back anywhere from $10.49 for a one-day pass to $445 per year.

If you’re on a budget while looking for added income, check out Quantum Online (http://www.quantumonline.com), which isn’t as pretty as Preferred Online but is considerably less expensive. Actually, it’s free; however, the publisher is happy to accept contributions. To use the site, you have to sign up for a free log-in; it can take several hours for your password to arrive.

Upon logging in, you can search for securities related to a particular company by name or by ticker symbol. You can see the company’s current credit ratings, which are supplied by Moody’s and Standard & Poor’s. One resource I found helpful was an article entitled “What Income Investors Should Know.” It provided insights on what happens to preferred stocks in bankruptcy, what a redemption or call date is, and why some issues trade on the Over-the-Counter Bulletin Board, more commonly known as the “pink sheets.”

You can find lists of real-estate investment trusts, closed-end funds, limited partnerships, royalty trusts and a variety of other securities. As mentioned, it isn’t going to win any beauty contests, but it contains excellent data for income investors—and, once again, the price is right.

Published in Barron’s, 3/28/2011. 

Posted by twcarey on 04/02 at 02:10 PM
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