Robinhood.com lets you trade options for free. (There is no commission when you buy/sell options).

While learning about optiosn on cboe.com, most of the book (I don't have the link to the book.pdf handy) in its calculations implies that most of the decisions should be made by keeping in mind, option commission pric,e which according to the book can be pricey sometimes.

Just trying to understand, what does option comission look like.

  • Is it % to amount of money traded
  • Is it fixed.
  • Does it depend on life span of options?
  • It depends on the broker. Mine charges a flat fee plus a small amount per contract. I don't know why any broker's fee would depend on the life span of the option, though. – D Stanley May 25 '18 at 19:19

In the old days, Fool Service Brokers charged a variable fee for equity and option trades. I think most have gotten away from that and lean more toward fixed fees and managed fee accounts.

On the discount broker side, option commissions are charged as a fixed fee. Some brokers charge a base rate plus a fee per contract (for example, $4.95 + $0.50 per contract). Another charges a simple flat fee per contract (25, 50, or 70 cents per contract with free assignment and exercise). And another charges $1.00 per contract to open with a maximum charge of $10 per leg and no commission to close.

If you are dealing at a deep discount broker (less than a dollar per contract), commissions should have almost zero involvement in your option decisions. Decisions should be based on your outlook for the underlying as well as your money management criteria.

I would suggest that you ask Robinhood what their routing procedure is for option orders. A good brokerage firm offers Smart Routing to the option exchange with the best prices. If RH is routing to a specific exchange, you may indirectly be paying for no commission trades with poorer trade fills.

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