Nov 9, 2007

option value

One of the great ripoff business models for a company is the one that OptionsXpress has. OptionsXpress is like an Etrade or Ameritrade except they focus on the trading of options. You go to their site, open an account, and buy and sell options. For this privilege they charge you some fee.

Now in the case of Etrade they would send this order to a broker or send it to an exchange floor and pay to have that trade executed. The amount they make is the difference between the fee they charge you and the fee they pay to the broker/exchange.

OptionsXpress doesn't have to do this. When they send their order to be executed, the executor actually pays them. They make money on both sides of the trade. Why? Because people who trade options typically are not that bright and the executor can actually make money buying and selling positions around this retail order.

What should be a free trade at the very least, actually costs you money. That's brilliant.

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