 | | The Truth About Zero-Fee Trading | | Karim Rahemtulla, Options Strategist, The Oxford Club |  "Thanks to you, my account has grown to $770,000. I want to be a millionaire and am well on my way." - Reader John Gable
The man who taught John how to do this wants to teach you too.
Click here to find out how to take his class for just $0.51. | | | On Tuesday, Charles Schwab (NYSE: SCHW), the pioneer in low-cost commissions, lobbed a grenade onto Wall Street.
It announced that it was going to a zero-dollar commission structure on all trading.
To put this in perspective, let's go back to the '90s. Back then, just before the advent of online trading, brokers could charge up to 5% of the amount of a transaction as their commission charge - both entering and exiting the trade. | | | | Question of the Week | | While working, how much of your income did you (or do you) allocate to savings each month?
Click here to answer. | | For a $20,000 trade, that could amount to as much as $2,000 in commissions. Very few brokers were that egregious, however, and usually they charged around 2% each way.
Still, that could have been $800 in profits...
Then, online trading went mainstream. Commission rates dropped to a fixed rate that hovered around $30. As time passed, that number dropped to less than $10 - and more recently, less than $5.
Last year, platforms like Robinhood appeared on the scene charging no commissions.
Their interfaces were not as good as the ones online brokers like TD Ameritrade and Fidelity had spent billions perfecting - but it was clear the race to zero commissions was on.
On Tuesday, TD Ameritrade (Nasdaq: AMTD) announced that it would match Schwab.
Yesterday, E-Trade (Nasdaq: ETFC) followed suit. Fidelity should also follow pretty quickly... if it hasn't done so by the time you read this article.
But there is one spot where brokerages haven't reduced commissions much, and that is in options trading. There, charging $0.65 per contract seems to be the norm.
That will also disappear over time. | | |  "The Most Exciting Breakthrough in the History of Pain Relief"
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These brokerages are still benefiting from a variety of factors like...
- Upgrades in technology
- Lower employee head count (think of the dreaded voice-activated menu you might find when you call)
- Increased trading fees from a high volume of stock
- Options trading
- Inroads to money management and specialized platform trading, which are features that customers do have to pay for.
But you will need to watch out for additional fees. These will come in the form of "processing" fees for holding nontraditional investments in your account (for example, holding real estate in your IRA), fees for foreign stocks, or fees for wire transfers and the like.
If you ever look at the fee schedule for your broker, you will see an endless number of ancillary fees on their books.
Embracing lowering commissions and keeping an eye on fees is a great move for investors, and especially for traders like me. Before this, I had already negotiated my broker's "official" rate lower due to how much I trade, but it certainly was not zero!
I wonder if I can convince them to pay me to trade...
Good investing,
Karim | | | | | | Look at What Obama Is Up to Now! 
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The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. 
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