ChoiceTrade has primarily focused on active traders placing large orders as its core customer base in the past, but the firm has been repositioning itself the last couple of years. Unfortunately, ChoiceTrade still appears to be searching for its niche while its rivals have gotten bigger in size, broader in their offerings, and more competitive in their pricing. We'll look at how ChoiceTrade stacks up in this new online brokerage landscape to help you decide if it is a fit for your trading needs.
- ChoiceTrade's range of offerings is limited to U.S. equities (stocks and ETFs) and options. There is no fixed income, mutual fund, futures, or international trading.
- ChoiceTrade clients can subscribe to newsletters that generate trading recommendations. Those recommended trades are stored on a staged orders page, but they are not sent to market until the client hits the TradeNow button. This gives you some control over executing newsletter recommendations, which is a fairly unique feature.
- ChoiceTrade has been in business for 20 years, and it has a clean regulatory record.
Who ChoiceTrade Is For
Despite some attempts to change its core appeal, ChoiceTrade is still best suited for options traders who place large transactions. This is mostly because of the $50 cap per month for options commissions. Once you’ve traded 125 contracts, any other transactions within that month take place at no additional charge.
ChoiceTrade offers great value for frequent options traders
Customizing the HTML5 browser-based ChoiceTrade Elite platform is relatively easy
ChoiceTrade newsletter subscribers can have orders based on trading alerts staged for easy execution
You can only trade U.S. equities and options with ChoiceTrade
ChoiceTrade’s news feeds and research capabilities are limited
The standard ChoiceTrade web platform is outdated
- Options commissions are capped at $50 per month, so frequent high-volume traders can control their costs. If you trade 125 contracts per month, you’ll hit the $50 cap and the rest of your trades won't incur a commission.
- The ChoiceTrade Elite platform, which is a browser-based streaming site, can be customized by dragging and dropping widgets around to your specifications. You can also customize the options chains displays.
- ChoiceTrade's Auto Staging tool (also called ChoiceTrade Convenience Tool) gives you control over your newsletter subscription trade triggers without having to enter them manually. Trades recommended by newsletters are set up in the tool so you can review them and choose which ones to send to market.
- The asset classes you can trade with ChoiceTrade are limited to U.S. equities and options. Their clearing firm, Electronic Transaction Clearing LLC, does not handle mutual funds, fixed income, or international assets.
- ChoiceTrade's only news feeds come from Yahoo Finance. Clicking on a headline spawns a new browser tab, which gets messy quickly.
- The only platform a client can access for free is the ChoiceTrade standard web platform, which is outdated and stale looking. To use the Elite platform, you must have at least $30,000 in your account or pay a $29.95 per month access fee.
ChoiceTrade is not as streamlined as some of its competitors when it comes to getting up and running. You can open an account on the web or on the mobile website; the mobile apps will redirect you to the mobile web. It takes about two days to get the account fully opened once you've set up a funding source. Setting layout defaults for the website and Elite platforms is fairly easy. Unfortunately, the standard website is easy to set-up because there are few defaults or customizations. The Elite platform is more dynamic and allows you to drag and drop widgets and define your options data setup. On the Elite platform, you can also design your own trading workflow.
All of the order types accessible on the web platforms can also be used on mobile apps. Watchlists on all platforms are basic but effective. You can create your own watchlists, name them, and sort them by your own criteria. Mobile charting is also simplistic and you can only add a few indicators. Data seems to update in real-time but there were often lags during our testing.
On mobile, the research tab brings you to information about the stock that you last viewed. The available information is bare-bones, consisting mostly of fundamental data and the earnings calendar. The News tab has recent news about specific stocks from Yahoo Finance, but does not cover general market news.
ChoiceTrade offers third-party platforms that clients can use, but these come with added fees in addition to a more robust trading experience. For the purposes of this review, we are looking at the standard ChoiceTrade web experience and the cheapest third-party platform branded ChoiceTrade Elite (provided by iVest).
ChoiceTrade's standard web platform is clunky and difficult to navigate. The widget-based Elite platform is considerably more elegant and easier to use, with automatically updating data and a workflow that you can design to your own specifications. The Auto Staging tool (also called ChoiceTrade Convenience Tool) sets up trades recommended by newsletters to which you subscribe that you can verify and enter, but you can't stage your own orders there. This tool is only on the standard web platform.
You can set your default order type to limit or market for both stocks and options and also set your default number of shares or contracts. The trading defaults set on ChoiceTrade's web platform extend to Elite and mobile platforms.
Mobile Trade Experience
ChoiceTrade's mobile app is sufficient for basic trading needs while you are away from a larger screen. The process of finding a stock and getting all the way through to placing and managing a trade is straightforward. That said, there is nothing exceptional about the mobile trade experience. Experienced traders who have used more robust and full-featured apps from some of ChoiceTrade's rivals will be disappointed.
Range of Offerings
Clients of ChoiceTrade can only trade U.S. equities and options. There are no mutual funds, fixed income, futures, futures options, international assets, currencies, or cryptocurrencies. Again, the main reason to become a ChoiceTrade customer is to trade options in large quantities, so the limited offering is understandable - but it is still a limitation. With ChoiceTrade, you can trade:
- Stocks long and short (approximately 3,000 on the easy-to-borrow list for short sales—slightly below average)
- OTCBB (penny stocks)
- Simple and multi-leg options
You can enter stop limits and trailing stops on all of ChoiceTrade's platforms, but no conditional orders. The order types are more restricted on the mobile app. You cannot select a tax lot when closing a position and the default is first-in-first-out.
ChoiceTrade's order router prioritizes speed of execution rather than price improvement. The firm does not report price improvement on your orders, and they do accept payment for order flow. For stocks, the payment for order flow accepted is on the high side—almost $0.01 per share. ChoiceTrade accepts an average rate of payment for order flow for options trades of about $0.37 per contract.
You cannot set up a trading system on ChoiceTrade though you can use their trading simulator to test strategies.
ChoiceTrade has lowered its equity trading commissions to $0 and also eliminated the per-leg fee for options trades to remain competitive. The brokerage’s options commission cap provides additional cost savings for heavy traders. It is worth noting that ChoiceTrade’s penny stock trades do incur a commission.
- No commission to trade equities, ETFs
- OTCBB/penny stocks are $7 per transaction
- Options base commission is $0 per leg
- Options per contract fee is $0.40
- Monthly options commissions are capped at $50 (125 contracts)
- Fee for 50 or contracts (single leg) is $20
- Covered call trade of 500 shares plus 5 contracts is $2
- Margin interest 7.75% for all loans. Discounts can be negotiated
- Inactivity fee of $35 a quarter if client trades less than 5 times per calendar quarter
- Account closure fee is $0
- Account transfer fee is $75 for a full transfer, $0 for partial
- Exercise and assignment fee is $5
- Voluntary reorganization fee is $50
- Wire fees are $35 for outgoing domestic wires, $60 for international
- ChoiceTrade does not issue paper checks, so there are no fees
- Paper trade confirmations are $5 per month
- Paper statements are $5 per statement
- Clearing and exchange fees, typically a fraction of a penny per share, are passed through to customers.
- Software access fee depends on the platform chosen. ChoiceTrade Elite is $24.99 per month for accounts smaller than $30,000. Two other platforms that we did not review are described on ChoiceTrade's software page.
- Live broker fee is an additional $25 per transaction
How This Broker Makes Money From You and for You
The pressure of zero fees has changed the business model for most online brokers. In lieu of fees, the way brokers make money from you is less obvious—as are some of the subtle ways they make money for you. Unfortunately, ChoiceTrade does not offer any ways to enhance your returns through lending stocks or an uninvested cash sweep.
- Interest on uninvested cash: Like many brokerages, ChoiceTrade makes money in the form of short-term lending interest using customers’ uninvested cash balances. Unlike most firms, however, ChoiceTrade pays no interest to customers at all on uninvested cash. The information about interest on cash on ChoiceTrade’s website is confusing; there is some text indicating they pay interest, but there are no details. When we asked management directly, they said they paid no interest.
- Stock loan programs: ChoiceTrade earns revenue loaning stocks in your account for short sales and does not share any portion of that revenue with you.
- Payment for order flow: ChoiceTrade receives payment for order flow (PFOF) for equity and option trades. This is the practice where a broker accepts payment from a market maker for letting that market maker execute the order. There is no price improvement for trades executed by ChoiceTrade.
- Price Improvement: ChoiceTrade's order router does not seek out price improvement.
- Portfolio margining: ChoiceTrade clients cannot apply for portfolio margining, which can lower the amount of margin needed based on the overall risk calculated. Typically, portfolio margining works best for customers who trade derivatives that offset the risk inherent in their equity positions. Since ChoiceTrade is an options-focused broker, it’s surprising that portfolio margining is not available.
- ChoiceTrade clients cannot apply for portfolio margining
- ChoiceTrade does not have a stock loan program
- ChoiceTrade pays no interest on idle balances
- Dividend reinvestment is unavailable
ChoiceTrade offers clients a limited suite of research tools. There is no ETF-specific screener, but ETFs can show up in the stock screener results.
There is a basic screener on the web platform while the Elite screener displays streaming real-time data and some customization options. You can add screener results to your existing watchlists or create a new one.
There are several tools for generating options trading ideas available in the Elite platform under the Find tab. Candidates for trades are identified based on your market outlook.
Tools and Calculators
On each stock's research page, you click on the Options tab to get a trade ticket and conduct some analysis of the trade. You can also add a note to the trade for a journal entry. There is a well-designed heatmap under the Research heading on the Elite platform.
Trading Idea Generators
You can find some options idea generators on the Elite platform, including covered calls, bullish options strategies, and others, but they take you to a stock information page. From there, click on the Options tab to get a pre-loaded trade ticket. You can do some light analysis on the suggested trade and use a slider to change the order price.
The built-in QuoteMedia news feeds are very limited. There is a news feed for individual stocks on each stock information page plus StockTwits posts on the Elite platform.
There are some Hammerstone market reports, which include price targets available on a few stocks.
The charting on ChoiceTrade's standard web platform is extremely basic. The Elite platform has a much more robust charting feature, which includes numerous options studies and ways to evaluate the probability of profit on a particular strategy.
The ChoiceTrade Elite platform has an intriguing portfolio analysis tool called Trade Journal, where you can examine your trading results, including inspecting them visually on charts. Buying power and margin calculations are shown in real-time. The portfolio analysis feature calculates a time value index, which is a time-weighted rate of return figure.
ChoiceTrade's education offerings are light. There are videos for platform walkthroughs on the Elite offering and there is a "How to use this page" link on most pages. Beyond that, there is little that is trading-specific, although you will find links on the Help & Learning page to Options Industry Council features. ChoiceTrade does offer a trading simulator for its customers to practice on.
- Phone line available Monday-Friday, 9 a.m.–5 p.m. Eastern time. Phones are answered very quickly.
- No online chat for current and prospective clients.
- Live broker available while phone lines are open.
- Non-U.S. customers can open accounts though there are no details provided on countries allowed.
ChoiceTrade needs to make improvements in this area to offer their clients more security.
- No two-factor authentication
- No biometric entry for the mobile app
- No excess SIPC insurance
- No significant breaches reported in 2019.
ChoiceTrade has found itself in a hard place with its competitors growing and investing more in the features and capabilities of their platforms. ChoiceTrade has a limited range of offerings, no interest on idle cash, and nominal educational/research content. Although the firm can still be attractive to the right type of options trader, there is little here for almost every other type of investor.
Given the strengths of other brokers covered in this series of reviews, we find it very difficult to recommend opening an account with ChoiceTrade at present. The three types of traders who might find an account useful are non-U.S. customers who cannot open an account at another broker, options traders who can make use of the $50 monthly cap on options commissions, or newsletter subscribers who want to take advantage of the ability to stage recommended trades. If ChoiceTrade wants to expand outside of that limited market, it is going to have to invest heavily in improving its platform for a wider customer base.
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