Options Commission Structures
Understanding how brokers charge for options trades and what it costs you.
Options commissions are fees charged by your broker for executing options trades. They are typically structured as a per-contract fee (e.g., $0.65 per contract) and sometimes include a base fee per trade. Since 2019, many brokers have reduced or eliminated stock trading commissions, but options commissions remain common because options trades involve more complex order routing and risk management for the broker.
Why It Matters
Commissions eat directly into your profits. A trader who makes 20 trades per month with an average of 5 contracts per trade and pays $0.65 per contract spends $130 per month — $1,560 per year — just on commissions. For a $25,000 account, that is a 6.2% annual drag before you even make your first profitable trade. Understanding commission structures helps you minimize this cost and choose the broker that offers the best value for your trading style.
Commissions also affect strategy selection. Strategies with more legs (iron condors have four legs, butterflies have three) incur more commissions. If your broker charges $0.65 per contract per leg, a 5-contract iron condor costs $13 to open and $13 to close — $26 round trip. If the iron condor collects $100 in credit, commissions consume 26% of your maximum profit.
How It Works
Common commission models:
Per-contract only:
- $0.50 to $0.65 per contract, no base fee
- Most common model (Schwab/thinkorswim, Fidelity, E*TRADE)
- Total cost = number of contracts x per-contract fee x number of legs
Capped per-contract:
- $1.00 per contract, capped at $10 per leg (tastytrade model)
- Favors traders who trade larger quantities per leg
- A 20-contract trade costs $10 instead of $13
Zero commission:
- $0 per contract (Robinhood, Webull)
- Revenue comes from payment for order flow (PFOF)
- Hidden cost may appear in wider spreads and less price improvement
Tiered pricing:
- Rate decreases with volume (Interactive Brokers tiered)
- Can go as low as $0.15-$0.25 per contract for very active traders
- Best for high-volume professionals
Additional fees beyond commissions:
- Regulatory fees: SEC fee (on sales), TAF fee (FINRA), OCC clearing fee. Usually a few cents per contract.
- Exchange fees: Some brokers pass through exchange fees ($0.02-$0.15 per contract depending on the exchange).
- Assignment/exercise fees: Flat fee ($0-$20) if your option is exercised or assigned.
- Margin interest: Not a commission, but a cost for margin accounts carrying overnight positions.
How commissions affect strategy choice:
- High-commission broker: Favor simpler strategies (vertical spreads, single options) with fewer legs and larger contract sizes.
- Low-commission broker: More freedom to trade complex, multi-leg strategies and adjust positions frequently.
- Closing commissions: Some brokers (like tastytrade) charge no commissions to close positions. This encourages taking profits early and managing risk actively.
Quick Example
You sell a 5-contract iron condor on SPY at three different brokers:
- Broker A ($0.65/contract): Open: 5 x 4 legs x $0.65 = $13.00. Close: $13.00. Total: $26.00.
- Broker B ($1.00/contract, $10 cap/leg): Open: $10 x 4 legs = $40 (wait — 5 contracts at $1 = $5 per leg, below cap). Open: $20. Close: $0 (free close). Total: $20.00.
- Broker C ($0/contract): Open: $0. Close: $0. Total: $0.00 (but potentially $10-20 in lost price improvement via PFOF).
If the iron condor collects $1.50 credit ($150 per 5 contracts), commissions at Broker A consume 17.3% of max profit, Broker B 13.3%, and Broker C 0% (but hidden costs may be similar).