Stock Trading Independently. Fixed and Variable Costs
Examples of fixed and variable costs from being an independent trader.
As an independent trader, there are several fixed and variable costs that I incur from purchasing securities with a broker dealer. Dependent on the broker dealer, I can be charged a fixed fee/fixed cost of $6.95 (USAA-account type dependent), $7 (Scottrade) to $19.95 (Fidelity) per securities trade, regardless of the number of security shares I purchase. Within the same aspect, I can be charged variable costs, such as commission and $0.002 cents per share, in addition to the fixed costs. The commission fees are applicable dependent on: the security I plan to purchase, it’s price per share, and the volume of securities detailed in that purchase. Unlike the big boards, if the security is an Over The Counter Bulletin Board (OTC-BB) security, I incur the charges of a fixed fee/fixed cost ($6.95, $7, or $19.95) and ½ of 1 percent of the total principal price (dependent on the broker dealer) of the total security trade order I place. For example, to place a trade with Scottrade, any buy, sell, short sell, or cover on any security is a fixed cost of $7 per trade; additionally and traditionally, if the security traded is OTCBB and I purchase 1000 shares of a security worth $1 per share, totaling a purchase price of $1000, the fixed cost I would incur is $7 and the variable costs/commission fees of ½ of 1 percent (0.005) of the principal ($1000), totaling $1000 times 0.005 = $5. Thus the total cost of the trade, fixed and variable, is $1000 + $7(fixed) + $5(variable) = $1012.
How can this be resolved for analysis purposes?
When trading independently, especially actively, analyzing and conducting due diligence on the various fixed and variable costs that broker dealers offer, can save a trader initial trading costs and benefit the trader’s trading gain strategy.
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