This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Why Schwab Wants OptionsXpress

The consolidation in the brokerage industry continues after Charles Schwab (SCHW - Get Report) announced plans to buy Chicago-based optionsXpress (OXPS). The acquisition will bolster Schwab's position in options trading, which is one of the fastest growing areas of the brokerage business today. As a result, many firms are working hard to attract more customers by offering options research, analytics and education. In that respect, the Schwab acquisition of optionsXpress is part of this long-term trend. It's good news for options traders because many tools and resources, that were once quite expensive, are now available for free today.

Shares of optionsXpress are up 15.3% to $17.67 on the deal news. Schwab will pay about $1 billion, as each optionsXpress shareholder will receive 1.02 SCHW share for each OXPS share. The merger is expected to close in the third quarter pending shareholder and regulatory approval. It will immediately bolster Schwab's options trading business, but the greatest short-term benefit is likely to be from sweeping optionsXpress customer accounts into its bank. At the end of last year, optionsXpress had about 380,000 client accounts and $7.9 billion in assets. By way of comparison, Schwab had nearly 8 million accounts and about $1.6 trillion in assets.

The two companies will keep their respective brand names and, on the surface, the deal looks very similar to the one from two years ago when TD Ameritrade (AMTD - Get Report) made a bid for ThinkorSwim. ThinkorSwim is also a Chicago-based broker best known for its sophisticated trading platform that offers a variety of options-related tools like risk graphs, options chains, data and charts. In both mergers, a large discount broker made a play for a smaller firm that specializes in options trading. They recognize the growing importance of options trading among retail investors.

"Options investors at Schwab tend to be among the larger, more active and longer-standing of our client relationships. OptionsXpress brings a similar set of sophisticated, engaged clients, many of whom we believe will find the investing, brokerage and banking services available through Schwab to be a valuable complement to those they have through OptionsXpress," Schwab CEO Walt Bettinger said in a statement.

The increased interest in options trading marks a significant shift within the brokerage industry over the past decade, or so. In the mid-90s, many firms still frowned on options and considered them too risky and speculative for most retail customers. Now, however, a lot of effort is focused on investor education. For example, optionsXpress bought the privately-held options-education company Optionetics in April 2009. ThinkorSwim and investment training company Investools merged in September 2006. Recognizing that the options market is one of the fast growing segments of the brokerage industry, many firms are looking for ways to gain market share. They do this by offering online spread trading capabilities, advanced options analytics and education.

Of course, not all brokers are created equal and finding the right options broker is kind of like shopping for a new car. You want to take your time and find the one that is really right for you. One of the best first steps is to visit the firm's web site, check commission rates, read samples of research, gauge the quality of the education material and test drive its trading platform. Most brokers today offer free demos. Finally, if you're still evaluating brokers, you might also want to look at a recent article titled, The Top Ten Things to Ask your Broker.

See you Wednesday!

On March 31, TheStreet's OptionsProfits is hosting a webinar featuring Andrew Giovinazzi of Aqumin. Using specific trading ideas, Andrew will discuss how to pick the right strategy for your risk tolerance and overall portfolio. We will address how to formulate the proper trade, manage the position and make adjustments and exit strategies.

OptionsProfits For actionable options trade ideas from a team of experts, visit TheStreet's OptionsProfits now.

Readers Also Like:

Readers Also Like:

Readers Also Like:

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AMTD $36.27 -1.06%
SCHW $29.34 -1.77%
AAPL $128.46 -1.50%
FB $78.97 -1.79%
GOOG $558.40 0.53%


DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters