ETRADE Cost to Sell Stock: A Deep Dive into Fees, Commissions, and Hidden Costs

When you're thinking of selling stock on ETRADE, the first thing that might come to mind is, "What’s the actual cost?" Sure, you can make trades on the platform easily, but like any financial service, there are fees involved. Understanding these costs will help you maximize your gains and minimize the expenses that might eat into your returns. Let’s dive right into it.

The Core: E*TRADE’s Standard Pricing Structure At the core of ETRADE’s pricing are its standard commissions and fees. Over the years, ETRADE has moved towards offering a commission-free trading experience for U.S. stocks and ETFs, which is undoubtedly one of its most attractive features for casual and experienced investors alike. Here’s the catch, though: while most online brokers, including E*TRADE, have embraced commission-free stock trading, that doesn’t mean there aren’t other costs.

As of recent reports, selling stocks via E*TRADE involves no base commission for U.S. listed stocks, ETFs, and options. But if you're trading options, the costs begin to creep in. There's a contract fee of $0.65 per options contract. If you're a high-volume trader, you may qualify for a reduced fee of $0.50 per contract, but this requires executing over 30 trades per quarter. Similarly, for those trading OTC (over-the-counter) stocks, there's a $6.95 fee per transaction, as these don't qualify for commission-free trades.

Regulatory and Exchange Fees: The Hidden Costs When people hear “zero commissions,” they often think the transaction is entirely free. However, that's not entirely the case. Whether you’re buying or selling stock, there are certain fees imposed by regulatory bodies that E*TRADE passes on to its users.

1. SEC Fees: These are minimal but worth noting. The Securities and Exchange Commission (SEC) charges a fee on stock sales to help fund the organization. As of 2023, this fee is approximately $0.00051 per dollar of stock sold. For most retail investors, this translates into a small, almost negligible cost, but it's there.

2. FINRA Trading Activity Fee (TAF): This is another fee that applies specifically to sales transactions. FINRA, the Financial Industry Regulatory Authority, charges a small fee on stock sales to cover its regulatory activities. The current rate is $0.000145 per share, with a maximum of $7.27 per transaction. Again, these costs may seem minor but can add up, especially for high-frequency traders or those selling large quantities of stock.

Miscellaneous Costs: Are There Any More Fees? If you thought we were done discussing fees, not quite yet. While the majority of your trades on E*TRADE will likely be commission-free or involve only minimal regulatory fees, other costs might sneak in depending on how you manage your account.

1. Broker-Assisted Trades: For those who prefer a human touch, executing trades with the assistance of a broker can be significantly more expensive. E*TRADE charges $25 for broker-assisted trades. This option might appeal to novice traders or those who want guidance, but it’s much higher than the standard cost of an online transaction.

2. Transfer Fees: While this doesn't directly relate to selling stock, it's worth mentioning that if you decide to transfer your assets out of E*TRADE, there’s a $75 fee for a full account transfer. Partial transfers are free, but moving all your assets can hit your wallet.

3. Margin Costs: For those trading on margin, you’ll need to factor in the margin interest rate. E*TRADE's margin rates are tiered based on the amount borrowed, ranging from 12.20% APR for balances under $10,000 to 10.45% for balances over $1 million. Selling stocks held on margin might lead to additional costs if you're not careful, as you'll need to repay any borrowed amount plus interest.

Avoiding Unnecessary Fees: Tips for Smart Traders By now, you might be wondering how to minimize these costs, especially if you’re a frequent trader. Here are a few smart strategies:

1. Stick to Commission-Free Assets: If you can, limit your trades to U.S. stocks and ETFs that are commission-free. This alone will save you a considerable amount in transaction costs over time.

2. Avoid Broker-Assisted Trades: Unless absolutely necessary, execute trades yourself online. The $25 broker-assisted fee is steep and can be easily avoided with a bit of self-education.

3. Monitor Your Account for Inactivity Fees: While ETRADE does not charge inactivity fees, it's always a good idea to stay active in managing your account. Some brokers charge for dormant accounts, and while ETRADE doesn’t at the moment, staying active keeps you on top of any changes.

4. Watch Out for Margin Balances: Trading on margin can be tempting, but remember that margin interest adds up quickly. If you're selling stocks to cover margin, make sure you account for both the sale and the interest charges.

E*TRADE Compared to Competitors To put ETRADE’s fees into perspective, it’s worth comparing its pricing model to that of its competitors. Charles Schwab, TD Ameritrade, and Fidelity all offer commission-free trading for U.S. stocks and ETFs, similar to ETRADE. Where the differentiation comes in is in margin rates and fees for broker-assisted trades.

• Charles Schwab: Schwab also offers zero commissions on U.S. stocks, ETFs, and options. Its options contract fee is $0.65, identical to E*TRADE’s. However, Schwab’s margin rates tend to be slightly lower, starting at 12.5% for balances under $25,000.

• TD Ameritrade: Like E*TRADE, TD Ameritrade offers commission-free trades for stocks and ETFs. Their options fee is also $0.65 per contract. However, TD Ameritrade tends to have higher margin rates, starting at 14.25%.

• Fidelity: Fidelity is one of ETRADE’s closest competitors, offering $0 commissions for U.S. stock and ETF trades and $0.65 per options contract. Fidelity’s margin rates are slightly lower than ETRADE’s, beginning at 12.075%.

When choosing a platform, it’s not just about the headline costs but also the overall value and additional services offered. ETRADE, for instance, provides a user-friendly interface, access to advanced trading platforms like Power ETRADE, and extensive research tools that can justify some of its costs.

Case Study: Selling a Large Stock Position To further illustrate, let’s consider an example. Suppose you hold 1,000 shares of a U.S.-listed stock and decide to sell it on E*TRADE. Here’s how the fees might break down:

• Commission: $0 (assuming it’s a U.S. stock or ETF).
• SEC Fee: At $0.00051 per dollar of stock sold, if your shares are worth $50 each, this fee would be $25.50.
• FINRA TAF: At $0.000145 per share, the fee would be $0.145 per share, which totals $14.50 for 1,000 shares.

Total cost: $40 (approximately), which includes regulatory fees but no commission. For larger transactions, these regulatory fees can become more noticeable.

Final Thoughts When selling stock on E*TRADE, the majority of your transactions will likely be free of hefty commissions, but it’s the smaller, often overlooked fees that can accumulate. Regulatory charges, options contract fees, and broker-assisted fees all add layers to what might otherwise seem like a “free” trade. By understanding these costs and utilizing smart trading strategies, you can maximize your profits and minimize your expenses.

In the world of investing, knowledge is power, and knowing the true cost of selling stocks on E*TRADE will put you in a much better position to succeed.