Stock Brokers / Option Brokers

You have come into a large amount of cash, and you would like to invest it in your favorite blue chip company. The question is: how can you buy the stock that you want? For the vast majority of stocks that you would want to buy, you can not just call up reception and ask to speak to the stock department. Public companies are normally listed on public stock exchanges like the Nasdaq exchange or the New York Stock Exchange (NYSE); this is the forum where you can buy and sell blue chip stocks. Once again, however, you can not just walk into the NYSE and amble onto the trading floor to buy some stocks. You have to be a registered trader with the stock exchange to buy or sell the stocks listed on the exchange. The fact of the matter is that it is virtually impossible for an average individual to buy a stock directly from a company. With the exception of closely held private companies, the system simply is not set up to work like that. In order to invest your cash in your favorite blue chip company, you are going to have to engage the services of stock brokers.

Stock brokers act as agents for either customers or companies on a stock exchange. When you want to buy a stock on a certain exchange, your broker will broadcast your offer and try to find a broker representing another stock holder or the company that is willing to sell you the stock for your specified price. In that sense, stock brokers are the middle men in any stock trade. For their services, the broker will usually take a percentage of the price you pay for the stock as their fee although some will take a flat fee instead.

The situation is similar if you want to buy options. Although you can technically contract with any other stockholder to buy their stock or sell them stock at a certain price, in order to access retail options from established institutions you need to engage the services of option brokers. Once again, most option brokers will take a percentage of the price you pay for your options as their fee.

As you can see, whether you are buying stocks or options, you will have to use brokers, which will in turn cost you money. There simply is no way around it. What you can do, however, is find stock and option brokers that charge low fees. A neat new way to do this is through discount online trading. When you use an online service, a lot of the functions that used to be performed by a human are now automated, meaning that the online service can charge you only minimal fees to buy and sell your stocks and options. These online trading services also do a great job providing you with financial data so you can properly analyse your investment strategies. In this sense, discount online trading also replicated the traditional advice giving role of brokers.