This article will compare Interactive Brokers vs. TradeStation vs. Paradigm Futures. We will walk you through where each one shines and how to choose what company best fits your needs.
Interactive Brokers, TradeStation, and Paradigm Futures are all in the commodity futures and options world. Futures and Options are commonly used to offset a price risk to a specific market. A futures contract is a legally binding contract with a specific set of quantities and a specific time associated with the contract. Futures are also facilitated through a Futures Exchange. Futures contracts are standardized, which allows hedgers, and speculators to efficiently transfer ownership to another party.
In the comparison of Interactive Brokers, TradeStation, & Paradigm Futures, we believe Paradigm Futures is the best option with the incredible support they provide. While Interactive Brokers & TradeStation may offer lower fees for low-volume traders, their platforms carry significant risks.
| Interactive Brokers | TradeStation | Paradigm Futures | |
| Rate | ✅✅✅ | ✅✅ | ✅✅ |
| Accessibility | ✅✅✅ | ✅✅✅ | ✅✅✅ |
| Information | ✅ | ✅ | ✅✅✅ |
| Equity Security | ✅✅ | ✅✅ | ✅✅✅ |
| Total | 9 | 8 | 11 |
Why would someone want to transfer ownership of a commodity to another party?
- Commodity Producers
- Commodity End-Users
- Commodity Storage Facilities
- Commodity Speculators
Transferring ownership using the futures markets lets commodity producers, end-users, and storage facilities mitigate their exposure to adverse price movements. Take, for example, a Corn farmer. The farmer plans to grow corn and harvest the corn in October. To grow the corn, the farmer must purchase their inputs in the winter and spring before planting the crop. The farmer accumulates the expenses before they can harvest and sell their produce. To take advantage of the seasonal strength of the market in the spring and summer before the crop is harvested, the farmer can use a futures contract, like softs futures, to SELL the December contract for a price that they feel is a reasonable price for their farm. By shorting the futures (selling), the farmer has transferred their risk to the buyer of the corn contract.
Another reason someone would want to trade the futures contracts is to speculate in a market they feel is undervalued or overvalued. Speculators play an essential role in the futures markets. Speculators are market participants that do not have a physical position in a market that they are trading. Speculators seek out opportunities in the price direction of a particular market. They provide liquidity in markets which helps hedgers. For every buyer, there has to be a seller and vice versa.
Now that we have looked at what futures contracts are and why someone would use them let’s discuss some of the players that facilitate the trades for hedgers and speculators and what pros and cons each has.
- Rates
- Accessibility
- Information
- Security of Equity
- Rates
Regarding rates in this industry, some go for the deep discount rate with low touch and low insight, and some go for a higher rate but higher user experience with a broker-assisted program.
Like many things in life, you get what you pay for. Deciding on what company to choose for futures and options trading is similar to deciding on what law firm you select. Lower rates are often attractive but not always the most conducive for business. Regarding which of the three companies is the cheapest in rates, it will start with Interactive Brokers. They promote a “starting at $0.00 commission” structure. This can be an excellent way to attract business initially, but you will want to read the fine print and notice desk fees, risk fees, and other fees that can be in the details that add cost to trading.
Tradestation commissions model are similar to Interactive brokers. Tradestation after hours trading can come with an added fee. They go for the deep discount rate with low broker assistance so if it’s after hours that will sometimes require a series 3 licensed broker. Again when companies promote a $0.00 commission rate or meager rates, you have to raise your eyebrows a little and see what else they charge for. This can make the fee structure complicated.
Paradigm Futures has a standard $65 / round turn charge with futures and options. One thing that sets Paradigm Futures apart from Interactive Brokers and Tradestation is the vested interest that they have for the clients. Paradigm Futures has brokers on staff that help each trader no matter the account size. Like the example, I gave above. Would you necessarily want to hire the cheapest lawyer in town?…NO!
Paradigm Futures can get competitive on rates also for self-directed accounts and/or accounts that trade a considerable volume.
2. Accessibility
Paradigm Futures, Interactive Brokers, and TradeStation can access the markets from your phone. So as long as you have internet service, you can place trades from your phone or computer anywhere in the world and at any time.
With Paradigm Futures, you have 24-hour access to phones in a trade. While you are calling from 7:30 am to 7:00 pm central standard time, there won’t be an added charge. Outside of that, there is a $3.00/ filled contract night desk fee. Interactive brokers and TradeStation have similar structures.
3. Information
With Paradigm Futures, you can access RJ O’Brien’s market insights in its online portal. RJ O’Brien is the oldest and largest private FCM in the U.S. With RJO’s network. They can get top-notch fundamental data with their extensive boots-on-the-ground network. RJO offers technical strategies that help facilitate hedges and speculators that utilize charts for their trading programs.
Paradigm Futures utilizes computer programing that pulls the data from government reports and creates charts the moment the data is released so users can look at the update in easy-to-read chart form. You can find these charts on the individual market pages in the “data visualizations” tab.
Interactive Brokers and TradeStation have a model that does not integrate the commodity broker. While this can help keep the costs lower. They lose the boots-on-the-ground function of their information. When it comes to trading commodity markets, it’s vital to understand what the physical market is doing. Physical markets can oftentimes be used to build out your trading narrative.
4. Equity Security
In light of the recent blowup of FTX and other companies that act as an exchange and trading firm for market participants, I thought it would be essential to point out that in times the little bit of savings on rates can be washed away overnight. Many newer companies have come into the market trading space as disrupters. When you are an investor looking to park hundreds if not millions of dollars at a firm to trade with you, you want to have confidence that in times of uncertainly, the company isn’t going to go under or come into a time where the stockholder’s confidence breaks and the stock price falls through the floorboard.
Take MF Global, for example. MF Global was a powerhouse in this space back in the early 2000s. 2 things that hurt MF Global was that they were trading their spec positions and they were a publicly traded company. MF Global’s positions were put on, and once there were rumors that the positions significantly cost the company, the shareholders started dumping their stock. This drove down the stock price and eventually bankrupted the company. Along with this customer, accounts ended up on the wrong side of the deal and costing them millions.
It’s important to ask yourself if you trust where you’re putting your equity. Paradigm Futures using RJ O’Brien as their FCM, you know your equity is at a long-standing company that has stood the test since 1914. There is no crisis this company hasn’t gone through. 1929 great depression, 1970s hyperinflation, 1980s high-interest rate environment, Y2K, September 11th, 2008 financial crisis, 2020 covid lockdowns, 2022 crypto blowout.
