Author: Eduardo Montero
Although it may not seem like it, the fees and commissions associated with online trading can sometimes make a difference to your overall results, so we believe that special emphasis should be placed on this important aspect which affects all traders directly or indirectly.
This time we will analyse each of the commissions and fees of IQ Option, a broker with enormous growth worldwide in its more than 8 years of activity, and that today continues to be the talk of the town.
Main features of IQ Option
Although many consider it as a binary options broker because it began as a binary broker, IQ Option today allows trading in almost all types of existing financial markets in the world, including the Forex market, one of the markets that is betting heavily on today.
It has its own investment platform where we can find all the necessary tools to develop as traders. This platform is extremely intuitive and easy to work with. We can open trades with just one click.
IQ Option has one of the lowest initial deposit amounts with a figure of only $10, so it will be very economical if you want to try the platform with a small amount of real money.
If you want to learn more about this broker, you can find a compilation of its features and the most relevant IQ Option Customer Reviews here.
Summary of IQ Option’s main commissions
Like other brokers, IQ Option charges a series of fees for the different services it provides to its clients. These fees can be basically separated into two different groups, those that we are charged for trading, that is, opening, maintaining, or closing positions, commonly known as operating fees, and those charged by the broker for activities that are not directly related to trading, such as fees for depositing or withdrawing capital from our account. These latter fees are known as non-operating fees.
Below is a summary of the main fees charged by IQ Option that you should be aware of before opening an account with them.
The fees and commissions you will find at IQ Option are:
- Commissions (spreads) that we are charged when trading.
- Overnight commissions (swaps) that apply when you keep trades open one or more days overnight.
- Commissions on binary options (for non-European traders only)
- Commissions charged for exchange rate, deposit, withdrawal and other types of trades.
IQ Option fees and commissions.
As mentioned above, IQ Option uses the same commission scheme as most brokers, where you will face fees associated with trading, as well as some not associated with trading.
Amongst the trading fees present at IQ Option are:
- Swaps commissions
While the Operational ones include:
- Deposits and withdrawals
- Inactivity fee
Let’s take a look at the details of each of these commissions present in IQ Option below.
IQ Option’s commissions (spreads)
A spread is the difference between the Bid price and the Ask price. Spreads vary from broker to broker depending on the liquidity providers they use or the broker’s own conditions.
There are fixed and variable spreads. In the case of IQ Option, spreads are variable and are adjusted according to market volatility, so they are usually different for each asset and have independent variations even within the same platform.
The following formula is used to calculate the cost of a spread in IQ Option:
Cost of a spread = Lot size × Contract size × Spread
EUR/USD Ask: 1.13482 Bid: 1.13478
Spread: 1.13482 – 1.13478 = 0.00005
Investment size: 2 lots
Contract size: 100,000 units of the base currency (= 200,000 EUR)
EUR/USD spread cost = (1.13482- 1.13478) × 2 × 100 000 = 10 USD
Below you can see the spreads applied by IQ Option on the main assets.
Overnight commissions (Swaps) that apply at IQ Option
A swap is the interest charge that an investor must pay to the broker in order for the broker to maintain their trades overnight. Swaps arise as a result of leveraged trading, the difference between the interest rates of the currencies plus the broker’s administrative fee.
In currency trading, one currency is borrowed to buy another. A swap will depend on whether you buy a currency with a higher or lower interest rate, compared to that of the currency you have borrowed.
Swaps can be positive and negative, i.e. you will pay or receive a certain amount if you hold trades overnight and in these trades you used leverage.
If you buy a currency with a higher interest rate than the borrowed currency, you will get a positive swap. Let’s look at the following example.
The US interest rate is 1.60 %.
The Australian interest rate is 0.60 %.
The administrative rate is 0,15 %.
If you open a purchase transaction on the USD/AUD pair, a swap of 0.60 % will be credited to your account, as the currency you have bought (USD) has a higher interest rate than the currency you have borrowed (AUD).
If you open a sell transaction in the same currency pair, your account will be debited with a swap of 1.30 %, as the currency you have borrowed (USD) has a higher interest rate than the currency you have bought (AUD).
In the opposite case, i.e. if the USD has a lower interest rate than the secondary currency (AUD in this case), then the fee will be negative and will therefore be deducted from your account balance.
To see the swap rates for each of IQ Option’s assets you can check the broker’s website (https://www.iqoption.com/) or access their information from the trading platform, always bearing in mind that these rates are indicative rates and are subject to change depending on market volatility.
Below are some of the main swap fees charged by the broker IQ Option.
Binary Options Commissions at IQ Option
This market is not available to European retail traders, so if you reside in Europe, you will not have access to this type of financial asset.
A binary option is a contract between the broker and the trader. Under this contract, the trader receives a profit if he/she is able to determine the direction of the selected asset at a given time, and the broker receives a specific percentage for the transaction.
IQ Option charges a commission based on a percentage of the trade. This commission is charged once our trade is completed, i.e. reaches its expiry date and time.
If the position is a winning one, the commission is deducted from the profits obtained, while if it was a losing one, we pay the full amount of the transaction, no more and no less, which means that every time we open a position in this market, from that moment on you know exactly how much you are going to lose or win.
So that you understand it better.
We open a trade in which we invest 10 dollars, with a commission of 20%. If we win this operation we would only receive 8 dollars, because the 10 dollars of profit would be applied to the discount of 20%, in which case we would end up earning only 80% of the investment.
In the event that the operation ends in a loss, only the 10 dollars that we have invested in the operation would be deducted from our balance, no more, no less.
It is valid to clarify that we will know at all times the commission that we will be charged on the operation before opening it, so we can determine whether or not we want to assume the risks of executing it.
It is also important to clarify that the value of this commission is variable and will depend to a large extent on the timetable and the liquidity or volatility of the market at the moment we are trading.
Other types of commissions charged by IQ Option
Exchange rate commission
Sometimes brokers charge an exchange rate fee, because each investment is set according to the base currency or quote currency, where the payout is always calculated in the quote currency.
The broker applies conversions if the currency of your account is different from the quote currency. Let’s look at some examples to help you understand when exchange rate commission might apply.
Example 1: Base currency = account currency
Let’s assume that your account currency is USD and you are trading the USD/JPY currency pair. In this case, conversion will not be applied when calculating margin, as the base currency (USD) is the same as the account currency (USD).
Example 2: No match
Let’s assume your account currency is GBP and you are trading the AUD/CHF currency pair. The conversion will be applied once the margin is calculated, as the account currency (GBP) is different from the base currency (AUD).
Conversion will also be applied when calculating payouts: first it will be calculated in CHF, which is the quote currency, and then converted to GBP, which is the account currency.
You don’t have to worry about commissions during deposits, as IQ Option does not charge any related to this, if you deposit 100 USD you will receive 100 USD in the trading account.
At this point it is important to clarify that this broker does not cover any external commissions and that they come from the payment methods we use to make the deposit.
In the case of withdrawals of capital (profits, or investment funds), IQ Option will charge a fee for handling this operation. This fee will be 2% of the total amount of the capital to be withdrawn as long as it does not exceed the limits specified for each of the methods, in which case you will be charged the maximum fee allowed.
These fees are set out below for each payment method.
Many brokers allow clients’ accounts to remain inactive for any length of time without incurring any extra charges, however at IQ Option this is not the case.
If for 90 (ninety) days or more, you do not place any buy/sell orders (“Inactive Account”), the Company reserves the right to charge an Inactive Account Fee in the amount of 10 EUR, which will be deducted monthly from your account balance until the account is activated again (“Charge”). The Fee cannot exceed the total balance of your account, so if your balance is 0, you will not have to pay anything, nor will you be indebted to IQ Option.
Is IQ Option a cheap or expensive broker?
At Forex World we have found a fair way to know more accurately whether a broker is expensive or cheap, our method is very simple, by comparing it with other brokers already classified in one of these two categories.
The table below contains summary information on the costs of 3 brokers, one that is considered an expensive broker (eToro), one that is considered cheap (Pepperstone) and our broker in question IQ Option.
Let’s take a look at the table and analyse what it shows.
|Average Spreads on FOREX||0||0.00009||0.0001|
|Average Spreads on Indices||0.4||0.025||0.75|
|Average Spreads on Commodities||0.19||0.035||0.45|
|Average Equity Commission||0.46||0.8||0.90|
|Withdrawals||0||2% (Free once a month)||$5|
In terms of trading fees, if you look at all the spreads, IQ Option takes the lead in some aspects even over the broker Pepperstone, which is considered a cheap broker, so in terms of spreads, we can say that IQ Option is a pretty cheap broker.
In the case of stock market commissions, IQ Option is closer to eToro, which is considered a somewhat expensive broker, and in the case of average swap rates, it is closer to cheap.
In terms of non-trading commissions, withdrawals at IQ Option are very cheap, with a 0 fee for the first withdrawal each month. At eToro broker, it will always be $5 USD, while at Pepperstone it will be 0, so in this aspect we can say that IQ Option is in the middle ground.
However, in terms of minimum deposit, few brokers can compete with the $10 USD or its equivalent, which is much less than the $200 required by both eToro and Pepperstone as an initial deposit.
In summary, in some aspects such as the spreads on currencies, commodities and indices, or the minimum deposit required, we can say that IO Option is cheap, while we can say that it is somewhat expensive to trade stocks, and you can’t withdraw as many times as you want for free.
So much for today’s article, in which we have analysed the fees and commissions of the broker IQ Option, coming to the conclusion that it is a cheap broker in some respects, but also somewhat expensive in others.
If you want to try this broker in more depth, remember that you have the option to open a free demo account with IQ Option where you can make trades with a virtual balance without putting your money at risk and see what are the conditions of the broker and how they impact their trading commissions.
Thank you very much!
You can open a trading account with IQ Option here:
This post is also available in Spanish: iq option comisiones
Author: Eduardo Montero
Welcome to Mundo-Forex.com: I'm Eduardo Montero, I work professionally in IT. I started trading in the financial markets (mainly Forex) more than 10 years ago. I'm the author of the articles on this website and of many others published on other websites specialised in stock market investment and finance in general. Learn more about me here: About the author.