Interactive Brokers mobile app enables fractional share trading
Fractional share trading with the ability to enter order size in terms of dollar amounts is in gradual rollout.
Online trading major Interactive Brokers has enhanced the trading capabilities of the IBKR Mobile app for Android-based and iOS-based gadgets. The latest improvements will be of use to traders who would like to buy a certain amount worth of an expensive stock, or looking to diversify among more investments.
The latest version of the app enables fractional share trading and gives traders the ability to enter order size in terms of dollar amounts.
When using a Cash Quantity order, users specify the dollar amount they want to buy or sell instead of specifying the number of shares. Rather than buying five shares they elect to buy, for example, $500 worth of a stock. Then they purchase the equivalent number of shares for that value rounded down to the nearest whole share.
If traders enable their account to Trade in Fractions, the brokerage will buy or sell a fraction of a share to use the full amount of cash the traders specified and get the greatest possible number of shares for their money. If traders want to spend $500 but one share of the stock they want to buy is currently $1000, they would end up with 0.5 shares.
The ability to trade in fractions also makes it easy for traders to diversify their portfolios; if they have $500 to spend they can purchase fractional amounts in multiple companies when they otherwise might only be able to purchase whole shares in two or three companies.
To use cash quantity for an order, tap the arrow at the end of the Quantity field to display the Size Ladder, where you typically specify the number of shares for the order. Tap Cash from the toggle at the bottom and specify the cash amount you want to use. When the order fills, it will fill as closely as possible to your specified amount, rounding down to the nearest whole share if you haven’t enabled trading in fractions.
Because the price may move before the order fills, IBKR applies a “Cash Quantity Estimate Factor” when calculating the order quantity. This factor, set to 25% by default, increases the calculated order quantity to try to achieve the desired monetary outcome in cases where the price drops (for a buy) or rises (for a sell) by allowing more units to be bought or sold. You can change the default percentage in the Size section of the Stock presets in Configuration.
To enable fractional share trading, log into Client Portal and from the Settings menu select Account Settings. Click the gear icon next to Trading Experience & Permissions and expand the Stocks section. Check United States (Trade in Fractions).
This feature is available to both IBKR Pro and IBKR Lite clients, and supported for a subset of US stocks.
The company notes that this version of the app is being rolled out to clients gradually.
In the preceding version of the solution, rolled out in October, the brokerage introduced commission-free trading of US exchange-listed stocks and ETFs – with no account minimums and no minimum activity fees – through its IBKR Lite trading plan. Designed for the less active trader, IBKR Lite offers a simplified trading experience with free, non-consolidated market data for US stocks with CBOE ONE and low cost access to the global markets.