| 28 January 2010

OptionsXpress (OXPS) reported quarter-end and year-end results this morning and, compared with what we just witnessed at E*TRADE (ETFC), we have to say the results are a breath of fresh air despite some nagging declines in earnings. The big surprise from E*TRADE was that they lost accounts in the fourth quarter. OptionsXpress, meanwhile, added 2,000 accounts and gained 10% on account openings for the year (compared with 4% at E*TRADE).

But let's be clear, despite this whiff of the positive, results remained disappointing. Total net revenues for the firm decreased 5% in 2009 and earnings per share of $1.05 as 30% less than the 2008 performance. Trade volume remained sluggish, and highly concentrated in options trades. The firm saw more than double the number of options trades in December as compared to stock trades. (This can be a good thing but depends on how their pricing model shakes out.)

So the number of accounts increased 10% on the year and client assets increased 43% compared to 2008. But given the new normal we're experiencing now -- a (near) no-interest, low-fee environment with little left to capture on the back-end -- optionsXpress results show us just how difficult it's going to be for any discount broker to make it if they're focused solely on trading activity.

“We continue to demonstrate our commitment to a strong balance sheet and prudent capital deployment. Over the past two years, we have repurchased approximately $100 million in stock, completed the acquisitions of OEC and Optionetics and still ended 2009 with no corporate debt and a strong cash position,” commented Adam DeWitt, Chief Financial Officer of optionsXpress. “We believe this provides us sufficient flexibility to take advantage of acquisition and other growth opportunities in all types of market conditions and macro-environments.”

We reported earlier that The Charles Schwab Corporation (SCHW) saw its biggest increases of late in adviser fees and banking. That firm is well-positioned to make a shift as pricing models disintegrate value for straight-up brokers.

So the question for firms like optionsXpress in 2010 is this: have we seen the worst of it and is the sun finally starting to poke through the storm clouds? Or was that just the eye of the storm and are the stormclouds are about to close in on us again. Stay posted.