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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, DC
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    001-32419
  optionsXpress Holdings,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

20-1444525(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)311 W. Monroe St., Suite 1000
    Chicago, Illinois 60606(Address of Principal
    Executive Offices,
    including Zip Code)

(312) 630-3300(Registrants Telephone
    Number,
    Including Area Code)   Securities Registered Pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock  $0.0001 par value

The NASDAQ Stock Market LLC   Securities Registered Pursuant to Section 12(g) of the
    Act:
 None
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
  ,
  DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
   
 PagePART IITEM 1.


BUSINESS


3ITEM 1A.


RISK FACTORS


13ITEM 2.


PROPERTIES


23ITEM 3.


LEGAL PROCEEDINGS


23ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


23PART IIITEM 5.


MARKET FOR THE REGISTRANTS COMMON EQUITY
    AND RELATED STOCKHOLDER MATTERS


23ITEM 6.


SELECTED FINANCIAL DATA


25ITEM 7.


MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


26ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


35ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


36ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


36ITEM 9A.


CONTROLS AND PROCEDURES


36ITEM 9B.


OTHER INFORMATION


39PART IIIITEM 10.


DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


39ITEM 11.


EXECUTIVE COMPENSATION


39ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    AND RELATED STOCKHOLDER MATTERS


39ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


39ITEM 14.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


39PART IVITEM 15.


EXHIBITS, FINANCIAL STATEMENT SCHEDULES


39SIGNATURES


40REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM


F-2CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


F-3CONSOLIDATED STATEMENTS OF OPERATIONS


F-4CONSOLIDATED STATEMENTS OF CHANGES IN
    STOCKHOLDERS EQUITY


F-5CONSOLIDATED STATEMENTS OF CASH FLOWS


F-6NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


F-7EX-10.6 AMENDED AND RESTATED RETENTION AGREEMENTEX-21.1 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF ERNST & YOUNG LLPEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEO AND THE CFOAmended and Restated Retention AgreementSubsidiariesConsent of Ernst & Young LLP302 Certification of Chief Executive Officer302 Certification of Chief Financial OfficerSection 906 Certification   2




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Forward-Looking
    Statements
  Form 10-K, 10-K
    
    the statements about our intention to pay dividends;
    the statements about future growth in online brokerage accounts,
    options trading, futures trading, online options trading and
    online futures trading;
    the statement that on a per trade basis, brokerage, clearing and
    other related expenses generally decrease as the number of
    customer trades increase;
    the statements about continuing to expand our product offering
    and our customer base and the costs associated with such
    expansion;
    the statements concerning future growth of our futures business,
    international operations and brokersXpress;
    the statements about the impact of changes in interest rates on
    our earnings;
    the statements concerning continued financing options; and
    the statements regarding scalability of our systems and the cost
    of increases.  Form 10-K
 PART I  ITEM 1.
    BUSINESS  Overview
  Barrons 2003-2006, Forbes SmartMoney
 3




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Market
    Opportunity
  35-40 million 10-15% 10-15%
    Platform
      Growth
    Strategy
    Growing
    Share of Growing Market  Retail Online
    Options
    Expand
    our Futures Business
  side-by-side
 4




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24-hour
  Increased
    Penetration in Larger Markets  Retail Online Stocks,
    Mutual Funds and Fixed-Income Products
    brokersXpress 
    Expansion into Professional Advisor and Institutional
    Markets
      International
    Expansion
    
    in 2004, we purchased a minority interest in an Australian
    registered broker;
    in 2005, we obtained a license to provide brokerage services in
    Canada;
    in early 2006, we obtained a license to provide brokerage
    services in Singapore,
    in late 2006, we received approval to provide brokerage services
    in the European Union; and
    in 2007, we focused our efforts on growing all of our existing
    international business.    Pursue
    Selective Strategic Acquisitions
    
    expand our product offering;
    accelerate the growth of one of our developing businesses like
    brokersXpress, futures or international; or 5




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
    provide technology capabilities that allow us to continue to
    provide superior differentiating tools to our customers.  Acquisition
    of XpressTrade
      Our
    Brokerage Platform
      
    We empower our customers by making accessible cutting-edge
    position management and order execution technology, advanced
    analytical tools, education and real-time financial information
    from any web browser.
    Our software was designed to ensure an efficient customer
    experience, beginning with a highly automated account opening
    process and ending with fast trade execution and thorough,
    real-time position monitoring.
    Our user-friendly interface provides interactive real-time views
    of account balances, positions, profits or losses and buying
    power to enable our customers to more easily make informed
    investment decisions. Customers are able to access all features
    from any web browser.    
    Education.  We offer the customer an ongoing,
    comprehensive education. The educational component of our
    website is not limited to specific areas, but is, by design,
    integrated into all facets of the website.
    Evaluation.  Our versatile evaluation tools
    provide a unique variety of analytical criteria, empowering our
    customers to make more informed investment decisions.
    Execution.  Our easy-to-follow order screens
    guide the user through the process of placing a trade, allowing
    our customers to use as many or as few of our features as they
    desire.    
    Portfolio Margining.  With Portfolio Margining,
    qualified investor margin requirements are based on the
    theoretical risks of the eligible securities in investors
    accounts instead of traditional Regulation T requirements. This
    results in significantly more efficient capital usage by
    customers in the program.
    Integrated Futures.  In January 2007, we
    acquired online futures broker XpressTrade. We took the best
    features from that platform and made them available on the
    optionsXpress platform, allowing customers 6




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side-by-side 24-hours
  
    Strategy
    Scan®.  Strategy
    Scan enables an investor to transform a trading idea into an
    executable trade. It accomplishes this by identifying up to
    three trading opportunities for our customers based upon their
    bullish, bearish or neutral opinion of a specific stock over a
    specified time frame. We clearly identify the range of potential
    gain or loss for each trading opportunity.
    Xspreads®.  Our
    Xspreads technology simplifies and expedites the execution of
    our customers combination trades. The Xspreads Order
    Booksm
    electronically displays customers orders, thereby creating
    greater transparency in the market, resulting in increased
    liquidity for both our customers and the broader marketplace. In
    addition, Xspreads enables our customers to execute all portions
    of a combination trade simultaneously, thereby eliminating the
    risk that all portions will not be executed at the desired price.
    Xecutesm(patent pending).  We pioneered online
    auto-trading for the retail investor. Our Xecute product allows
    our customers who subscribe to specified third-party advisory
    newsletters and other financial publications to automate the
    trading of the third-party recommendations. This not only
    benefits our customers who subscribe to these newsletters, but
    also makes us the logical brokerage platform for other
    subscribers to such newsletters.
    Advanced Order Management(patent
    pending).  Our software allows our retail customers to
    automate professional trading strategies involving order
    sequencing without manual intervention. Our customers are able
    to enter contingent orders which are executed in accordance with
    specified time, price or other triggers. A significant advantage
    of this feature is that our customers do not have to constantly
    monitor the market in order to execute their orders.
    Virtual Trading.  Virtual trading provides our
    customers with a mock trading environment where they can
    practice strategies and educate themselves without risk,
    utilizing current market information. This provides our
    customers with a practical method of gaining real market
    experience without putting money at risk. Our customers can mock
    trade almost any strategy involving stocks, options and mutual
    funds, including spreads, straddles, and covered calls. We
    believe virtual trading provides our customers with a better
    environment to learn versus simply studying trading strategies.
    Integration with Third-Party Investment
    Software.  The design of our technology allows
    customers to integrate our execution with third-party investment
    or analytical software, including
    e-Signal,
    Quotracker, PowerOptions and Wizetrade. This is a key design
    feature of our platform and differentiates us from other online
    trading systems that rely on legacy technologies. Giving the
    customer access to other technologies allows us to service
    customers who use complementary analytical software. The design
    of our technology allows us to easily and cost-effectively
    private label our website for other financial institutions.    
    Over 30 downloadable webinars covering topics from account setup
    through complex order placing, for investors ranging from
    beginner to advanced skill levels.
    Live events throughout the country covering site demonstrations
    and options investing strategies.
    Personal coaching services, with a program that is
    custom-developed for each investor, designed to help customers
    use options and the optionsXpress toolset to become better
    investors.
    Rich content woven throughout the website, including a self-help
    library of user guides and customer message boards. 7




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Customer
    Service
  e-mail
  e-mail
    Marketing
    e-mail
    Broker-Dealer
    Operations
  Order
    Processing
   8




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Clearing
    and Custody
    
    maintaining customer accounts;
    extending credit for margin accounts;
    settling stock and bond transactions with the DTCC and option
    transactions with the OCC;
    settling commissions and clearing fees; preparing customer trade
    confirmations and statements;
    performing designated cashier functions, including the delivery
    and receipt of funds and securities to or from the customer;
    possession or control of customer securities, safeguarding
    customer funds and transmitting tax accounting information to
    the customer and to the applicable tax authorities; and
    forwarding prospectuses, proxies and other shareholder
    information to customers.    Margin
    and Leverage
    Payment
    for Order Flow
   9




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.
  Supervision
    and Compliance
      Technology
    Systems and Architecture
    Intellectual
    Property
    optionsXpress brokersXpress optionsXpress brokersXpress
 10




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Competition
    and Pricing
        Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 10-K, 10-Q, Form 8-K,
  Regulation
  Overview
   11




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Net
    Capital Rule
      Foreign
    Jurisdictions and Regulation
    and/or
  Patriot
    Act
   12




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ITEM 1A.
    RISK
    FACTORS  Form 10-K
  We may be
    unable to effectively manage our rapid growth and retain our
    customers.
      We
    operate in a highly regulated industry and compliance failures
    could adversely affect our business.
    
    sales methods,
    trade practices,
    use and safekeeping of customers funds and securities,
    capital structure,
    record-keeping,
    best execution,
    financing of customers purchases, and
    conduct of directors, officers and employees.  cease-and-desist
 13




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Changes
    in legislation or regulations may affect our ability to conduct
    our business or reduce our profitability.
      Servicing
    customers outside the United States involves special challenges
    that we may not be able to meet, which could negatively impact
    our financial results.
      Substantial
    competition could reduce our market share and harm our financial
    performance.
     14




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If we
    fail to attract customers in a cost-effective manner, our
    profitability and growth may be impaired.
    Our
    business is primarily transaction-based, and decreases in
    trading or other changes in our revenue base could harm our
    business.
       15




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We have
    exposure to interest rate risk.
    We have
    exposure to liquidity risk.
    We are
    subject to various forms of credit risk, and those risks could
    have a material adverse effect on our financial
    situation.
       16




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Our risk
    management policies and procedures may not be effective and may
    leave us exposed to unidentified or unexpected risks.
    We may
    suffer losses if our reputation is harmed.
    Systems
    failures and delays could harm our business.
      
    a loss of customers or a reduction in the growth of our customer
    base;
    increased operating expenses;
    financial losses; and
    litigation or other customer claims; and regulatory sanctions or
    additional regulatory burdens.   17




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Our
    networks and those of our third-party service providers may be
    vulnerable to security risks.
    We will
    need to introduce new products and services to remain
    competitive.
    Our
    inability to protect our intellectual property rights or our
    infringement of the intellectual property rights of others could
    adversely affect our business.
       18




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Acquisitions
    involve risks that could adversely affect our
    business.
    
    difficulties in the integration of acquired operations, services
    and products;
    failure to achieve expected synergies;
    diversion of managements attention from other business
    concerns;
    assumption of unknown material liabilities of acquired companies;
    amortization of acquired intangible assets, which could reduce
    future reported earnings;
    potential loss of clients or key employees of acquired
    companies; and
    dilution to existing stockholders.    Failure
    to comply with net capital requirements could adversely affect
    our business.
      Our
    self-clearing operations for securities expose us to liability
    for errors in clearing functions.
   19




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We are
    dependent on clearing agents for executing and processing our
    futures transactions and any failures by them or difficulties in
    our relationships could materially harm our business.
    The loss
    of or change in our third-party vendors and service providers
    may adversely affect our business.
      Our
    exposure to possible litigation could adversely affect our
    business.
      Losses
    due to employee or customer fraud could have an adverse effect
    on our business.
   20




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Procedures
    and requirements of the Patriot Act may expose us to significant
    costs or penalties.
    The
    market price of our common stock could fluctuate
    significantly.
    Market
    volatility may cause our stock price and the value of your
    investment to decline.
    
    actual or anticipated variations in quarterly operating results;
    changes in financial estimates by us or by any securities
    analysts who might cover our stock;
    conditions or trends in our industry, including trading volumes,
    regulatory changes or changes in the securities marketplace;
    changes in the market valuations of other companies operating in
    our industry; announcements by us or our competitors of
    significant acquisitions, strategic partnerships or divestitures;
    announcements of investigations or regulatory scrutiny of our
    operations or lawsuits filed against us;
    additions or departures of key personnel; and
    sales of our common stock, including sales of our common stock
    by our directors and officers or our strategic investors.  Our
    officers, directors and largest stockholders will maintain the
    ability to control all matters submitted to stockholders for
    approval.
   21




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The
    future sale of shares of our common stock may negatively impact
    our stock price.
      Provisions
    in our charter documents and Delaware law could discourage
    potential acquisition proposals, could delay, deter or prevent a
    change in control and could limit the price certain investors
    might be willing to pay for our stock.
    
    a classified board of directors with staggered terms;
    a prohibition on stockholder action through written consents;
    a requirement that special meetings of stockholders be called
    only by the board of directors;
    advance notice requirements for stockholder proposals and
    director nominations;
    limitations on the ability of stockholders to amend, alter or
    repeal the by-laws; and
    the authority of the board of directors to issue, without
    stockholder approval, preferred stock with such terms as the
    board of directors may determine and additional shares of our
    common stock.    We may
    not continue to pay dividends on our common stock.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   22




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ITEM 2.
    PROPERTIES    Location

Space

Principal UsageChicago, IL

41,110 sq. feet

Corporate HeadquartersEl Paso (Mesa St), TX

10,000 sq. feet

Customer Service CenterEl Paso (Granada St), TX

2,200 sq. feet

Office SpaceThousand Oaks, CA

950 sq. feet

Office Space     ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS    Common Stock


Common StockClosing Sales Price


Closing Sales Price2007


2006High


Low


High


LowFirst Quarter

$
25.65


$
21.89


$
31.95


$
25.46Second Quarter

$
27.67


$
23.06


$
33.35


$
21.00Third Quarter

$
28.41


$
21.97


$
29.11


$
21.47Fourth Quarter

$
33.90


$
26.61


$
32.01


$
22.44    23




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Performance
    Graph
  The Company performance information is not deemed to be
    soliciting material or to be filed with
    the SEC or subject to the SECs proxy rules or to the
    liabilities of Section 18 of the Exchange Act, and the
    Company performance information shall not be deemed to be
    incorporated by reference into any prior or subsequent filing by
    the Company under the Securities Act of 1933 Act, as
    amended, or the Exchange Act.
  
    
    The Charles Schwab Corporation;
    E*TRADE Financial Corporation;
    TD Ameritrade Holding Corporation; and
    TradeStation Group, Inc.;  Dividends
     24




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Recent
    Sales of Unregistered Securities; Use of Proceeds from
    Registered Securities
    ITEM 6.
    SELECTED
    FINANCIAL DATA    Year Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share data)Results of OperationsRevenuesCommissions

$
153,913


$
123,305


$
91,410


$
71,567


$
38,088Interest revenue and fees


62,493



30,781



12,813



3,648



1,274Interest expense


(7,015
)


(1,440
)










Net interest revenue and fees


55,478



29,341



12,813



3,648



1,274Other brokerage related revenue


35,389



33,816



24,503



17,751



8,793Other


2,250



470



257



103



26Net revenues

$
247,030


$
186,932


$
128,983


$
93,069


$
48,181ExpensesCompensation and benefits

$
26,499


$
21,510


$
14,175


$
9,760


$
5,037Brokerage, clearing, and other related expenses


19,910



21,583



15,295



14,258



8,494Advertising


14,816



7,454



5,681



6,675



2,975Quotation services


7,579



5,688



4,249



3,693



1,984Depreciation and amortization


5,710



3,394



2,293



1,648



770Technology and telecommunication


3,593



2,969



2,305



1,434



693Other


9,374



7,447



4,732



3,376



1,010Total expenses


87,481



70,045



48,730



40,844



20,963Income before income taxes


159,549



116,887



80,253



52,225



27,218Income taxes


61,830



45,158



31,512



21,015



10,862Net income

$
97,719


$
71,729


$
48,741


$
31,210


$
16,356Net income per share  basic

$
1.55


$
1.15


$
0.79


$
0.56


$
0.30Net income per share  diluted

$
1.55


$
1.15


$
0.79


$
0.55


$
0.29Weighted average shares  basic


62,923



62,319



60,136



37,956



40,583Weighted average shares  diluted


63,131



62,612



62,055



57,264



56,783   25




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As of December 31,2007


2006


2005


2004


2003Statistical DataNumber of customer accounts (at period end)(1)


262,400



204,600



161,800



101,000



57,700Daily average revenue trades (DARTs)(2)


35,500



27,200



19,600



13,600



7,600Customer trades per account(3)


38



37



38



43



47Average commission per trade

$
17.38


$
18.13


$
18.54


$
20.99


$
19.90Option trades as a percent of total trades


67
%


74
%


76
%


79
%


79
%Advertising expense per net new customer account(4)

$
304


$
138


$
93


$
154


$
84Balance Sheet (at period end, in thousands)Cash and short-term investments

$
228,667


$
194,665


$
105,533


$
24,759


$
2,777Total assets


1,155,511



687,524



126,569



40,095



9,990Total liabilities


877,803



506,696



8,050



7,089



2,011Total stockholders equity


277,708



180,828



118,519



33,006



7,979DividendsDividends declared per share (during the period)

$
0.25


$
0.20


$
0.72


$
0.13


$
0.17     (1)
    
    Customer accounts are open, numbered accounts.(2)
    
    DARTs are total revenue-generating trades for a period divided
    by the number of trading days in that period.(3)
    
    Customer trades per account are total trades divided by the
    average number of total customer accounts during the period.(4)
    
    Calculated based on total net new customer accounts opened
    during the period. Excludes accounts acquired in the XpressTrade
    acquisition.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Overview
    Sources
    of Revenue
   26




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Operating
    Expenses
    Results
    of Operations
    Year Ended December 31,2007


2006


2005Results of OperationsNet revenues (in thousands)

$
247,030


$
186,932


$
128,983Compensation and benefits


10.7
%


11.5
%


11.0
%Brokerage, clearing, and other related expenses


8.0



11.5



11.8Advertising


6.0



4.0



4.4Quotation services


3.1



3.0



3.3Depreciation and amortization


2.3



1.8



1.8Technology and telecommunication


1.5



1.6



1.8Other


3.8



4.0



3.7Income before income taxes


64.6



62.6



62.2Income taxes


25.0



24.2



24.4Net income


39.6



38.4



37.8  27




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Year
    Ended December 31, 2007 versus Year Ended December 31,
    2006
  Overview
    
    total customer accounts increased by 57,800 to 262,400, or 28.3%;
    total trades increased by 2.1 million to 8.9 million,
    or 30.2%; and
    average commission per trade decreased by $0.75 to $17.38, or
    4.1%.    Commissions
    Net
    interest revenue and fees
    Other
    brokerage-related revenue
    Other
    income
   28




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Compensation
    and benefits
    Brokerage,
    clearing, and other related expenses
    Advertising
    Quotation
    services
    Depreciation
    and amortization
    Technology
    and telecommunication
    Other
   29




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Income
    taxes
    Net
    income
    Year
    Ended December 31, 2006 versus Year Ended December 31,
    2005
  Overview
    
    total customer accounts increased by 42,800 to 204,600, or 26.5%;
    total trades increased by 1.9 million to 6.8 million,
    or 38.8%; and
    average commission per trade decreased by $0.41 to $18.13, or
    2.2%.    Commissions
    Net
    interest revenue and fees
    Other
    brokerage-related revenue
   30




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Other
    income
    Compensation
    and benefits
    Brokerage,
    clearing, and other related expenses
    Advertising
    Quotation
    services
    Depreciation
    and amortization
    Technology
    and telecommunication
    Other
   31




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Income
    taxes
    Net
    income
    Liquidity
    and Capital Resources
      (Rule 15c3-1)
  Rule 15c3-1
     32




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Credit
    Facility
      Cash
    Flow
        Capital
    Expenditures
  98-1
  Off-Balance-Sheet
    Arrangements
   33




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Summary
    Disclosures about Contractual Obligations and Commercial
    Commitments
    Payments Due by Period(In thousands)Less Than








More ThanContractual Obligations

Total


1 Year


1 - 3 Years


3 - 5 Years


5 YearsCapital lease obligations

$
6


$
6


$



$



$
Operating lease obligations


10,178



1,443



2,873



2,778



3,084Purchase obligations


3,499



1,792



1,707







Total

$
13,683


$
3,241


$
4,580


$
2,778


$
3,084       Critical
    Accounting Policies
  Form 10-K,
  Software
  SOP 98-1
 34




---



##### Table of Contents



Recently
    Issued Accounting Standards
  SFAS No. 157 Fair Value
    Measurements.
  SFAS No. 159 The Fair Value Option for
    Financial Assets and Financial Liabilities instrument-by-instrument
  SFAS No. 160 Non-controlling Interests
    in Consolidated Financial Statements, an amendment of Accounting
    Research Bulletin No. 51
  SFAS No. 141R Business Combinations
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
   35




---



##### Table of Contents



Credit
    Risk
        ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  page F-1 Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  MANAGEMENTS
    ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
    REPORTING
   36




---



##### Table of Contents



37




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 Ernst &
    Young LLP
    38




---



##### Table of Contents



Disclosure
    Controls and Procedures
    Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   PART III  , Form 10-K Form 10-K,
 PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  Form 10-K:
  PageNumber

DescriptionF-1

Index to Consolidated Financial StatementsF-2

Report of Ernst & Young LLP, Independent Registered
    Public Accounting FirmF-3

Consolidated Statements of Financial Condition at
    December 31, 2007 and 2006F-4

Consolidated Statements of Operations at December 31, 2007,
    2006 and 2005F-5

Consolidated Statements of Changes in Stockholders Equity
    for the years ended December 31, 2007, 2006 and 2005F-6

Consolidated Statements of Cash Flows for the years ended
    December 31, 2007, 2006 and 2005F-7

Notes to Consolidated Financial Statements     Form 10-K:
  PageSchedule I  Condensed Financial Information of
    Registrant

S-1          39




---



##### Table of Contents



SIGNATURES      By:
    /s/  DAVID
    A. FISHER   Chief Executive Officer (Principal Executive Officer)
  By:
    /s/  ADAM
    J. DEWITT   Chief Financial Officer (Principal Financial and Accounting
    Officer)
  By:
    /s/  RONALD
    L. WETZEL   Controller
    /s/  JAMES
    A. GRAYJames
    A. Gray

Chairman of the Board/s/  NED
    W. BENNETTNed
    W. Bennett

Director/s/  HOWARD
    C. DRAFTHoward
    C. Draft

Director/s/  BRUCE
    R. EVANSBruce
    R. Evans

Director/s/  DAVID
    A. FISHERDavid
    A. Fisher

Director/s/  STEVEN
    FRADKINSteven
    Fradkin

Director/s/  S.
    SCOTT WALDS.
    Scott Wald

Director  40




---



##### Table of Contents



Exhibits
  ExhibitNumber

Description3
.1

Amended and Restated Certificate of Incorporation of
    optionsXpress Holdings, Inc.(4)3
.2

Amended and Restated By-laws of optionsXpress Holdings, Inc.(1)4
.1

Certificate of Common Stock of optionsXpress Holdings, Inc.(2)10
.1

Restricted Stock Agreement, by and between optionsXpress
    Holdings, Inc. and David A. Fisher(1)(3)10
.2

Management Rights Agreement, dated January 15, 2004, by and
    among investment funds affiliated with Summit Partners, L.P.(1)10
.3

optionsXpress, Inc. 2001 Equity Incentive Plan(1)10
.4

Form of optionsXpress Holdings, Inc. 2005 Equity Incentive
    Plan(1)10
.5

Form of optionsXpress Holdings, Inc. 2005 Employee Stock
    Purchase Plan(1)10
.6

Amended and Restated Retention Agreement, by and between
    optionsXpress, Inc. and James A. Gray dated January 3, 200710
.7

Employment Agreement, dated as of January 15, 2004, by and
    between optionsXpress, Inc. and Ned W. Bennett(1)(3)10
.8

Employment Agreement, by and between optionsXpress Holdings,
    Inc. and David A. Fisher(1)(3)10
.9

Form of Indemnification Agreement, dated as of January 15,
    2004, by and between optionsXpress, Inc. and its directors(1)10
.10

Amended and Restated 2005 Employee Stock Purchase Plan,
    incorporated by reference to the Report on
    Form 8-K,
    filed May 17, 2005(3)14
.1

Code of Ethics(4)21
.1

Subsidiaries of optionsXpress Holdings, Inc.23
.1

Consent of Ernst & Young LLP31
.1

Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     (1)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Registration Statement on
    Form S-1/A
    filed January 7, 2005.(2)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Registration Statement on
    Form S-1/A,
    filed January 24, 2005.(3)
    
    Management Contract(4)
    
    Incorporated by reference to the same exhibit filed with the
    optionsXpress Holdings, Inc. Annual Report of
    Form 10-K,
    filed March 30, 2006. 41




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Consolidated
    Financial Statements
    Years Ended December 31, 2007, 2006 and 2005
  Contents
  Consolidated Financial Statements

F-1Report of Independent Registered Public Accounting Firm

F-2Consolidated Statements of Financial Condition

F-3Consolidated Statements of Operations

F-4Consolidated Statements of Changes in Stockholders Equity

F-5Consolidated Statements of Cash Flows

F-6Notes to Consolidated Financial Statements

F-7  F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm               Ernst &
    Young LLP
    F-2




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Consolidated Statements of Financial
    Condition
  December 312007


2006(In thousands)ASSETSCash and cash equivalents

$
70,492


$
76,590Short-term investments


158,175



118,075Cash and investments segregated in compliance with federal
    regulations


599,059



281,288Receivables from brokerage customers, net


207,417



139,080Receivables from brokers, dealers, and clearing organizations


37,044



21,601Deposits with clearing organizations


28,334



38,115Fixed assets (net of accumulated depreciation and amortization
    of $8,984 and $6,806 at December 31, 2007 and 2006,
    respectively)


12,878



6,619Goodwill


28,616



79Other intangible assets, net


3,900



Other assets


9,596



6,077Total assets

$
1,155,511


$
687,524LIABILITIES AND STOCKHOLDERS EQUITYPayables to brokerage customers

$
851,130


$
476,890Payables to brokers, dealers and clearing organizations


8,002



17,422Accounts payable and accrued liabilities


15,734



8,748Current and deferred income taxes


2,937



3,636Total liabilities


877,803



506,696Stockholders equityCommon stock, $0.0001 par value (187,500 shares
    authorized; 63,026 and 62,386 issued and outstanding at
    December 31, 2007 and 2006, respectively)


6



6Preferred stock, $0.0001 par value (75,000 shares
    authorized; none issued)






Additional paid-in capital


108,064



93,183Accumulated other comprehensive income


49



28Retained earnings


169,589



87,611Total stockholders equity


277,708



180,828Total liabilities and stockholders equity

$
1,155,511


$
687,524    F-3




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
 Consolidated
    Statements of Operations  Years Ended December 312007


2006


2005(In thousands, except per share data)RevenuesCommissions

$
153,913


$
123,305


$
91,410Interest revenue and fees


62,493



30,781



12,813Interest expense


(7,015
)


(1,440
)


Net interest revenue and fees


55,478



29,341



12,813Other brokerage-related revenue


35,389



33,816



24,503Other income


2,250



470



257Net revenues


247,030



186,932



128,983ExpensesCompensation and benefits


26,499



21,510



14,175Brokerage, clearing, and other related expenses


19,910



21,583



15,295Advertising


14,816



7,454



5,681Quotation services


7,579



5,688



4,249Depreciation and amortization


5,710



3,394



2,293Technology and telecommunication


3,593



2,969



2,305Other


9,374



7,447



4,732Total expenses


87,481



70,045



48,730Income before income taxes


159,549



116,887



80,253Income taxes


61,830



45,158



31,512Net income

$
97,719


$
71,729


$
48,741Earnings per common share:Basic

$
1.55


$
1.15


$
0.79Diluted

$
1.55


$
1.15


$
0.79Weighted-average number of common shares:Basic


62,923



62,319



60,136Diluted


63,131



62,612



62,055Dividends declared per share

$
0.25


$
0.20


$
0.72    F-4




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
 Consolidated
    Statements of Changes in Stockholders Equity  Series A





AccumulatedConvertible


Additional


OtherCommon Stock


Preferred Stock


Paid-In


Comprehensive


RetainedShares


Amount


Shares


Amount


Capital


Income (Loss)


Earnings


Total(In thousands)Balance, January 1, 2005


38,296


$
4



18,196


$
2


$
12,450


$
2


$
20,548


$
33,006Preferred stock converted into common stock


18,196



2



(18,196
)


(2
)














Proceeds from initial public offering


5,000















76,725











76,725Direct costs of capital raised


















(1,885
)










(1,885
)Tax benefit (Note 19)


















1,923











1,923Stock options expensed


















24











24Employee stock purchase plan


















14











14Stock option exercises


609















924











924Stock dividend (Note 14)


















1







(1
)


Dividend declared


























(40,938
)


(40,938
)Net income


























48,741



48,741Currency translation adjustment






















9







9Unrealized loss on short-term investments






















(24
)






(24
)Total comprehensive income






















(15
)


48,741



48,726Balance, December 31, 2005


62,101


$
6






$



$
90,176


$
(13
)

$
28,350


$
118,519Tax benefit (Note 19)


















694











694Stock options expensed


















1,452











1,452Employee stock purchase plan


1















21











21Stock option exercises


284















840











840Dividend declared


























(12,468
)


(12,468
)Net income


























71,729



71,729Currency translation adjustment






















17







17Unrealized gain on short-term investments






















24







24Total comprehensive income






















41



71,729



71,770Balance, December 31, 2006


62,386


$
6






$



$
93,183


$
28


$
87,611


$
180,828Tax benefit (Note 19)


















510











510Stock options expensed


















1,863











1,863Employee stock purchase plan


2















43











43Stock option exercises


124















1,315











1,315Stock issued in acquisition


505















11,150











11,150Issuances of common stock


9



























Dividend declared


























(15,741
)


(15,741
)Net income


























97,719



97,719Currency translation adjustment






















21







21Total comprehensive income






















21



97,719



97,740Balance, December 31, 2007


63,026


$
6






$



$
108,064


$
49


$
169,589


$
277,708    F-5




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
 Consolidated
    Statements of Cash Flows  Years Ended December 312007


2006


2005(In thousands)Operating activitiesNet income

$
97,719


$
71,729


$
48,741Adjustments to reconcile net income to cash provided by
    operating activities:Depreciation and amortization


5,710



3,394



2,293Stock-based compensation


1,863



1,452



24Excess tax benefit for stock-based compensation
    (Note 19)










1,923Net deferred income taxes


(73
)


(439
)


195Gain from investment in non-consolidated affiliate


(359
)


(53
)


(189
)Deferred rent


541







Loss from abandonment of fixed assets


94







Payment for lease incentives


116







Changes in operating assets and liabilities:(Increase) decrease in:Cash segregated in compliance with federal regulations


(224,430
)


(280,703
)


(585
)Receivables from brokerage customers, net of allowance for
    doubtful accounts


(67,571
)


(139,080
)


Receivable from brokers, dealers and clearing organizations


(15,119
)


(9,836
)


(2,466
)Deposits with clearing organizations


9,781



(38,115
)


Other assets


(3,569
)


(437
)


3Increase (decrease) in:Payables to brokerage customers


283,361



476,521



369Payables to brokers, dealers and clearing organizations


(9,420
)


17,422



Accounts payable and accrued liabilities


5,125



2,178



1,547Current income taxes payable


(626
)


2,964



(1,150
)Net cash provided by operating activities


83,143



106,997



50,705Investing activitiesPurchases of short-term investments


(168,500
)


(74,275
)


(240,464
)Proceeds from maturities/sales of short-term investments


128,400



51,499



145,165Purchases and development of computer software


(2,528
)


(2,264
)


(1,386
)Purchases of fixed assets


(8,423
)


(3,661
)


(1,263
)Loan to affiliates and non-affiliates


500



(972
)


(2,098
)Cash used in business acquisition


(24,817
)


(79
)


Net cash used in investing activities


(75,368
)


(29,752
)


(100,046
)Financing activitiesExercise of stock options


1,315



840



924Purchases through employee stock purchase plan


43



21



14Excess tax benefit for stock-based compensation
    (Note 19)


510



694



Dividends paid


(15,741
)


(12,468
)


(40,938
)Proceeds from initial public offering










76,725Direct costs of capital raised










(1,885
)Net cash provided by (used in) financing activities


(13,873
)


(10,913
)


34,840Net increase (decrease) in cash and cash equivalents


(6,098
)


66,332



(14,501
)Cash and cash equivalents, beginning of year


76,590



10,258



24,759Cash and cash equivalents, end of year

$
70,492


$
76,590


$
10,258Supplemental disclosure of cash flow information:Income taxes paid

$
62,060


$
41,944


$
30,507Interest paid


7,015



1,450



17Supplemental disclosure of non-cash activity:Non-cash foreign currency translation

$
21


$
17


$
9Non-cash unrealized gain (loss) on short-term investments






24



(24
)Issuance of stock in acquisition


11,150







    F-6




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial Statements
 (In thousands, except per share data)
  1.
    Basis of
    Presentation and Nature of Operations  Basis
    of Presentation
    Nature
    of Operations
        2.
    Summary
    of Significant Accounting Policies  Use of
    Estimates
   F-7




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  Commissions
    Net
    Interest Revenue and Fees
    Other
    Brokerage-Related Revenue
    Advertising
    Income
    Taxes
    Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
  Cash
    and Cash Equivalents
    Short-term
    Investments
   F-8




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Cash
    and Investments Segregated in Compliance with Federal
    Regulations
  Rule 15c3-3
  Fixed
    Assets
    Accounting
    for the Costs of Computer Software Developed or Obtained for
    Internal Use (SOP 98-1),
  Securities
    Borrowed
    Customer
    Transactions
    Stock-Based
    Compensation
  Accounting for Stock-Based Compensation Share-Based Payment
 F-9




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Earnings
    Per Share
      Fair
    Value of Financial Instruments
  Disclosure about Fair Value of
    Financial Instruments,
  Goodwill
    Other
    Intangible Assets, Net
    3.
    Recent
    Accounting Pronouncements  SFAS No. 157 Fair Value
    Measurements.
  SFAS No. 159 The Fair Value Option for
    Financial Assets and Financial Liabilities
 F-10




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  instrument-by-instrument
  SFAS No. 160 Non-controlling Interests
    in Consolidated Financial Statements, an amendment of Accounting
    Research Bulletin No. 51
  SFAS No. 141R Business Combinations
  4.
    Business
    Acquisition  24-hour
   F-11




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  5.
    Stock-Based
    Compensation    2005Net income, as reported

$
48,741Deduct  Total stock-based employee compensation
    expense determined under fair value-based method for all awards,
    net of tax


375Pro forma net income


48,366Less income allocable to preferred stock


1,020Pro forma net income applicable to common stockholders

$
47,346Income per share:Basic, as reported

$
0.79Basic, pro forma


0.79Diluted, as reported


0.79Diluted, pro forma


0.79     6.
    Short-Term
    Investments    Amortized

UnrealizedMaturity Period

Type of Security

Cost

Losses

Fair ValueMaturity of greater than ten years


Auction Rate Certificates


$
86,475


$



$
86,475$
86,475


$



$
86,475     Amortized

UnrealizedMaturity Period

Type of Security

Cost

Losses

Fair ValueMaturity of greater than ten years


Auction Rate Certificates


$
71,700


$



$
71,700$
71,700


$



$
71,700     Amortized


UnrealizedMaturity Period

Type of Security


Cost


Losses


Fair ValueMaturity of less than five years


Auction Rate Certificates


$
1,550


$



$
1,550Maturity of greater than ten years


Auction Rate Certificates



45,675







45,675$
47,225


$



$
47,225  F-12




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Amortized

UnrealizedMaturity Period

Type of Security

Cost

Losses

Fair ValueMaturity of less than five years


Auction Rate Certificates


$
500


$



$
500Maturity of greater than ten years


Auction Rate Certificates



70,350







70,350$
70,850


$



$
70,850   7.
    Receivables
    from Brokers, Dealers and Clearing Organizations    2007


2006Deposits for securities borrowed

$
30,529


$
11,828Securities failed to deliver


152



1,599Other receivables from brokers, dealers, futures clearing agents
    and clearing organizations


6,363



8,174$
37,044


$
21,601   8.
    Fixed
    Assets    2007


2006Furniture and equipment

$
11,468


$
7,585Leasehold improvements


4,077



215Computer software


6,317



5,62521,862



13,425Less accumulated depreciation and amortization


(8,984
)


(6,806
)$
12,878


$
6,619     9.
    Goodwill
    and Other Intangible Assets    Balance, January 1, 2006

$
Goodwill recorded in purchase of optionsXpress Europe


79Balance, December 31, 2006

$
79Goodwill recorded in purchase of XpressTrade (Note 4)


28,537Balance, December 31, 2007

$
28,616  F-13




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
      December 31, 2007Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


AmountCustomer relationships

$
4,500


$
(900
)

$
3,600Trade name


300







300$
4,800


$
(900
)

$
3,900         10.
    Other
    Assets    2007


2006Interest receivable

$
3,313


$
861Loan receivable


2,500



3,000Prepaid expenses


1,318



1,067Investment in non-consolidated subsidiary


816



436Other


1,649



713$
9,596


$
6,077  F-14




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  11.
    Payables
    to Brokers, Dealers and Clearing Organizations    2007


2006Payables to clearing organizations

$
7,183


$
6,069Securities failed to receive


819



11,353$
8,002


$
17,422   12.
    Accounts
    Payable and Accrued Liabilities    2007


2006Accrued employee compensation

$
2,988


$
3,884Deferred rent


3,008



Accounts payable


1,361



768Other accrued expenses


8,377



4,096$
15,734


$
8,748   13.
    Commitments,
    Contingencies, and Guarantees  Commitments
      December 31,2008

$
1,4432009


1,4392010


1,4342011


1,4292012


1,3492013


1,3782014


1,2352015


471$
10,178      F-15




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
      Credit
    Facility
    General
    Contingencies
       F-16




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  Legal
    Contingencies
      Guarantees
        14.
    Capitalization  Common
    Stock
    Preferred
    Stock
    Dividends
   F-17




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    2007


2006


2005Common stock:March 31

$
0.0625


$
0.0500


$
0.6000
*June 30


0.0625



0.0500



0.0400September 30


0.0625



0.0500



0.0400December 31


0.0625



0.0500



0.0400Convertible preferred stock:March 31

$



$



$
0.6000
*     *
    
    Dividend paid to all stockholders of record immediately prior to
    the Companys initial public offering.  15.
    Employee
    Benefit Plan    16.
    Employee
    Stock Purchase Plan    17.
    Equity
    Incentive Plans      Options
   F-18




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Weighted


WeightedAverage


Average


AggregateNumber of


Exercise


Remaining Life


IntrinsicOptions


Price


(years)


ValueOutstanding, January 1


785


$
17.56Granted to employees


285



24.93Exercised by employees


(124
)


10.57Forfeited by employees


(161
)


27.04Outstanding, December 31


785


$
19.41



7.84


$
11,316Exercisable, December 31


357


$
12.92



6.59


$
7,458     Options Outstanding


Options ExercisableWeighted-





Weighted-Range of





Remaining


Average


Number of


AverageExercise Prices





Contractual


Exercise


Options


ExerciseLow

High


Number


Life (Years)


Price


Exercisable


Price$0.17

$
7.14



75



5.06


$
1.91



75


$
1.91$7.15

$
15.96



179



6.77



12.32



149



11.74$15.97

$
21.00



134



7.36



17.87



91



16.75$21.01

$
28.58



330



9.18



25.50



29



27.15$28.59

$
32.77



67



8.18



31.00



13



31.00785



7.84


$
19.41



357


$
12.92       2007


2006


2005Risk-free interest rate


4.3
%


4.6
%


4.3
%Expected volatility


35
%


42
%


42
%Annual dividend yield


1
%


1
%


1
%Expected life


7.5 years



7.5 years



5 years    F-19




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  Deferred
    Shares
      Weighted


WeightedAverage


Average


AggregateNumber of


Grant Date


Remaining Life


IntrinsicShares


Fair Value


(years)


ValueNonvested, January 1


45


$
30.78Granted to employees


108



24.28Released to employees


(9
)


30.78Forfeited by employees


(43
)


25.45Nonvested, December 31


101


$
26.09



1.95


$
3,417     18.
    Regulatory
    Requirements  (Rule 15c3-1)
  Rule 15c3-1
   F-20




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  19.
    Income
    Taxes    Years Ended December 312007


2006


2005Current:Federal

$
49,741


$
36,860


$
25,421State


11,671



8,737



5,896Foreign


491







61,903



45,597



31,317Deferred:Federal


(113
)


(375
)


149State


40



(64
)


46(73
)


(439
)


195Total income tax expense

$
61,830


$
45,158


$
31,512     Years Ended December 312007


2006


2005Federal income tax at statutory rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal tax effect


4.8



4.8



4.8Other


(1.0
)


(1.2
)


(0.5
)38.8
%


38.6
%


39.3
%     December 312007


2006


2005Deferred tax assets:Stock-based compensation

$
1,006


$
506


$
Deferred rent


1,196







Other deferred tax assets


464







Total deferred tax assets


2,666



506



Deferred tax liabilities:Property and intangible assets


(2,707
)


(751
)


(751
)Other deferred tax liabilities


(556
)


(425
)


(358
)Total deferred tax liabilities


(3,263
)


(1,176
)


(1,109
)Net deferred tax liabilities

$
(597
)

$
(670
)

$
(1,109
)    F-21




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
      20.
    Earnings
    Per Share    Years Ended December 312007


2006


2005Reported net income

$
97,719


$
71,729


$
48,741Less income allocable to preferred stock










1,028Adjusted net income applicable to common stockholders

$
97,719


$
71,729


$
47,713Weighted-average number of common shares outstanding 
    basic


62,923



62,319



60,136Effect of dilutive securities


208



293



1,919Weighted-average number of common shares outstanding 
    diluted


63,131



62,612



62,055Basic EPS

$
1.55


$
1.15


$
0.79Diluted EPS

$
1.55


$
1.15


$
0.79   21.
    Related
    Party Transactions     F-22




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  22.
    Quarterly
    Financial Information (Unaudited)    2007First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Full YearRevenues

$
54,728


$
59,400


$
64,089


$
68,813


$
247,030Net income before income taxes


34,784



37,873



41,345



45,547



159,549Net income


21,281



23,170



25,265



28,003



97,719Basic earnings per share


0.34



0.37



0.40



0.44



1.55Diluted earnings per share


0.34



0.37



0.40



0.44



1.55   2006First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Full YearRevenues

$
46,438


$
47,311


$
43,837


$
49,346


$
186,932Income before income taxes


29,603



29,474



26,401



31,409



116,887Net income


18,045



17,998



16,262



19,424



71,729Basic earnings per share


0.29



0.29



0.26



0.31



1.15Diluted earnings per share


0.29



0.29



0.26



0.31



1.15  F-23




---



##### Table of Contents



Schedule I 
    Condensed Financial Information of the Registrant.
  optionsXpress
    Holdings, Inc.
    (Parent Company)
  Statements of Operations
  For the


For theYear Ended


Year EndedDecember 31,


December 31,2007


2006(In thousands)RevenuesInterest income

$
2,753


$
3,102Dividend income from subsidiaries


82,500



32,00085,253



35,102Expenses


2,920



3,178Income before income taxes


82,333



31,924Income taxes


4,644



247Income before equity in undistributed net income of subsidiaries


77,689



31,677Equity in undistributed net income of subsidiaries


20,030



40,052Net income

$
97,719


$
71,729  S-1




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
    (Parent Company)
  Statements of Financial Condition
  December 31,


December 31,2007


2006(In thousands)ASSETSCash and cash equivalents

$
6,063


$
1,102Short-term investments


86,475



47,225Investment in subsidiaries


187,944



128,910Due from subsidiaries


3,312



3,967Other assets


1,652



538Total assets

$
285,446


$
181,742LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accrued liabilities

$
1,765


$
775Due to subsidiaries


5,973



139Total liabilities


7,738



914Total stockholders equity


277,708



180,828Total liabilities and stockholders equity

$
285,446


$
181,742  S-2




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
    (Parent Company)
  Statements of Cash Flows
  For the


For theYear Ended


Year EndedDecember 31,


December 31,2007


2006(In thousands)Operating activitiesNet income

$
97,719


$
71,729Adjustments to reconcile net income to cash provided by
    operating activities:Equity in undistributed net income of subsidiaries


(20,030
)


(40,052
)Depreciation and amortization


26



24Net deferred income taxes


(230
)


(77
)Changes in operating assets and liabilities:(Increase) decrease in:Due from subsidiaries


655



(835
)Other assets


(926
)


3,166Increase (decrease) in:Accounts payable and accrued liabilities


976



289Due to subsidiaries


5,834



139Net cash provided by operating activities


84,024



34,383Investing activitiesPurchases of short-term investments


(81,950
)


(65,025
)Proceeds from maturities/sales of short-term investments


42,700



42,556Equity investment in subsidiaries


(25,938
)


(311
)Purchases and development of computer software


(2
)


(76
)Net cash used in investing activities


(65,190
)


(22,856
)Financing activitiesExercise of stock options


1,315



840Purchases through employee stock purchase plan


43



21Excess tax benefit for stock- based compensation


510



694Dividends paid


(15,741
)


(12,468
)Net cash used in financing activities


(13,873
)


(10,913
)Net increase in cash


4,961



614Cash and cash equivalents, beginning of year


1,102



488Cash and cash equivalents, end of year

$
6,063


$
1,102Supplemental disclosure of cash flow information:Income taxes paid

$
61,995


$
41,938Supplemental disclosure of non-cash activity:Non-cash foreign currency translation


21



17Non-cash unrealized gain (loss) on short-term investments






24Transfer of short-term investments to subsidiary






70,543Issuance of stock in acquisition


11,150



  S-3




---



##### Table of Contents



Notes to
    Condensed Financial Statements (in thousands)
   S-4