##### Table of Contents





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, 2008oro

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
  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


24ITEM 3.


LEGAL PROCEEDINGS


24ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


24PART IIITEM 5.


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


24ITEM 6.


SELECTED FINANCIAL DATA


27ITEM 7.


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


28ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


39ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


40ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


40ITEM 9A.


CONTROLS AND PROCEDURES


40ITEM 9B.


OTHER INFORMATION


43PART IIIITEM 10.


DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11.


EXECUTIVE COMPENSATIONITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    AND RELATED STOCKHOLDER MATTERSITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14.


PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15.


EXHIBITS, FINANCIAL STATEMENT SCHEDULES


43SIGNATURES


44    REPORT 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-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 CFO  2




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Forward-Looking
    Statements
  Form 10-K, Form 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, brokersXpress and our institutional
    business;
    the statements about the impact of changes in interest rates on
    our earnings;
    the statements concerning continued financing options;
    the statements regarding scalability of our systems and the cost
    of capacity increases; and
    the statements concerning uncertainties and deteriorations in
    the credit and capital markets and the credit quality of our
    auction rate securities.  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 in Professional Advisor and Independent Representative
    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 2006, we obtained a license to provide brokerage services in
    Singapore and we received approval to provide brokerage services
    in the European Union; and
    in 2008, we entered into an exclusive marketing agreement with
    Reliance Money Limited of India.   5




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Pursue
    Selective Strategic Acquisitions
    
    expand our product offering;
    accelerate the growth of one of our developing businesses like
    brokersXpress, futures, international, or institutional; or
    provide technology capabilities that allow us to continue to
    provide superior differentiating tools to our customers.  Business
    Acquisitions
            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. 6




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
    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 to trade futures
    side-by-side
    with other securities. optionsXpress customers can now trade
    futures products at over 20 exchanges,
    24-hours a
    day.
    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.
    Xecute®

    (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 7




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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.  
    myOX.  myOX allows customers to take greater
    control of how they view market and account information by
    customizing the optionsXpress website to their specific
    interests and preferences. The adaptable modular interface
    allows customers to select information that they want to see,
    its location on the screen and how it is displayed.
    Research Center.  Research center gathers all
    of the market information customers need in one place, with
    highly organized menus, hover-over article abstracts, a
    convenient reader function, quick calendars and the ability to
    search for news and research by symbol.    
    Over 475 live internet webinars in 2008 and 65 downloadable on
    demand 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.  Customer
    Service
  e-mail
  e-mail
    Marketing
     8




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e-mail
    Broker-Dealer
    Operations
  Order
    Processing
    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.     9




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Margin
    and Leverage
    Payment
    for Order Flow
    Supervision
    and Compliance
      Technology
    Systems and Architecture
   10




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Intellectual
    Property
    optionsXpress brokersXpress Open E Cry optionsXpress brokersXpress
  Competition
    and Pricing
        Employees
   11




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Available
    Information
  Form 10-K, Form 10-Q, Form 10-K, Form 10-Q, Form 8-K,
  Regulation
  Overview
        Net
    Capital Rule
     12




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Foreign
    Jurisdictions and Regulation
    and/or
  Patriot
    Act
    ITEM 1A.
    RISK
    FACTORS  Form 10-K
  We may be
    unable to effectively manage our growth and retain our
    customers.
      We
    operate in a highly regulated industry and compliance failures
    could adversely affect our business.
   13




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
    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
  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.
   14




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Substantial
    competition could reduce our market share and harm our financial
    performance.
        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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and/or
      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.
   17




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
    a loss of customers or a reduction in the growth of our customer
    base;
    increased operating expenses;
    financial losses;
    litigation or other customer claims; and regulatory sanctions or
    additional regulatory burdens; or
    regulatory sanctions or additional regulatory burdens.    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;
    increased litigation risk with transaction parties; and
    dilution to existing stockholders.    Failure
    to comply with net capital requirements could adversely affect
    our business.
   19




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Our
    self-clearing operations for securities expose us to liability
    for errors in clearing functions.
    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.
     20




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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.
    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; 21




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
    changes in the market valuations of other companies operating in
    our industry;
    changes in investment firms ability or desire to invest in
    publicly traded equities;
    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.
    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.
   22




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Our
    investments in auction rate securities are subject to risks that
    may cause losses and affect the liquidity of these
    investments.
  2025-2041)
          ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   23




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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 CenterPowell, OH


5,609 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 Price2008


2007High


Low


High


LowFirst Quarter

$
33.39


$
19.56


$
25.65


$
21.89Second Quarter

$
24.67


$
19.77


$
27.67


$
23.06Third Quarter

$
26.52


$
19.42


$
28.41


$
21.97Fourth Quarter

$
19.01


$
11.29


$
33.90


$
26.61    24




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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
     25




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Recent
    Sales of Unregistered Securities; Use of Proceeds from
    Registered Securities
    Purchases
    of Equity Securities by the Issuer
    TotalNumber ofShares


ApproximatePurchased


Dollar Value ofas Part of


Shares thatTotal





Publicly


May Yet BeNumber of


Average


Announced


PurchasedShares


Price


Plans


Under the PlansPurchased


Paid per


or Programs


or ProgramsPeriod

(1)


Share


(1)


(3)October 1 through October 31, 2008





$







$
31,715,254November 1 through November 30, 2008


495,900



12.40



495,900



25,566,934December 1 through December 31, 2008


675,217



12.15



675,217



17,361,6961,171,117
(2)

$
12.26



1,171,117


$
17,361,696     (1)
    
    Represents shares that were repurchased by us pursuant to a
    stock repurchase program approved by our Board of Directors on
    February 13, 2008 that authorizes us to repurchase up to
    $100 million of our outstanding common stock (the
    Repurchase Program). The Repurchase Program has no
    expiration date and may be terminated at any time by the Board
    of Directors.(2)
    
    Represents repurchased shares which were retired to authorized,
    but unissued.(3)
    
    Does not include shares that may yet be repurchased by us
    pursuant to a stock purchase agreement we entered into with Ned
    W. Bennett on February 14, 2008 (the Bennett Stock
    Purchase Agreement) because, according to its terms, there
    is no maximum number of shares that may be repurchased. The
    Bennett Stock Purchase Agreement does not have an expiration
    date and does not create an obligation for us to buy, or
    Mr. Bennett to sell to us, any of his shares of our common
    stock. The number of shares we may purchase under the Bennett
    Stock Purchase Agreement is limited only by the number of shares
    of our common stock that Mr. Bennett may hold from time to
    time. 26




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ITEM 6.
    SELECTED
    FINANCIAL DATA    Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share data)Results of OperationsRevenuesCommissions

$
167,562


$
153,913


$
123,305


$
91,410


$
71,567Interest revenue and fees


46,956



62,493



30,781



12,813



3,648Interest expense


(1,794
)


(7,015
)


(1,440
)






Net interest revenue and fees


45,162



55,478



29,341



12,813



3,648Other brokerage related revenue


30,832



35,389



33,816



24,503



17,751Other


3,002



2,250



470



257



103Net revenues

$
246,558


$
247,030


$
186,932


$
128,983


$
93,069ExpensesCompensation and benefits

$
28,571


$
26,499


$
21,510


$
14,175


$
9,760Brokerage, clearing, and other related expenses


27,675



19,910



21,583



15,295



14,258Advertising


20,716



14,816



7,454



5,681



6,675Quotation services


6,594



7,579



5,688



4,249



3,693Depreciation and amortization


7,423



5,710



3,394



2,293



1,648Technology and telecommunication


4,226



3,593



2,969



2,305



1,434Other


10,030



9,374



7,447



4,732



3,376Total expenses


105,235



87,481



70,045



48,730



40,844Income before income taxes


141,323



159,549



116,887



80,253



52,225Income taxes


51,008



61,830



45,158



31,512



21,015Net income

$
90,315


$
97,719


$
71,729


$
48,741


$
31,210Net income per share  basic

$
1.49


$
1.55


$
1.15


$
0.79


$
0.56Net income per share  diluted

$
1.49


$
1.55


$
1.15


$
0.79


$
0.55Weighted average shares  basic


60,566



62,923



62,319



60,136



37,956Weighted average shares  diluted


60,720



63,131



62,612



62,055



57,264   27




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As of December 31,2008


2007


2006


2005


2004Statistical DataNumber of customer accounts (at period end)(1)


318,600



262,400



204,600



161,800



101,000Daily average revenue trades (DARTs)(2) Retail DARTs


36,500



35,500



27,200



19,600



13,600Institutional DARTs(3)


7,100















Total DARTs


43,600



35,500



27,200



19,600



13,600Customer trades per account(4)


38



38



37



38



43Average commission per trade

$
15.27


$
17.38


$
18.13


$
18.54


$
20.99Option trades as a percent of total trades


53
%


67
%


74
%


76
%


79
%Advertising expense per net new customer account(5)

$
388


$
304


$
138


$
93


$
154Balance Sheet (at period end, in thousands)Cash and investments in securities

$
204,387


$
228,667


$
194,665


$
105,533


$
24,759Total assets


972,333



1,155,511



687,524



126,569



40,095Total liabilities


704,443



877,803



506,696



8,050



7,089Total stockholders equity


267,890



277,708



180,828



118,519



33,006DividendsDividends declared per share (during the period)

$
0.32


$
0.25


$
0.20


$
0.72


$
0.13     (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)
    
    Includes all Open E Cry and other institutional
    revenue-generating trades beginning in July 2008.(4)
    
    Customer trades per account are total trades divided by the
    average number of total customer accounts during the period.(5)
    
    Calculated based on total net new customer accounts opened
    during the period. Excludes accounts acquired in the XpressTrade
    and Open E Cry acquisitions.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Overview
    Sources
    of Revenue
   28




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Operating
    Expenses
    Results
    of Operations
    Year Ended December 31,2008


2007


2006Results of OperationsNet revenues (in thousands)

$
246,558


$
247,030


$
186,932Compensation and benefits


11.6
%


10.7
%


11.5
%Brokerage, clearing, and other related expenses


11.2



8.0



11.5Advertising


8.4



6.0



4.0Quotation services


2.7



3.1



3.0Depreciation and amortization


3.0



2.3



1.8Technology and telecommunication


1.7



1.5



1.6Other


4.1



3.8



4.0Income before income taxes


57.3



64.6



62.6Income taxes


20.7



25.0



24.2Net income


36.6



39.6



38.4  29




---



##### Table of Contents



Year
    Ended December 31, 2008 versus Year Ended December 31,
    2007
  Overview
    
    total customer accounts increased by 56,200 to 318,600, or 21.4%;
    total trades increased by 2.1 million to 11.0 million,
    or 23.9%;
    the decline in the target federal funds rate from 4.25% at the
    beginning of the year to 0.00-0.25% at the end of the
    year; and
    the incorporation of Open E Crys results beginning
    July 1, 2008, which represented 16% of our total trades.  Commissions
    Net
    interest revenue and fees
    Other
    brokerage-related revenue
    Other
    income
    Compensation
    and benefits
    Brokerage,
    clearing, and other related expenses
   30




---



##### Table of Contents



Advertising
    Quotation
    services
    Depreciation
    and amortization
    Technology
    and telecommunication
    Other
    Income
    taxes
    Net
    income
   31




---



##### Table of Contents



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
    Compensation
    and benefits
   32




---



##### Table of Contents



Brokerage,
    clearing, and other related expenses
    Advertising
    Quotation
    services
    Depreciation
    and amortization
    Technology
    and telecommunication
    Other
   33




---



##### Table of Contents



Income
    taxes
    Net
    income
    Liquidity
    and Capital Resources
    2025-2041)
       34




---



##### Table of Contents



250bps-300bps
        (Rule 15c3-1)
  Rule 15c3-1
   35




---



##### Table of Contents



Credit
    Facility
        Cash
    Flow
        Capital
    Expenditures
  98-1
 36




---



##### Table of Contents



Off-Balance-Sheet
    Arrangements
    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 YearsOperating lease obligations

$
8,100


$
1,292


$
3,937


$
2,871


$
Purchase obligations


3,811



3,411



400







Total

$
11,911


$
4,703


$
4,337


$
2,871


$
     Critical
    Accounting Policies
  Form 10-K,
  Investments
    in Securities
     37




---



##### Table of Contents



Software
  SOP 98-1
    Recently
    Issued Accounting Standards
  SFAS No. 141R Business Combinations
  SFAS No. 160
  SFAS No. 161
  
    how and why an entity uses derivative instruments;
    how derivative instruments and related hedged items are
    accounted for under SFAS No. 133 and its related
    interpretations; and
    how derivative instruments and related hedged items affect an
    entitys financial position, financial performance and cash
    flows.     38




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
        Credit
    Risk
   39




---



##### Table of Contents



Securities
    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
  Disclosure
    Controls and Procedures
    Managements
    Report on Internal Control over Financial Reporting
     40




---



##### Table of Contents



Form 10-K Form 10-K.
 41




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   
              Ernst &
    Young LLP
  
 42




---



##### Table of Contents



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, 2008 and 2007F-4

Consolidated Statements of Operations at December 31, 2008,
    2007 and 2006F-5

Consolidated Statements of Changes in Stockholders Equity
    for the years ended December 31, 2008, 2007 and 2006F-6

Consolidated Statements of Cash Flows for the years ended
    December 31, 2008, 2007 and 2006F-7

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


S-1          43




---



##### 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/  MICHAEL
    SOENENMichael
    Soenen

Director/s/  S.
    SCOTT WALDS.
    Scott Wald

Director  44




---



##### Table of Contents



Exhibits
  ExhibitNumber

Description3
.1

Amended and Restated Certificate of Incorporation of
    optionsXpress Holdings, Inc.(8)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)(4)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,
    2007(3)10
.7

Employment Agreement, dated as of January 15, 2004, by and
    between optionsXpress, Inc. and Ned W. Bennett(1)(4)10
.8

Form of Indemnification Agreement, dated as of January 15,
    2004, by and between optionsXpress, Inc. and its directors(1)10
.9

Amended and Restated 2005 Employee Stock Purchase Plan,
    incorporated by reference to the Report on
    Form 8-K,
    filed May 17, 2005(4)10
.10

optionsXpress Holdings, Inc, Stock Purchase Agreement, dated as
    of February 13, 2008, by and among Ned Bennett and
    optionsXpress Holdings, Inc.(5)10
.11

Employment Agreement, dated as of April 18, 2008, by and
    between optionsXpress Holdings, Inc. and David Fisher(4)(6)10
.12

Employment Agreement, dated as of April 18, 2008, by and
    between optionsXpress Holdings, Inc. and Adam DeWitt(4)(6)10
.13

optionsXpress Holdings, Inc. 2008 Equity Incentive Plan, as
    amended(7)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)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Annual Report on
    Form 10-K
    filed February 29, 2008.(4)
    
    Management Contract(5)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Current Report on
    Form 8-K
    filed February 14, 2008.(6)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Current Report on
    Form 8-K
    filed April 22, 2008.(7)
    
    Incorporated by reference to Appendix A to optionsXpress
    Holdings, Inc. Proxy Statement filed April 18, 2008, as
    amended in optionsXpress Holdings, Inc. Proxy Statement filed
    May 13, 2008.(8)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Annual Report on
    Form 10-K
    filed March 30, 2006. 45




---



##### 



optionsXpress
    Holdings, Inc.
  Consolidated
    Financial Statements
 Years
    Ended December 31, 2008, 2007 and 2006
  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 312008


2007(In thousands)ASSETSCash and cash equivalents

$
114,450


$
70,492Cash and investments segregated in compliance with federal
    regulations


427,669



599,059Receivables from brokerage customers, net


137,502



207,417Receivables from brokers, dealers, and clearing organizations


15,621



37,044Investments in securities


89,937



158,175Deposits with clearing organizations


108,409



28,334Fixed assets (net of accumulated depreciation and amortization
    of $15,376 and $8,984 at December 31, 2008 and 2007,
    respectively)


12,979



12,878Goodwill


44,234



28,616Other intangible assets, net


4,569



3,900Other assets


16,963



9,596Total assets

$
972,333


$
1,155,511LIABILITIES AND STOCKHOLDERS EQUITYPayables to brokerage customers

$
675,872


$
851,130Payables to brokers, dealers and clearing organizations


293



8,002Accounts payable and accrued liabilities


28,253



15,734Current and deferred income taxes


25



2,937Total liabilities


704,443



877,803Stockholders equityCommon stock, $0.0001 par value (250,000 shares
    authorized; 58,780 and 63,026 issued and outstanding at
    December 31, 2008 and 2007, respectively)


6



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






Additional paid-in capital


28,555



108,064Accumulated other comprehensive (loss) income


(1,340
)


49Retained earnings


240,669



169,589Total stockholders equity


267,890



277,708Total liabilities and stockholders equity

$
972,333


$
1,155,511    F-3




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Consolidated
    Statements of Operations
  Years Ended December 312008


2007


2006(In thousands, except per share data)RevenuesCommissions

$
167,562


$
153,913


$
123,305Interest revenue and fees


46,956



62,493



30,781Interest expense


(1,794
)


(7,015
)


(1,440
)Net interest revenue and fees


45,162



55,478



29,341Other brokerage-related revenue


30,832



35,389



33,816Other income


3,002



2,250



470Net revenues


246,558



247,030



186,932ExpensesCompensation and benefits


28,571



26,499



21,510Brokerage, clearing, and other related expenses


27,675



19,910



21,583Advertising


20,716



14,816



7,454Quotation services


6,594



7,579



5,688Depreciation and amortization


7,423



5,710



3,394Technology and telecommunication


4,226



3,593



2,969Other


10,030



9,374



7,447Total expenses


105,235



87,481



70,045Income before income taxes


141,323



159,549



116,887Income taxes


51,008



61,830



45,158Net income

$
90,315


$
97,719


$
71,729Earnings per common share:Basic

$
1.49


$
1.55


$
1.15Diluted

$
1.49


$
1.55


$
1.15Weighted-average number of common shares:Basic


60,566



62,923



62,319Diluted


60,720



63,131



62,612Dividends declared per share

$
0.32


$
0.25


$
0.20    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, 2006


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 investments in securities






















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


$
277,708Tax benefit (Note 19)


















(19
)










(19
)Stock options expensed


















2,574











2,574Employee stock purchase plan


3















41











41Stock option exercises


22















222











222Stock repurchases


(4,537
)














(87,537
)










(87,537
)Stock issued in acquisition


235















5,210











5,210Issuances of common stock


31



























Dividend declared


























(19,235
)


(19,235
)Net income


























90,315



90,315Change in unrealized loss on available for sale securities, net
    of tax of $777






















(1,311
)






(1,311
)Currency translation adjustment, net of tax of $16






















(78
)






(78
)Total comprehensive income






















(1,389
)


90,315



88,926Balance, December 31, 2008


58,780


$
6






$



$
28,555


$
(1,340
)

$
240,669


$
267,890    F-5




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Consolidated
    Statements of Cash Flows
  Years Ended December 312008


2007


2006(In thousands)Operating activitiesNet income

$
90,315


$
97,719


$
71,729Adjustments to reconcile net income to cash provided by
    operating activities:Depreciation and amortization


7,423



5,710



3,394Stock-based compensation


2,574



1,863



1,452Deferred income taxes


(536
)


(73
)


(439
)Loss (gain) from investment in non-consolidated affiliate


7



(359
)


(53
)Loss from abandonment of fixed assets






94



Unrealized loss (gain), deferred rent and other


39



541



Payment for lease incentives






116



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


219,878



(224,430
)


(280,703
)Receivables from brokerage customers, net


69,948



(67,571
)


(139,080
)Receivable from brokers, dealers and clearing organizations


21,501



(15,119
)


(9,836
)Investments in securities


2,500







Deposits with clearing organizations


(80,075
)


9,781



(38,115
)Other assets


(5,354
)


(3,569
)


(437
)Increase (decrease) in:Payables to brokerage customers


(221,162
)


283,361



476,521Payables to brokers, dealers and clearing organizations


(7,709
)


(9,420
)


17,422Accounts payable and accrued liabilities


10,937



5,125



2,178Current income taxes


(3,788
)


(626
)


2,964Net cash provided by operating activities


106,498



83,143



106,997Investing activitiesPurchases of investments in securities


(20,600
)


(168,500
)


(74,275
)Proceeds from sales and maturities of investments in securities


84,250



128,400



51,499Purchases and development of computer software


(3,794
)


(2,528
)


(2,264
)Purchases of fixed assets


(1,949
)


(8,423
)


(3,661
)Loan to non-affiliates


(1,000
)


500



(972
)Dividend from affiliate


211







Cash used in acquisition


(13,130
)


(24,817
)


(79
)Net cash provided by (used in) investing activities


43,988



(75,368
)


(29,752
)Financing activitiesExercise of stock options


222



1,315



840Excess tax benefit for stock-based compensation


(19
)


510



694Purchases through employee stock purchase plan


41



43



21Stock repurchases


(87,537
)






Dividends paid


(19,235
)


(15,741
)


(12,468
)Net cash used in financing activities


(106,528
)


(13,873
)


(10,913
)Net increase (decrease) in cash and cash equivalents


43,958



(6,098
)


66,332Cash and cash equivalents, beginning of year


70,492



76,590



10,258Cash and cash equivalents, end of year

$
114,450


$
70,492


$
76,590Supplemental disclosure of cash flow information:Income taxes paid

$
55,342


$
62,060


$
41,944Interest paid


1,794



7,015



1,450Supplemental disclosure of non-cash activity:Non-cash foreign currency translation gain (loss)

$
(94
)

$
21


$
17Non-cash change in unrealized gain (loss) on available for sale
    investments in securities


(2,088
)






24Issuance of stock in acquisition

$
5,210


$
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
   F-8




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Cash
    and Cash Equivalents
    Investments
    in Securities
    Trading.
    Available-for-sale.
  Other-than-temporary
    impairment. available-for-sale other-than-temporary other-than-temporary available-for-sale
  Cash
    and Investments Segregated in Compliance with Federal
    Regulations
  Rule 15c3-3
  Fixed
    Assets
   F-9




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounting
    for the Costs of Computer Software Developed or Obtained for
    Internal Use (SOP 98-1),
  Securities
    Borrowed
    Customer
    Transactions
    Stock-Based
    Compensation
    Earnings
    Per Share
    Fair
    Value of Financial Instruments
   F-10




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  157-2, FSP 157-2 FSP 157-2
  contract-by-contract
  Disclosure about Fair Value of
    Financial Instruments,
  Goodwill
    Other
    Intangible Assets, Net
    3.
    Recent
    Accounting Pronouncements     F-11




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      4.
    Business
    Acquisitions      24-hour
   F-12




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  5.
    Investments
    in Securities  available-for-sale
  Amortized


UnrealizedMaturity Period

Type of Security


Cost


Losses(1)


Fair ValueMaturity of greater than ten years


Auction Rate Securities


$
27,900


$
(2,088
)

$
25,812$
27,900


$
(2,088
)

$
25,812   marked-to-market
  Amortized


UnrealizedMaturity Period

Type of Security

Cost


Losses( 2)


Fair ValueMaturity of greater than ten years

Auction Rate Securities

$
64,125


$
(4,446
)

$
59,679Maturity less than ten years

UBS Put Right

$



$
4,446


$
4,446$
64,125


$



$
64,125     (1)
    
    Unrealized loss is reported within consolidated other
    comprehensive income.(2)
    
    Unrealized gain (loss) is reported within the consolidated
    statement of operations.  available-for-sale
  Amortized


UnrealizedMaturity Period

Type of Security

Cost


Losses


Fair ValueMaturity of greater than ten years

Auction Rate Securities

$
86,475


$



$
86,475$
86,475


$



$
86,475   marked-to-market
  Amortized


UnrealizedMaturity Period

Type of Security

Cost


Losses


Fair ValueMaturity of greater than ten years

Auction Rate Securities

$
71,700


$



$
71,700$
71,700


$



$
71,700   6.
    Receivables
    from Brokers, Dealers and Clearing Organizations    2008


2007Deposits for securities borrowed

$
8,364


$
30,529Securities failed to deliver


2,917



152Other receivables from brokers, dealers and clearing
    organizations


4,340



6,363$
15,621


$
37,044  F-13




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  7.
    Fixed
    Assets    2008


2007Furniture and equipment

$
13,484


$
11,468Leasehold improvements


4,127



4,077Computer software


10,744



6,31728,355



21,862Less accumulated depreciation and amortization


(15,376
)


(8,984
)$
12,979


$
12,878     8.
    Goodwill    Balance, January 1, 2007

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


28,537Balance, December 31, 2007

$
28,616Goodwill adjustment recorded in purchase price allocation of
    XpressTrade (Note 4)


406Goodwill recorded in purchase of OEC (Note 4)


15,212Balance, December 31, 2008

$
44,234     9.
    Other
    Intangible Assets, Net    December 31, 2008Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


AmountCustomer relationships

$
5,810


$
(1,931
)

$
3,879Trade name


690







690$
6,500


$
(1,931
)

$
4,569   F-14




---



##### 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.
    Fair
    Value of Financial Instruments   F-15




---



##### Table of Contents



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


December 31,2008


2007Financial instruments owned, at fair value:Money market funds included in cash and cash equivalents

$
61,393


$
5,868U.S. treasury securities included in cash and investments
    segregatedin compliance with federal regulations


1,000



Auction rate securities included in investments in securities


85,490



158,175UBS Put Right included in investments in securities


4,447



U.S. treasury securities included in deposits with clearing
    organizations


16,018



18,508Money market funds included in deposits with clearing
    organizations


50,000



Corporate equities and derivatives included in other assets


8,050



1,057$
226,398


$
183,608Financial instruments sold but not yet purchased, at fair
    value:Corporate equities and derivatives included in accounts payables
    and accrued liabilities

$
11,411


$
578$
11,411


$
578     Level 1:
  Level 2:
  Level 3:
   F-16




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Level 1(1)


Level 2


Level 3(2)


TotalFinancial instruments owned, at fair value:Money market funds included in cash and cash equivalents

$
61,393


$



$



$
61,393U.S. treasury securities included in cash and investments
    segregated in compliance with federal regulations


1,000











1,000Investments in securities










89,937



89,937U.S. treasury securities included in deposits with clearing
    organizations


16,018











16,018Money market funds included in deposits with clearing
    organizations


50,000











50,000Corporate equities and derivatives included in other assets


8,050











8,050$
136,461


$



$
89,937


$
226,398Financial instruments sold but not yet purchased, at fair
    value:Corporate equities and derivatives included in accounts payables
    and accrued liabilities

$
11,411


$



$



$
11,411$
11,411


$



$



$
11,411     (1)
    
    All of the Companys assets and liabilities included in
    Level 1 of the fair value hierarchy are exchange traded
    securities.(2)
    
    Level 3 assets represent 39.7% of all assets measured at
    fair value.    InvestmentsinSecurities-AssetsBalance, January 1, 2008

$
Total gains/(losses), realized and unrealized(1)


(2,088
)Purchases, issuances, sales and settlements


(15,550
)Transfers in/(out) of Level 3


107,575Balance, December 31, 2008

$
89,937     (1)
    
    See Footnote 5 for details on recognized unrealized loss.  2025-2041)
 F-17




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        250bps-300bps
     F-18




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    available-for-sale
  11.
    Other
    Assets    2008


2007Interest receivable

$
1,203


$
3,313Loans receivable


3,228



2,500Prepaid expenses


1,212



1,318Investment in non-consolidated subsidiary


505



816Securities owned, at fair value


8,050



1,113Other


2,765



536$
16,963


$
9,596   12.
    Payables
    to Brokers, Dealers and Clearing Organizations    2008


2007Payables to clearing organizations

$



$
7,183Securities failed to receive


293



819$
293


$
8,002   13.
    Accounts
    Payable and Accrued Liabilities    2008


2007Accrued employee compensation

$
2,323


$
2,988Deferred rent


2,668



3,008Accounts payable


151



1,361Securities sold, at fair value


11,411



603Other accrued expenses


11,700



7,774$
28,253


$
15,734  F-19




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  14.
    Commitments,
    Contingencies, and Guarantees  Commitments
      December 31,2009


1,2922010


1,3012011


1,3302012


1,3062013


1,2292014


1,1712015


471$
8,100       Credit
    Facility
    General
    Contingencies
   F-20




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          Legal
    Contingencies
    Guarantees
     F-21




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      15.
    Capitalization  Common
    Stock
    Preferred
    Stock
    Dividends
      2008


2007


2006Common stock:March 31

$
0.0800


$
0.0625


$
0.0500June 30


0.0800



0.0625



0.0500September 30


0.0800



0.0625



0.0500December 31


0.0800



0.0625



0.0500   16.
    Employee
    Benefit Plan    17.
    Employee
    Stock Purchase Plan   F-22




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  18.
    Equity
    Incentive Plans      Options
      Weighted


WeightedAverage


Average


AggregateNumber of


Exercise


Remaining Life


IntrinsicOptions


Price


(years)


ValueOutstanding, January 1


785


$
19.41Granted to employees


393



23.49Exercised by employees


(22
)


9.93Forfeited by employees


(13
)


26.82Outstanding, December 31


1,143


$
20.92



7.14


$
1,057Exercisable, December 31


461


$
16.24



6.26


$
1,057     Options Outstanding


Options ExercisableWeighted-





Weighted-Range of





Remaining


Average


Number of


AverageExercise Prices





Contractual


Exercise


Options


ExerciseLow

High


Number


Life (Years)


Price


Exercisable


Price$ 

$
15.00



204



5.15


$
8.28



193


$
7.95$15.00

$
20.00



179



7.10



17.24



107



16.36$20.00

$
22.50



144



8.79



21.85



17



21.22$22.50

$
25.00



369



7.02



24.08



66



24.46$25.00

$
30.00



156



8.26



27.16



50



27.49$30.00

$
35.00



91



7.65



31.51



27



31.001,143



7.14


$
20.92



460


$
16.24  F-23




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      2008


2007


2006Risk-free interest rate


3.1
%


4.3
%


4.6
%Expected volatility


46
%


35
%


42
%Annual dividend yield


1.5
%


1.0
%


1.0
%Expected life


7.5 years



7.5 years



7.5 years     Deferred
    Shares
      Weighted


WeightedAverage


Average


AggregateNumber of


Grant Date


Remaining Life


IntrinsicShares


Fair Value


(years)


ValueNonvested, January 1


101


$
26.09Granted to employees


92



20.07Released to employees


(31
)


25.93Forfeited by employees


(1
)


25.52Nonvested, December 31


161


$
22.64



1.68


$
2,150     19.
    Regulatory
    Requirements  (Rule 15c3-1) Rule 15c3-1,
 F-24




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Rule 15c3-1
    20.
    Income
    Taxes    Years Ended December 312008


2007


2006Current:Federal

$
46,089


$
49,741


$
36,860State


4,526



11,671



8,737Foreign


932



491



51,547



61,903



45,597Deferred:Federal


(386
)


(113
)


(375
)State


(153
)


40
)


(64
)(539
)


(73
)


(439
)Total income tax expense

$
51,008


$
61,830


$
45,158     Years Ended December 312008


2007


2006Federal income tax at statutory rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal tax effect


2.1



4.8



4.8Other


(1.0
)


(1.0
)


(1.2
)36.1
%


38.8
%


38.6
%    F-25




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    December 312008


2007


2006Deferred tax assets:Stock-based compensation

$
1,588


$
1,006


$
506Deferred rent


990



1,196



Unrealized loss


777







Accrued liabilities


807







Other deferred tax assets


330



464



Total deferred tax assets


4,492



2,666



506Deferred tax liabilities:Property and intangible assets


(3,311
)


(2,707
)


(751
)Other deferred tax liabilities


(450
)


(556
)


(425
)Total deferred tax liabilities


(3,761
)


(3,263
)


(1,176
)Net deferred tax asset (liabilities)

$
731


$
(597
)

$
(670
)        F-26




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  21.
    Earnings
    Per Share    Years Ended December 312008


2007


2006Reported net income

$
90,315


$
97,719


$
71,729Weighted-average number of common shares outstanding 
    basic


60,566



62,923



62,319Effect of dilutive securities


154



208



293Weighted-average number of common shares outstanding 
    diluted


60,720



63,131



62,612Basic EPS

$
1.49


$
1.55


$
1.15Diluted EPS

$
1.49


$
1.55


$
1.15   22.
    Related
    Party Transactions      23.
    Quarterly
    Financial Information (Unaudited)    2008First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Full YearRevenues

$
60,765


$
61,624


$
66,852


$
57,317


$
246,558Net income before income taxes


37,499



37,002



37,717



29,105



141,323Net income


23,789



23,348



23,994



19,184



90,315Basic earnings per share


0.38



0.39



0.40



0.32



1.49Diluted earnings per share


0.38



0.39



0.40



0.32



1.49   F-27




---



##### Table of Contents



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  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  F-28




---



##### Table of Contents



Schedule I 
    Condensed Financial Information of the Registrant.
  optionsXpress
    Holdings, Inc.
    (Parent Company)
    Statements of Financial Condition
  December 31,


December 31,2008


2007(In thousands)ASSETSCash and cash equivalents

$
13,288


$
6,063Investments in securities


89,937



86,475Investments in subsidiaries


158,894



187,944Due from subsidiaries


3,013



3,312Other assets


7,521



1,652Total assets

$
272,653


$
285,446LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accrued liabilities

$
3,756


$
1,765Due to subsidiaries


1,006



5,973Total liabilities


4,762



7,738Total stockholders equity


267,891



277,708Total liabilities and stockholders equity

$
272,653


$
285,446  S-1




---



##### Table of Contents



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


For theYear Ended


Year EndedDecember 31,


December 31,2008


2007(In thousands)RevenuesInterest income

$
3,900


$
2,753Dividend income from subsidiaries


138,711



82,500Other income


649



143,260



85,253Expenses


4,172



2,920Income before income taxes


139,088



82,333Income taxes


(382
)


4,644Income before equity in undistributed net income of subsidiaries


139,470



77,689Equity in undistributed (distributed in excess of) net income of
    subsidiaries


(49,155
)


20,030Net income

$
90,315


$
97,719  S-2




---



##### Table of Contents



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


For theYear Ended


Year EndedDecember 31,


December 31,2008


2007(In thousands)Operating activitiesNet income

$
90,315


$
97,719Adjustments to reconcile net income to cash provided by
    operating activities:Equity distributed in excess of (in undistributed) net income of
    subsidiaries


49,155



(20,030
)Depreciation and amortization


26



26Stock-based compensation


678



Deferred income taxes


(1,363
)


(230
)Deferred rent


(339
)


Changes in operating assets and liabilities:(Increase) decrease in:Investments in securities


2,500



Due from subsidiaries


2,196



655Other assets


(3,754
)


(926
)Increase (decrease) in:Accounts payable and accrued liabilities


2,352



976Due to subsidiaries


(4,967
)


5,834Net cash provided by operating activities


136,799



84,024Investing activitiesPurchases of investments in securities


(64,050
)


(81,950
)Proceeds from maturities/sales of investments in securities


56,000



42,700Equity investment in subsidiaries


(14,996
)


(25,938
)Purchases and development of computer software






(2
)Net cash used in investing activities


(23,046
)


(65,190
)Financing activitiesExercise of stock options


222



1,315Excess tax benefit for stock- based compensation


(19
)


510Purchases through employee stock purchase plan


41



43Stock repurchases


(87,537
)


Dividends paid


(19,235
)


(15,741
)Net cash used in financing activities


(106,528
)


(13,873
)Net increase in cash


7,225



4,961Cash and cash equivalents, beginning of year


6,063



1,102Cash and cash equivalents, end of year

$
13,288


$
6,063Supplemental disclosure of cash flow information:Income taxes paid

$
54,405


$
61,995Supplemental disclosure of non-cash activity:Non-cash foreign currency translation gain (loss)


(94
)


21Non-cash change in unrealized loss on available for sale
    investments in securities


(2,088
)


Issuance of stock in acquisition


5,210



11,150  S-3




---



##### Table of Contents



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