Shares of E*Trade (NASDAQ:ETFC) opened sharply lower this morning, after the online discount broker warned that it would need to raise more capital after posting uninspiring quarterly results.

E*Trade posted a loss of $0.41 a share for the period, more than doubling last year's deficit but in line with Wall Street expectations. The company continues to win over traders, tacking on another 63,000 net new brokerage accounts to close out the quarter with 2.7 million. Larger rivals Charles Schwab (NASDAQ:SCHW) and TD AMERITRADE (NASDAQ:AMTD) were better magnets during the quarter, but at least E*Trade is still gaining more customers than it's losing.

It wasn't necessarily a given. E*Trade has always positioned itself -- and its signature Complete Savings Account (CSA) product -- as a high-yielding parking space. Free-falling rates have clearly eaten into that marketing mantra. CSA yields began the quarter at 3.01% but bowed out at a puny 1.45% rate. It's happening all over, of course, but it's never easy when your flagship income vehicle meets the mattress alternative halfway in three months. 

This doesn't mean that E*Trade is just a parking lot. Daily average revenue trades dipped to 194,000 sequentially, but that is an 8% improvement over the activity during last year's first quarter.

Add it up and the report isn't stellar, but it's clearly not enough to explain the stock's 29% slide at the open. That level of nail-biting is the result of the company's financial state, as it seeks to raise capital to beef up its Tier-1 and risk-based capital ratios.

The company continues to pay the price for its open lending ways during easier times. E*Trade's allowance for losses on its loan portfolio increased, despite a general downtick in delinquencies. The company is trying to beef up its balance sheet, and successfully trimmed $1 billion of exposure from its bank loan portfolio. It's a step in the right direction, but it's only natural for shareholders to feel skittish when even those steps aren't enough to get in the way of the need to raise more capital.

This makes E*Trade the riskiest bet in its field. Potential investors eyeing E*Trade for its brokerage accounts -- the part of its business that is actually gaining a larger audience -- may feel safer with TD AMERITRADE or Schwab. More aggressive wagers on an uptick in market trading activity can be found in TradeStation (NASDAQ:TRAD), options specialist optionsXpress (NASDAQ:OXPS), or possibly even a blue-chip exchange powerhouse like NYSE Euronext (NYSE:NYX).

Thankfully for those willing to take the gamble on E*Trade -- and gracefully accepting this morning's deluge -- the stock is also priced at a significant discount to its peers if it is able to lick its capital concerns and return to profitability.

It's going to be feast or famine here. Don't let the chipper E*Trade Baby tell you otherwise.

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NYSE Euronext is a Motley Fool Rule Breakers selection. optionsXpress Holdings and Charles Schwab are Motley Fool Stock Advisor picks. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz believes in self-service gasoline pumps and self-service stock brokerages. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.