Is there actual edge in becoming a pit trader in the 21st century? I checked CBOE's webiste and I see that the prices of a seat are within reach for an individual. But how long will it take to make the ROI? What are typical trades that a SPX pit trader does that a small operation can do. How many contracts a day/month and how much "edge" per trade?
Becoming a SPX pit trader
- Thread starter CashDelivery
- Start date
seats was for brokers. why would an individual want the 'expense' of having a seat. there was time when physical exchange, seats were limited. now electronic. there is no seat limit. so the seat was valuable. limited seats. pit traders trade firm and client orders.. they are employees and trade the firms, client. or their own account.
Robert Morse
Sponsor
- You will have to be an SEC registered BD
- Become a member of the CBOE and agree to be regulated by them
- Have $5mm to $10mm min capital to open an account with ABN AMRO, GSEC or ML PRO
- Have ability to provide accounting and regulatory requirements with an approved WSP
No chance for an individual in the SPX pit now.
First you will have to pay a trading permit fee of about $7,000.
Add another $3,000 for technology,
You will also have to join a JBO/Prop firm that currently has traders on the floor. There are still a few. The clearing firms will have no interest in you as an individual no matter how much capital you have. Id say minimum capital would be at least $250,000 if the JBO was interested, maybe much more.
Assuming you finally get to the floor you will be standing in a pit and your advantage would be being asked a market on very large trades. Would you willing to buy 1,000 back month options with a small edge with no way to get out?
There is very little retail paper announced in the pit as smaller order are filled electronically.
The big guys can take down a position and adjust their markets on other products they trade.
First you will have to pay a trading permit fee of about $7,000.
Add another $3,000 for technology,
You will also have to join a JBO/Prop firm that currently has traders on the floor. There are still a few. The clearing firms will have no interest in you as an individual no matter how much capital you have. Id say minimum capital would be at least $250,000 if the JBO was interested, maybe much more.
Assuming you finally get to the floor you will be standing in a pit and your advantage would be being asked a market on very large trades. Would you willing to buy 1,000 back month options with a small edge with no way to get out?
There is very little retail paper announced in the pit as smaller order are filled electronically.
The big guys can take down a position and adjust their markets on other products they trade.
