Being both long and short at same time

[Sig]

The AML people at the firm or clearinghouse will "very likely" take a hard look at this. It comes off looking as classic AML or a tax game. It may not be either, but the AML folks are gonna go nuts - especially if it shows as two clearing numbers. As Robert pointed out if they are 1256 you'll have to mark at yearend.

There is a flat out rule against it at U.S. brokerages because its seen as a bucket shop tactic to encourage it in order to double the spread take. I seem to recall so potential issues with big prop shops having left hand not knowing what the right had was doing issues and inadvertently triggering this by opposite positions taken by different segments of the operation (or course it would seem good business practice to net this internally anyway). The folks who do allow it probably aren't super concerned about AML rules, but I agree, if you did manage to make it happen in a real brokerage they would probably take a dim view. Although you can't really launder money that way unless you have an advisor account with multiple customers and the advisor allocates trades at the end of the day or you have separate entity accounts that are doing pre-arranged trades between one another on high bid/ask spread products.

 

[qlai]

AML folks are gonna go nuts - especially if it shows as two clearing numbers.

Anti-Money-Laundering? We are taking about intra-day scalping. Flat at the end of day either way. I am not familiar with futures, but what prevents me having two sub accounts where I trade same stock - long in one and short in another? No illegal/suspecious game playing.

 

[Sig]

Anti-Money-Laundering? We are taking about intra-day scalping. Flat at the end of day either way. I am not familiar with futures, but what prevents me having two sub accounts where I trade same stock - long in one and short in another? No illegal/suspecious game playing.

That's how one launders money, especially the two accounts part. You put the dirty money in one account and trade it to the other account as the "losing" side of a bid/ask spread. The other account then shows clean money that was legitimately "earned" from trading.

That may not be what you are doing, and if they are sub accounts of the same master it wouldn't be terribly effective, but the AML people have a set of things they are told are "suspicious activity" and they jump on it when they see it. It's cheaper for them to just stop anything that has even a chance of being money laundering or shows a money laundering pattern than to take the risk or spend the time doing an exhaustive investigation of what you're actually doing. Hence they'll take a dim view of it, no matter that you're just doing it because you're not bright enough to understand that having opposite positions in two sub accounts is exactly the same as being flat. In fact if you use that as an explanation it would only make them even more suspicious given that anyone with even a basic math background can see it makes no sense and certainly it's not something a legitimate trader would ever do on purpose (absent the big prop shop example I gave earlier). They would probably give you the benefit of the doubt that you were doing something illegal rather than just so dumb that you're doing it on purpose.

 

[speedo]

That's how one launders money, especially the two accounts part. You put the dirty money in one account and trade it to the other account as the "losing" side of a bid/ask spread. The other account then shows clean money that was legitimately "earned" from trading.

That may not be what you are doing, and if they are sub accounts of the same master it wouldn't be terribly effective, but the AML people have a set of things they are told are "suspicious activity" and they jump on it when they see it. It's cheaper for them to just stop anything that has even a chance of being money laundering or shows a money laundering pattern than to take the risk or spend the time doing an exhaustive investigation of what you're actually doing. Hence they'll take a dim view of it, no matter that you're just doing it because you're not bright enough to understand that having opposite positions in two sub accounts is exactly the same as being flat. In fact if you use that as an explanation it would only make them even more suspicious given that anyone with even a basic math background can see it makes no sense and certainly it's not something a legitimate trader would ever do on purpose (absent the big prop shop example I gave earlier). They would probably give you the benefit of the doubt that you were doing something illegal rather than just so dumb that you're doing it on purpose.

Not necessarily "exactly the same as" being flat. You could be long in a higher time frame shooting for R, a fib number, measured move, whatever and not concerned about back fill in the way. At the same time taking a short on a lower time frame based off an average MFE move for example. like any two trades, one could work, both could work or both could fail but satisfy a trade plan with attendant rules.

 

[Sig]

Not necessarily "exactly the same as" being flat. You could be long in a higher time frame shooting for R, a fib number, measured move, whatever and not concerned about back fill in the way. At the same time taking a short on a lower time frame based off an average MFE move for example. like any two trades, one could work, both could work or both could fail but satisfy a trade plan with attendant rules.

No, actually it is exactly the same as being flat! This is just so fundamentally basic a concept that it's mind blowing that anyone would disagree with it, -1+1=0, always and forever! If you're "long in a higher time frame" and "short on a lower time frame" then that's exactly the same as being flat in a lower time frame and long at the point you decide to stop being short in your lower time frame. Do the math, it will become obvious.

 

[speedo]

No, actually it is exactly the same as being flat! This is just so fundamentally basic a concept that it's mind blowing that anyone would disagree with it, -1+1=0, always and forever! If you're "long in a higher time frame" and "short on a lower time frame" then that's exactly the same as being flat in a lower time frame and long at the point you decide to stop being short in your lower time frame. Do the math, it will become obvious.

Do the math if you get a lower target on the lower timeframe and a larger gain taking longer time on a higher one...it's not really that mind blowing. In that scenario, they are independent trades with separate outcomes.

 

[Sig]

Do the math if you get a lower target on the lower timeframe and a larger gain taking longer time on a higher one...it's not really that mind blowing. In that scenario, they are independent trades with separate outcomes.

Seriously, spell it out for me with an example of such a scenario, including entry and exit prices and quantities. Please, really do the math for me (and you). Right here.

 

[speedo]

Not wasting more time arguing this, you get it or you don't.

 

[speedo]

No I will give an example with charts but don't have time now, will do tomorrow.

 

[digitalnomad]

Do the math if you get a lower target on the lower timeframe and a larger gain taking longer time on a higher one...it's not really that mind blowing. In that scenario, they are independent trades with separate outcomes.

I get what you’re saying, but it requires some abstract thought to model and implement, and can be quantified. Been doing it myself for years. Keep in mind, most people aren’t wired to understand the multi-dimensional aspects of this.