Bye-bye reg T

yip1997 · Feb 12, 2007

Quote from Maverick74:

Well, maybe not your first week. You need to establish yourself a little bit. Usually traders get more rope after their first month. What do you expect? To come into the firm and trade 3 to 1 over haircut the first day? LOL.

Thats why i said not getting this benefit in the "first several months". Just to give a realistic picture for those "unprofitable" traders.

Maverick74 · Feb 12, 2007

Quote from yip1997:

Thats why i said not getting this benefit in the "first several months". Just to give a realistic picture for those "unprofitable" traders.

Well, just a month. It usually takes guys that long if not longer to understand how to trade with a haircut. You don't want to choke on your haircut if you do not know what you are doing. Make sense?

yip1997 · Feb 12, 2007

Quote from Maverick74:

Well, just a month. It usually takes guys that long if not longer to understand how to trade with a haircut. You don't want to choke on your haircut if you do not know what you are doing. Make sense?

It makes sense. But guys like me would have done a lot of simulation before they join a prop firm.

I will post the fact one month after I join the firm

. I just wonder why successful option traders like RA, and others oppose the idea of joining prop. I like to hear opinions from both sides.

Maverick74 · Feb 12, 2007

Quote from yip1997:

It makes sense. But guys like me would have done a lot of simulation before they join a prop firm.

I will post the fact one month after I join the firm . I just wonder why successful option traders like RA, and others oppose the idea of joining prop. I like to hear opinions from both sides.

Yip, without starting a fire here, there are usually reasons why guys don't join JBO's. It's usually for legal reasons. You need to be approved by an exchange and if you have marks on your record, it ain't gonna happen. Some of these guys have questionable pasts. Joining is not an option for a lot of guys. Otherwise, joining a JBO really comes down to how much capital one has and how much one needs.

Optionspoet · Feb 23, 2007

Does anybody know when ToS will offer this and whether any conditions will be placed on who will benefit?

Any insight would be appreciated.

MTE · Feb 23, 2007

Quote from Optionspoet:

Does anybody know when ToS will offer this and whether any conditions will be placed on who will benefit?

Any insight would be appreciated.

As far as I know TOS will offer it as soon as it is available, not sure of any conditions, but the best way to get the most accurate answer is to ask TOS directly.

Maverick74 · Feb 23, 2007

Quote from MTE:

As far as I know TOS will offer it as soon as it is available, not sure of any conditions, but the best way to get the most accurate answer is to ask TOS directly.

I was told in NY that TOS would not be offering portfolio margin. Not sure if they meant never or just not in April when it rolls out.

yip1997 · Feb 23, 2007

Quote from Optionspoet:

Does anybody know when ToS will offer this and whether any conditions will be placed on who will benefit?

Any insight would be appreciated.

They said they will offer it to everyone without any conditions by April.

Optionspoet · Feb 23, 2007

Quote from MTE:

As far as I know TOS will offer it as soon as it is available, not sure of any conditions, but the best way to get the most accurate answer is to ask TOS directly.

I called earlier today but was told that an e-mail will be sent out with the details. I checked here to see if anybody else had better luck than I did.

Thanks to everyone for all the responses.

mskl · Feb 23, 2007

Quote from Maverick74:

There still seems to be some confusion about the new portfolio margin rules.

Here are the limitations to the portfolio margin account vs a JBO.

The portfolio margin is a pattern day trader account unless you have 5 million in your account. If you make more then 4 trades open and close in a 5 day period your account will be frozen.

In a JBO account there are no limitations to the frequency of your trading.

In a portfolio margin account, you are held to the current 4 to 1 daytrading margins you currently have.

For a JBO, your intra-day buying power is practically unlimited.

There is no cross margining in a portfolio account.

There is in a JBO.

You do not receive the preferential 60/40 tax treatment for equity options in a portfolio margin account like you do in a JBO.

In a JBO, you get a K-1. In a portfolio margin account you get a 1099.

In a portfolio margin account, you pay $37.50 per contract vs $25.00 per contract in a JBO.

At the current time, the only broker that has gone public with account minimums is Fimat USA. They require $150,000 to open a portfolio margin account.

I hope this clears up all the confusion.

Here is what I have been told:

1) Pattern day traders will have the benefit of PM (Portfolio Margin). Positions that are hedged can always use portfolio margin. Unhedged positions will use normal day trading margin (for equity 4:1) on the day they are transacted.

2) On day two of your positions - all positions can use PM (even speculative)

3) Any new positions for the day that are speculative will use day trading rules. Any fully hedged positions for the day can use portfolio margin

4) Your account will only be frozen if your account is <25 K which is no different than the current day trading rules. But keep in mind that brokers will probably ask for more than $25 K for portfolio margin.

BTW, my broker is requiring $100,000 minimum for this benefit. So - portfolio accounts should NEVER be frozen.

I came very close to setting up a JBO with Goldman years ago - and walked away for a variety of reasons - now with PM - there really is no reason to have a JBO with a BD.

As for the minimum margin per contract difference - that is basically meaningless and will probably never give a person with a JBO a competitive advantage over a customer with PM. Keep in mind what the current margin requirements are for hedged positions now and what they will be in April.

For example - conversion/reconversion positions (Completely hedged) ie long 1,000 IBM, short 10 $95 calls and long 10 $95 puts currently will cost about $50,000 (Reg-T) in margin. Put that trade on in a PM account and it will cost only $750 vs a JBO account: $500. ROE on a 20 lot option trade using the minimum price movement (.01) will result in virtually no difference to a trader using a JBO vs PM - ie it would be beneficial to do the trade regardless of your status. Currently - customers can't compete on many trades.

Message to all JBO traders: get ready for some more competition come April - especially in the vanilla arb business