Cme - Income Collapses 42% -

[LincolnArmy]

Quote from moneyrules:

The cme didn't even have afterhours trading for futures before 2000. There is no market reason to even have afterhour trading. In some exchanges, the market is open for 4 hours per day 5 days per week. There is no reason to have 24 hour trading other than taking bets or getting volume and commissions for speculators. CME is a business like a casino. For the actual economic purpose of the market or exchange 4 hours is more than enough time for anyone who wants to buy or sell contracts. tjhere is no real volume afterhours. that is why the market is joke.

Moneyrules -welcome to the industry. It is all too apparent that you haven't been around for long. Fresh out of school maybe?
You've got a lot of things to say -practically everyone of them is wrong. Your first post was nonsense, but let's start with something simple. Did the cme really not have after hours trading before 2000?
If that is the case then my recollections of globex and project A in the 90s must all have been imagined. More shocking are my memories of standing in the pits in the evenings. Could I really have just imagined the hundreds of other people there? Very worrying. Either I need to see a shrink or you need to get a proper education...

 

[Rationalize]

Quote from diarist:

...A business with profits of $10 on $100 in sales would see a 50% drop in profits (if not more) with a mere 5% drop in revenue...

I get 10 / 100 as a 10% profit margin.

A 5% drop in revenue = 95, and a profit of 9.5 .

The drop in profits is 10 - 9.5 = 0.5

As a percentage = 0.5 / 10 = 5%.

What am I missing?

 

[mgrund]

Quote from keeptradin':

Do you find that your profitability has remained similar to your higher-frequency trading years, while your stress level has decreased?

I now trade about ten percent of the volume I traded 5-7 years ago, but am focussed on making better quality trades. I find I don't get the "rush" that I used to feel, and corresponding stomach pains.

Correct, By holding longer term I am still making approx the same amount of monthly ticks that I used to when sitting in front of the screen all day scalping.Also, by adopting my new trading stratedgy I am not bored senseless all day by just looking at size of Bids/offers.

 

[chaykapwr]

Quote from Rationalize:

I get 10 / 100 as a 10% profit margin.

A 5% drop in revenue = 95, and a profit of 9.5 .

The drop in profits is 10 - 9.5 = 0.5

As a percentage = 0.5 / 10 = 5%.

What am I missing?

Fixed costs...

You are assuming the fixed costs change with the revenue.

Lets assume on 100 sales, the fixed cost are 70 and the variable were 20, then yes the profit margin would be 10%. Now lets assume sales drop to 95.

You still have a 20% variable cost rate, but the fixed costs stay the same at 70.
Your profit is now $6, a 40% decrease

 

[diarist]

Quote from Rationalize:

I get 10 / 100 as a 10% profit margin.

A 5% drop in revenue = 95, and a profit of 9.5 .

The drop in profits is 10 - 9.5 = 0.5

As a percentage = 0.5 / 10 = 5%.

What am I missing?

You are assuming that that 10% profit margin on sales of 100 means that there is a fixed percent profit/dollar. You would thus assume that had the same business had only $1 in sales, it therefore had a dime profit. Not so ... in all likelihood, the business is losing $89.

What you are missing the concept of "breakeven" - the point at which costs and revenue are equal. If a business has a $90 breakeven (salaries, utilities, insurance, licensing fees, interest payments, etc.) and it has sales of $100, then it has a profit of $10, which,as you pointed out would be a 10% profit margin. If sales drop 5% to $95, then the profit will have dropped by 50% ($95 sales - $90 expenses = $5 profit/$10 profit = 1/2 = 50%.

I won't get into gross vs. net margin. Let's just say that business is a game of margins.

 

[diarist]

Quote from chaykapwr:

Fixed costs...

You are assuming the fixed costs change with the revenue.

Lets assume on 100 sales, the fixed cost are 70 and the variable were 20, then yes the profit margin would be 10%. Now lets assume sales drop to 95.

You still have a 20% variable cost rate, but the fixed costs stay the same at 70.
Your profit is now $6, a 40% decrease

Had I read your post it would have saved me a post.