Don's Openings, Part 6 2003
- Thread starter Don Bright
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Thank you for your response....
Is it probably correct that 98000 x .005 x 2 = $980 commissions were paid...and 4x $250 =$1000 were revenues earned....?
Wouldn't it be better if you were paying .001 per share...thus keeping 80% of the profits?
What you are saying is that you made $1980 and kept $1000...
wouldn't you rather pay $196 in commission and $396 in profits to the firm...?
And on the days you were not profitable....pay $196...and not $980 ?
This is an example between a business model that is front end
oriented versus a back end model oriented model...
However congrats on the profits and your market edge....
Is it probably correct that 98000 x .005 x 2 = $980 commissions were paid...and 4x $250 =$1000 were revenues earned....?
Wouldn't it be better if you were paying .001 per share...thus keeping 80% of the profits?
What you are saying is that you made $1980 and kept $1000...
wouldn't you rather pay $196 in commission and $396 in profits to the firm...?
And on the days you were not profitable....pay $196...and not $980 ?
This is an example between a business model that is front end
oriented versus a back end model oriented model...
However congrats on the profits and your market edge....
Gee, wouldn't it be better if we just won the lottery? Paid $1,00 and won a Million.....
Just dealing with reality, that's all...go ahead with your plan, and we will continue helping traders, as we have for so long.
Did you want to come trade with us? Try out the strategy? Come up with $5K? Let me know.
(I'll play a little longer, just for fun)....
Don
Just dealing with reality, that's all...go ahead with your plan, and we will continue helping traders, as we have for so long.
Did you want to come trade with us? Try out the strategy? Come up with $5K? Let me know.
(I'll play a little longer, just for fun)....
Don
You guys may want to refer back to the last time we had this type of conversation. I was happy to come back with a ZERO commission rate and 50/50 profit split....why pay .000000001 when you can pay .00000000000000000
(do a search, it's real)....
Have a good weekend....
See you in NYC in February...on my Birthday this year ...Feb 14th... (yes, a Valentine, true and true)....
Don
(do a search, it's real)....
Have a good weekend....
See you in NYC in February...on my Birthday this year ...Feb 14th... (yes, a Valentine, true and true)....
Don
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Gary, I track by individual stock daily and also by $$$ gain or loss on a long term basis.
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I said the $250 was average net gain a day, that means after commission. Also the 98,000 shares is both in and out so not times 2 so weekly commission is $490. As Don has pointed out it is the bottom line that matters. I don't care how much I pay in commission, I care about taking home money everyday. Don has his guys going for bigger share quantities on fewer stocks than the way I trade. I enter orders on about 50 stocks with fewer shares than Don's way. Don's guys would get killed if they tried to do the openings on some of the thinner stocks that I trade, anything more than 800 shares on a stock that trades less than 300K shares a day is asking for major slippage as you try to exit. However these stocks are some of my more consistant winners because the game isn't being played on them as much as some of the large caps.
If you can tell me where I can pay .001 with no desk fees and still get their equity leverage and software support I'd be interested in checking them out. Personally I think 1/2 a cent isn't too bad.
Thank you for your responses....
Ok...so what you are saying is that you make about $250 per day net...on an average of 25,000 shares...you pay .005 all in...
Thus you make $375 per day and take home $250....
In the new business model you would make $375...and you would pay $25 in commissions and $70 to the firm...$280 versus $250...or a positive difference of $7200 per year....
What percent of your initial capital is paid out in commissions per year...?...
What percent of your capital is $7200...?...
Ok...so what you are saying is that you make about $250 per day net...on an average of 25,000 shares...you pay .005 all in...
Thus you make $375 per day and take home $250....
In the new business model you would make $375...and you would pay $25 in commissions and $70 to the firm...$280 versus $250...or a positive difference of $7200 per year....
What percent of your initial capital is paid out in commissions per year...?...
What percent of your capital is $7200...?...
Hi Vaquero,
Your idea of a business model sounds like a good one at first blush, but I'd like to view it another way. As you've probably seen going through this thread, traders employing the Opening Strategy are probably making anywhere from 0.5 cents/share to 3.0 cents/share in a very good month. That's per share traded, not round turn, so the comparisons are direct and don't need to be multiplied by 2.
In a bad month, a .1 commission rate plus 20% split looks like a comparable commission charge of 0.2 cents (0.1 + 20% * 0.5 cents gross profit) a very nice proposition.
Now, say an average month gets a trader 1.5 cents per share. Now the comparable commission rate looks like 0.4 cents (done as above). This rate is getting fairly close to "industry standard."
Finally, a trader having a better month, at say 2.2 cents per share, is paying the equivalent of .54 cents in commission. OK, still workable.
So, to get back to your question, I think anyone making on average a gross of 1.5 cents per share on average (an average trade of 3.0 cents) would need some other inducement to move over.
Taken from your point of view, I assume, as a business owner, I'd ask a different question of you: Assuming rational "member traders" in a steady-state model will figure out the above for themselves, I'd expect your mature business to look like a mix of newer traders (for whom this is a good deal) and experienced traders making something like 1.0 cents per share on average. So, your overall cash flow model looks like any other prop firm doing business at a 0.4 cents rate. That's quite low. Especially if you are providing some "give ups" to your more experienced traders in exchange for trading and mentoring.
Can your business survive given that cash flow? Will you be cutting corners on software, connectivity, support, etc. to achieve this? At the very least, I'd expect these have to be run very lean. Will you be able to assure me that you are financially backed to avoid cash crunches, and adequately protected against "blow ups?"
Thank you for you responses...
Indeed...this is no new concept....
Its just that there are far more front end firms and almost no back end or profit centered firms....
Clearing firms...self clearing...business structure...advertising costs....bricks and mortar....software....successful traders with valid blotter histories...all of it matters....and there are no barriers to entry for those firms capable of changing to this model...
I do firmly believe that the profitability of the client has to come first as the major objective...the change in technology and the advent of the internet make this possible...
The back end model relies on profits...not the number of shares that you trade....
Again thank you for your excellent responses....and we'll keep those that that have an interest up to date....
Indeed...this is no new concept....
Its just that there are far more front end firms and almost no back end or profit centered firms....
Clearing firms...self clearing...business structure...advertising costs....bricks and mortar....software....successful traders with valid blotter histories...all of it matters....and there are no barriers to entry for those firms capable of changing to this model...
I do firmly believe that the profitability of the client has to come first as the major objective...the change in technology and the advent of the internet make this possible...
The back end model relies on profits...not the number of shares that you trade....
Again thank you for your excellent responses....and we'll keep those that that have an interest up to date....
Lescor,
what would your net profit in dollar terms be on the OO strategy for the month?if I may ask......
thanks
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