Enveloping orders

[Don Bright]

Quote from Dustin:



I agree that prop traders with limited capital at risk can have a good risk/reward ratio with envelopes. I did them and made good money. BUT I do not feel the risk/reward is worth it for a firm promoting it to all of their traders. The firm is more at risk with this strategy than any other that I can think of. That was my point and I would enjoy hearing arguments against that.

If you're referring to BT's risk on this, we are more than prepared via our Risk Control. We've had Pairs "blow up" for Millions overall, and yet, we're in this for the long run, and since the money is ours (except for the traders relatively small contribution), we "have an especially strong interest" in keeping it intact (the money).... And, as far as "promoting it to all their traders"....we do our very best to simply show, by example, what is currently working....all the while stressing to everyone (strongly) that there is no "magic" formula for this. I personally feel much better about this approach than letting traders simply flounder about using un-sound strategies, or worse yet, older techniques that simply don't work anymore. The market is very cyclical, and as conditions change, so must we all.

As you know, I can only speak for BT, and am always willing to "share."

Don

 

[axeman]

Exactly.


peace

axeman

Quote from WarEagle:



I think he meant that when a serious event occurs you will get the wrong side of the envelope 90% of the time. Not that the event will occur 90% of the time.

From what I have seen, to envelope you have to be a skilled trader. The few big losers thrown in there can really wipe out a lot of smaller gains. I don't think its appropriate for a beginner, at least not on a large basket.

Doing it on a few large stocks like Don does is probably the best way to learn.

 

[Nordic]

Quote from Don Bright:

[ I usually only envelope 15 or so stocks, and after getting filled on 2 or 3, I cancel the rest (with the new high speed cancel option).


(High speed cancel option) What is this? A cxl message with an electric "shock" attached should the specialist decide to pocket it.

 

[Dustin]

Quote from riskreward:

Do you just hope that the shorts balance out the longs?

You still don't understand the core argument here. If a plane crashes into a building, every Bright/Echo trader doing this will probably get filled long on at least 50% of their buys (depending on how many specialists would let them cancel before fills), while no shorts would get filled. The firm would be entirely long while the market plummets.

Don I'm not picking on Bright. I'm sure you have the cash to back up an event like this. But there are other firms doing this that may not.

 

[Don Bright]

Quote from Nordic:

Quote from Don Bright:

[ I usually only envelope 15 or so stocks, and after getting filled on 2 or 3, I cancel the rest (with the new high speed cancel option).


(High speed cancel option) What is this? A cxl message with an electric "shock" attached should the specialist decide to pocket it.

Come by my office and I'll be happy to show you the 'instant out" feature.

Don

 

[Don Bright]

Quote from Dustin:





Don I'm not picking on Bright. I'm sure you have the cash to back up an event like this. But there are other firms doing this that may not.

I understand what you're saying in this regard, Dustin.

Don

 

[riskreward]

Don, I think you answered most of my qs but missed an important one. I was always fuzzy on this "capital contribution" thing. What am I, the individual trader liable for? Say I come in w/ 50K. I take on 500K of risk. I lose it all in an act of god. Do I owe you 450K?

 

[WarEagle]

Quote from Don Bright:

Come by my office and I'll be happy to show you the 'instant out" feature.

Don

I find this intriguing. How is your software able to make the specialist let you out any faster than someone else?

My orders show "cancel pending" immediately, but I am at the whim of the specialist and have had him wait forever to let me out or fill me immediately when he received the cancel request. I really don't think he pays attention to what software platform it was sent through.

Am I missing something?

 

[Don Bright]

Quote from riskreward:

Don, I think you answered most of my qs but missed an important one. I was always fuzzy on this "capital contribution" thing. What am I, the individual trader liable for? Say I come in w/ 50K. I take on 500K of risk. I lose it all in an act of god. Do I owe you 450K?

As long as our traders don't violate any rules, they are "limited" partners, and thereby cannot lose any more money than they contributed initially. That, of course, is one reason that we watch the risk pretty closely....lol....

Don

 

[Don Bright]

Quote from WarEagle:



I find this intriguing. How is your software able to make the specialist let you out any faster than someone else?

My orders show "cancel pending" immediately, but I am at the whim of the specialist and have had him wait forever to let me out or fill me immediately when he received the cancel request. I really don't think he pays attention to what software platform it was sent through.

Am I missing something?

Electronic cancels for orders away from NBBO has been added to our basket manager. This, and a a couple of other things have really helped in recent months. It was developed on RediExpress, and then added to our newer versions.

Don