haircut charge

[Maverick74]

Quote from mschey:

You offer more leverage? With all due respect, I would be very skeptical about that. I have been with several firms over the years, and Bright is the only one that really allows a trader the BP they need when they need it.

No, i have talked to Don in private and know this to be true. First of all, Don does not endorse options trading and persuades most of his traders from trading them. By giving traders risk based haircuts on options you are getting far more leverage then Don could ever grant them with stock. Not to mention we will borrow traders capital to go beyond their haircut. Our traders get far more leverage on either directional or volatility plays. Most of the super leverage Don offers is through correlated pairs. Again, nothing wrong with that, but you have to be a pairtrader!

We also help raise cash for our traders. Not cash from our balance sheet but real investor cash. I'm working with 3 guys right now helping them raise 5 to 10 million each.

This capital charge really shouldn't be an issue. You have lots of options. Just requires one to be more creative in their approach to the market.

It's not an issue until you leverage a few hundred basis pts. It does add up.

As I've said, one can construct the portfolio to take advantage of the reduced capital charges by making some sector plays on stocks that traditionally move in opposite directions.

Or, If one wants to get long, they can get long the Higher beta stocks, short the Spy and theoretically get long as much as they want to. Or do just the opposite if you have a short bias.

If you want to play the EOY trades, then you just use SPY to offset positions, get the reduced capital charges, and make the difference in spread.

I'm not arguing any of this, but again, you are talking stocks. How many guys just trade stocks these days. We trade everything. Stocks, options, futures, commodities, etc.

Also....don't forget getting paid for short stock. You do get paid 4% or so.

We pay close to 5% on short stock.

In the end, you have lots of options and that 1% per month is not a deal breaker IMO. Be sure to consider all of your options before making a decision.

Agreed.

 

[Don Bright]

Quote from yip1997:

Well said. Trading is about effective use of capital via innovation. You are the very few who understands it. You probably are or will be among the top 5% traders in Bright.

I can attest to Mr. Schey's trading skills and profitability over the years (don't know exactly what he did when he was trading "on the dark side" - other firm(s), but does well with us).

Don

 

[Don Bright]

Mav, I scanned what you said above, and things do change. We have added options to the mix, with some basic guidelines. We've always allowed traders to buy up to 25% of their equity of options. We also allow, after properly screened, "one to one" vs. options or vs. stock spreads.

I noticed that you are raising outside capital for your traders to use, I might be interested, what do you pay these outside investors? How do you pass the costs through to the trader? Sounds interesting.

BTW, are you moving to Texas?

Don

 

[Maverick74]

Quote from Don Bright:

Mav, I scanned what you said above, and things do change. We have added options to the mix, with some basic guidelines. We've always allowed traders to buy up to 25% of their equity of options. We also allow, after properly screened, "one to one" vs. options or vs. stock spreads.

I noticed that you are raising outside capital for your traders to use, I might be interested, what do you pay these outside investors? How do you pass the costs through to the trader? Sounds interesting.

BTW, are you moving to Texas?

Don

Don, that's good to hear you guys are doing options now. But it's still not the core of what you do. Just as we have guys that do pairs trading, it's not the core of what we do. Different strokes for different folks.

I have a very standard agreement for raising capital where traders give up a small cut of their profits on what I raise them for a period of time then they own the assets completely. It doesn't cost the investor anything. My cut comes out of the trader.

No, my mother moved to Texas. I'm still in Chi-town.

 

[Don Bright]

Quote from Maverick74:

Don, that's good to hear you guys are doing options now. But it's still not the core of what you do. Just as we have guys that do pairs trading, it's not the core of what we do. Different strokes for different folks.

I have a very standard agreement for raising capital where traders give up a small cut of their profits on what I raise them for a period of time then they own the assets completely. It doesn't cost the investor anything. My cut comes out of the trader.

No, my mother moved to Texas. I'm still in Chi-town.

I see no problem with you taking a cut of profits for your efforts.

What interest rate does the investor receive?

Just curious,

Don

 

[Maverick74]

Quote from Don Bright:

I see no problem with you taking a cut of profits for your efforts.

What interest rate does the investor receive?

Just curious,

Don

The investor gets the profits. They split the profits with the trader. All that is negotiable.

 

[yip1997]

Quote from Maverick74:

The investor gets the profits. They split the profits with the trader. All that is negotiable.

Are you acting like an IB? Are those traders CTA?

 

[Maverick74]

Quote from yip1997:

Are you acting like an IB? Are those traders CTA?

We have an IB set up. But this is not being done through an IB.

 

[rallymode]

Quote from sandy1:

I guess the old saying "We mock what we don't understand" applies here. I don't trade at Bright and make very good money day trading pairs. Maybe pair trading is too complicated for you to understand. Trading pairs takes a little more work and knowledge than directional trading. If you would like a crash course in pair trading PM and I will be more than happy to educate you on the process.

LOL spare me the rhetoric on the merits of stat arbs.

 

[rallymode]

Quote from yip1997:

This thread is about haircut charge, not about pair trading. I think rallymode is so surprised to find people talking about pair trading instead of talking about haircut charge.

Yes. My comedy reference was in the context of Don implying that Bright loans money out at 2% when in fact you are doing nothing but getting into a pair at 2% debit. All this credit interest/debit interest lingo is nothing but a scheme to lure people in. Not even sure why mav brought up the conversion/reversal example. How in the world are you going to exploit it when you have a pair on?