How do I start a business managing people's money?
- Thread starter Steven676
- Start date
In my opinion, this guaranteed interest rate concept is a recipe for blow-up. In that case, you're really just increasing leverage *substantially*, especially if you take the "capital" you raise thru this loan and lever it up with your broker via margin.
Let's say you have 100K of personal capital, borrow another 400K from F&F, take the full 500K and leverage at 4x (intraday via RegT or using IB portfolio margin). You're really leveraged 20x1 which is great assuming all goes well. If you want to lever 20x then this is a way to do that, but you're begging for a blowup.
To each their own I guess but don't confuse a ridiculously leveraged trading book with a trading business.
Let's say you have 100K of personal capital, borrow another 400K from F&F, take the full 500K and leverage at 4x (intraday via RegT or using IB portfolio margin). You're really leveraged 20x1 which is great assuming all goes well. If you want to lever 20x then this is a way to do that, but you're begging for a blowup.
To each their own I guess but don't confuse a ridiculously leveraged trading book with a trading business.
Take a look at this another way with 500K. If you have 100K in your account and then borrow 400K from F&F at an interest rate of 5%. Your trading expenses are 20K for the loan + operating expenses. The trader parks his 100K in a high interest (pays 2%) secure account to cover any trading losses + loan interest. If the trader eats through 80K then the trader's track record was never that strong and should return the F&F loans + interest. If the trader is averaging 20% returns he should be able to increase those returns with the proper use of leverage. Having access to leverage and knowing how to use that leverage is part of the game. If your an undisciplined trader then yes there is a chance of a blowup. On the plus side you won't have to take any calls (complaints) from your F&F regarding their investment. Paperwork is kept at a minimum. Also, 5% annual return is not that bad for F&F.
Collective2 is definitely not worth it in my opinion.
1) There are way too many investors on their that have figured out how to exploit loopholes in their system that allow investors to “subscribe” to your system as simulation subscribers so they end up getting all of your trades without having to pay the sub fee. They simply then do the buys and sells on their real money Acct without having to pay you. That works for most investors on there - unless you are doing rapid day trades opening and closing positions intraday only -then it doesn’t work for them.
However for swing trades and longer term investment trades the investors on C2 can get all of your trades without paying you your fee
2) Option Trades - Another problem with C2 is that you cannot do any type of option spread trades - because their system doesn’t accept any type of spread or combo option order so you would have to “leg into” each trade of that kind instead of putting out 1 order to open or close all legs. Additionally all fills are strictly at the bid or ask only. There are no midpoint orders so each leg of a combo or spread would be filled individually and in addition each is filled only at the bid or ask.
3) problems with limit orders to buy or sell on stocks or futures on C2 - another problem is C2
converts all limit orders to market orders on real money accounts that are tied to your system to replicate your orders. So say you have a real money account at TradeStation that is tied to your C2 strategy and you are trading AAPL stock and we are in a fast moving market so you put in an order to buy 1,000 shares at a limit price of $250.25. C2’s system sends the order to the account at TradeStation that is tied to your system but since their system can’t transmit it it as a limit order to TradeStation (or any other broker) it is instead sent as a “market order”
and it is not filled at $250.25 but instead was filled at $250.60 - also same thing in reverse - you put in a limit order to sell at “X” price or better - it is transmitted instead as a market sell order and it is sold at a much worse price
so C2 looks good on the outside - but the reality of how it really works is much different both in terms of paying subscribers and also how trades are executed
1) There are way too many investors on their that have figured out how to exploit loopholes in their system that allow investors to “subscribe” to your system as simulation subscribers so they end up getting all of your trades without having to pay the sub fee. They simply then do the buys and sells on their real money Acct without having to pay you. That works for most investors on there - unless you are doing rapid day trades opening and closing positions intraday only -then it doesn’t work for them.
However for swing trades and longer term investment trades the investors on C2 can get all of your trades without paying you your fee
2) Option Trades - Another problem with C2 is that you cannot do any type of option spread trades - because their system doesn’t accept any type of spread or combo option order so you would have to “leg into” each trade of that kind instead of putting out 1 order to open or close all legs. Additionally all fills are strictly at the bid or ask only. There are no midpoint orders so each leg of a combo or spread would be filled individually and in addition each is filled only at the bid or ask.
3) problems with limit orders to buy or sell on stocks or futures on C2 - another problem is C2
converts all limit orders to market orders on real money accounts that are tied to your system to replicate your orders. So say you have a real money account at TradeStation that is tied to your C2 strategy and you are trading AAPL stock and we are in a fast moving market so you put in an order to buy 1,000 shares at a limit price of $250.25. C2’s system sends the order to the account at TradeStation that is tied to your system but since their system can’t transmit it it as a limit order to TradeStation (or any other broker) it is instead sent as a “market order”
and it is not filled at $250.25 but instead was filled at $250.60 - also same thing in reverse - you put in a limit order to sell at “X” price or better - it is transmitted instead as a market sell order and it is sold at a much worse price
so C2 looks good on the outside - but the reality of how it really works is much different both in terms of paying subscribers and also how trades are executed
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What about items 2 and 3 how does your platform address those
2) Option Trades - Another problem with C2 is that you cannot do any type of option spread trades - because their system doesn’t accept any type of spread or combo option order so you would have to “leg into” each trade of that kind instead of putting out 1 order to open or close all legs. Additionally all fills are strictly at the bid or ask only. There are no midpoint orders so each leg of a combo or spread would be filled individually and in addition each is filled only at the bid or ask.
3) problems with limit orders to buy or sell on stocks or futures on C2 - another problem is C2
converts all limit orders to market orders on real money accounts that are tied to your system to replicate your orders. So say you have a real money account at TradeStation that is tied to your C2 strategy and you are trading AAPL stock and we are in a fast moving market so you put in an order to buy 1,000 shares at a limit price of $250.25. C2’s system sends the order to the account at TradeStation that is tied to your system but since their system can’t transmit it it as a limit order to TradeStation (or any other broker) it is instead sent as a “market order”
and it is not filled at $250.25 but instead was filled at $250.60 - also same thing in reverse - you put in a limit order to sell at “X” price or better - it istransmitted instead as a market sell order and it is sold at a much worse price
2) Option Trades - Another problem with C2 is that you cannot do any type of option spread trades - because their system doesn’t accept any type of spread or combo option order so you would have to “leg into” each trade of that kind instead of putting out 1 order to open or close all legs. Additionally all fills are strictly at the bid or ask only. There are no midpoint orders so each leg of a combo or spread would be filled individually and in addition each is filled only at the bid or ask.
3) problems with limit orders to buy or sell on stocks or futures on C2 - another problem is C2
converts all limit orders to market orders on real money accounts that are tied to your system to replicate your orders. So say you have a real money account at TradeStation that is tied to your C2 strategy and you are trading AAPL stock and we are in a fast moving market so you put in an order to buy 1,000 shares at a limit price of $250.25. C2’s system sends the order to the account at TradeStation that is tied to your system but since their system can’t transmit it it as a limit order to TradeStation (or any other broker) it is instead sent as a “market order”
and it is not filled at $250.25 but instead was filled at $250.60 - also same thing in reverse - you put in a limit order to sell at “X” price or better - it istransmitted instead as a market sell order and it is sold at a much worse price