IB: The Party Is Over

stevene9

Having a large number of customers/traders looks very nice on the corporate books. I do think that they are "just feeling their way around this situation".
Which business model is more stable
1: having 10000 customers that each spend 10 dollars
2: having 10 customers that each spend 10000 dollars

Business number 1. is less risky and therefore considered to be worth more.

Business number 2. may be easier to run but is much more risky. What happens if you lose 3 clients. Your profit margins in that case are down much more than 30%.
 
And could I just add one important thing to this discussion?

ktm:

The Germans didn't bomb Pearl Harbor. It was the Japanese!!!

BSAM
 
>Which business model is more stable?
>
>1: having 10000 customers that each
>spend 10 dollars
>
>2: having 10 customers
>that each spend 10000 dollars
>
>Business number 1. is less risky and
>therefore considered to be worth more.

That conclusion is very debatable and will very much depend on the situation. If the 10000 customers include many, many who are "impulse" customers (for instance buying the latest fad) and a company doesn't have confidence that it can provide the next "fad", then it can be much less risky to have 10 customers who have proven to be in a core business for the long haul.

I can't say which is "less risky" in this situation, but I can say that many, many traders (particularly small ones)came to attempt trading through fadish expectations.

Someone said IB is likely watching their competitors and their numbers for answers. I couldn't agree more. I'd be surprised if they don't do what is in their best interest (although one might wonder after reading the Chairman's letter on trailing stops).

JB
 
Originally posted by BSAM
And could I just add one important thing to this discussion?

ktm:

The Germans didn't bomb Pearl Harbor. It was the Japanese!!!

BSAM
More...
BSAM
No offense,but rent the movie "Animal House" All will
be calm.Oh and one more quote--I think it's time for a---
ROAD TRIP
 
today was my first day trading with IB.. i only made a couple of trades to check it out and the interface is actually much easier to use than i feared.. actually, i think with practice it will be much faster than cyber.. i appreciate everyone on this board who recommended IB, thanks..

the only thing i want to add about 4:1 margin and trading in cash accounts is that until a few days ago we didnt even know that other brokers were going to offer cash account trading.. the rule doesnt even go into effect for another month.. maybe we should see how things shake out before we jump to conclusions and start making threats.. just a thought..

-qwik
 
michaelday -

Let me change your example to this one. Suppose you are a finance lender with $100,000,000 to lend. Would you be better off loaning the funds to 10,000 low credit risk people who can't get credit anywhere else, but where you can charge higher fees, or would you be better off lending the money to AAA corporations. It depends on the credit risk, doesn't it. Are junk bonds better than Treasuries. It depends on the risk/reward you wish to take with your money. Your conclusion, in my opinion, is fallacious. It all depends on your risk profile. This is not a mathematical case of large numbers, which is what you are trying to say. Lending to 100 near bankrupt companies is not safer than lending to Johnson & Johnson. I am not saying that traders that use 4 to 1 leverage are inherently bad, but I am saying that they are inherently more risky, almost by definition. Having 1000 traders using high leverage is not less risky than having one trader trading all cash. The theory of large numbers does not apply where the mathematical probability of default is different between the two classes of investors.
 
There is a reason why IB is still possibly my only choice if I am going to trade with my own money as a newbie. No ticket charge and 0.5 cent per share for anything more than 500 shares? Hello? Wake up, there isn't a firm on this planet that can compete with this at least not until you start every position with more than 1500 shares.

What's done is done, crying about it won't make a difference, plan the next move . . .

As far as volume is concerned, I don't think it matters, the 100/200/300/400 shares on the TOS never meant anything to begin with. 4 to 1 margin will easily balance out that effect . . . Small potato accounts never moved the market, it never will. I find it funny to hear 10-15% volume gone because people with less than 25K can't day trade. What hell are you smoking can I have some?
 
Vikana said: "Actually, I propose that IB allows 4:1 day trading margin and 2:1 for overnights. That would give most of us what we're asking for, and reduce the overnight risks for them (and us)."

Stop it Vikana. You are making too much sense! That's a great proposal and would be a very reasonable compromise.






Now, "May I have 10,000 marbles please"
 
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