margining multi-leg positions in stocks

E

endicottsteel

I am looking for guidance from people who are involved in this and know what is what. I currently swing trade a number of multi-leg future positions, typically there are 4 or 5 legs to the position. I use the prop firm route to achieve margining that is viable. I couldn't do this sort of trade via a standard retail future broker as they couldn't handle the margining, they would try and apply to margin for each leg and it would just end up being a cluster****. So the way to trade these positions is clear to me, use a prop firm who know how to margin.

I see a lot of opportunities in stocks. For example something like the XLF etf versus weighted basket of BRK, WFC, JPM, BAC is likely to be a highly co-integrated spread. I would be looking to hold for days to weeks up to a couple of months.

What are the best routes available to someone who needs custom margining of this nature?

My initial thoughts are a prop firm like Bright Trading (RIP Don you legend) who understand this stuff or using a portfolio margin account. Low round trips would be needed but not crazy low given the holding period is relatively long.

Thanks in advance.

endicott

edit - as an additional point taking this further where custom margining of stocks against futures is required, what would be the options.
 
I have a few thoughts here. Your futures prop firm does not determine margin for day trading or overnight positions, Their FCM does. They are allowing you to use capital either they put up or other traders like you did, that they are not using. The same will be true for an equity prop firm. In the US, the highest margin available for a customer account is portfolio margin which is up to 6.6 to 1 for equities. You will not get any margin relief for equity pairs that offset unless it is recognized by the OCC like Some indexes.

One more point. Only a self clearing broker dealer or prop firm with a JBO relationship with them can get margin offsets for future/equity positions, no customer accounts.
 
This has been brought up before. I believe Rob and I have different perspectives on what is possible.

What you are looking for is commonly done by trading firms with reasonable capital and high volume. It is called margin financing. You work with their risk department to specify the mixed portfolios you plan to trade. For example - CL vs uso. You agree on an appropriate margin number for that basket and then the clearing firm will post the higher, required, margin on your behalf and you pay a tiny amount of interest on this "loan".

It's been my experience that most things that you think should be possible are indeed done by someone. But it might require capital/relationship/fees/entities that are pretty effective at keeping the door closed until opening it becomes a necessity.
 
garachen,

Prop accounts are not customer accounts. Even though your money might be up as first loss, you're trading in the account for the firm not your own account so those finance charges are internal Charges are not external. The firm is using their capital and their relationships to allow this.

If the FCM allows it, they can finance span margin vs a securities position. This is done for customers that have big balance sheets or those that are deemed hedgers.
 
I am not a prop trader or a BD. My account is a customer account. There is no internal financing. But I agree, if I were associated with a prop firm then what you describe would be the case.

Yes, you need an FCM that allows this. It doesn't apply to 99.99% of the people here so it doesn't actually matter.
 
So from the replies here it looks like if I am correct if I want to trade 4 stocks against an etf, dollar neutral I will need a US prop firm like bright trading unless I have a very large account say $1m+ then I could probably make my own arrangement with some digging. If I need futures versus stocks I am likely to need $1m account and go digging again. Only the prop option is available to me at present.
 
You don't need $1mm. We introduce to Apex Clearing and their minimum account size is $250,000 for portfolio margin. Our minimum is a little higher. However, if you need the offsets like you described, PM does not offer that. PM offer a max of 15% margin for equities and a little better for broad based indexes like SPY, QQQ and IWM.
 
rmorse said:
You don't need $1mm. We introduce to Apex Clearing and their minimum account size is $250,000 for portfolio margin. Our minimum is a little higher. However, if you need the offsets like you described, PM does not offer that. PM offer a max of 15% margin for equities and a little better for broad based indexes like SPY, QQQ and IWM.
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yes i was saying c. $1m for the custom solution garachen was talking about. I know portfolio margin capital req is lower for interactive brokers, they can do it for $100k deposit as long as that balance is maintained.

Anyone here trade with Bright trading?
 
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