Overnight leverage

[RedManPlus]

Quote from Cre8UrF8:

Your inventing some fuzzy math there bub, you can't get 15:1 just because you have 50/50 long to short.

Don even admits that Bright (Bob) only has $10million of firm capital in it. That really isn't more than others like Echo and Generic. The way Bright gives out so much overnight leverage is through the use of options against large concentrated positions the firm holds. The options limit the risk on the large position the firm has in that particular stock and therefore lowers the amount of capital they need to actually have to carry that position. It is all done with smoke and mirrors and inventive financing. Not that there is anny thing wrong with it or anything for traders to worry about. But Don doesn't tell people that's how they do it and tries to play it off as Bright having huge amounts of capital, which isn't true. Bright isn't anymore well capitalized than other firms, however they do alow much more buying power to traders. Which I feel is a huge risk.

A month ago a Bright trader put on positions that were 700:1 of his deposit before their risk manager caught it. Any firm that doesn't have parameters to prevent this and only reacts after the fact is dangerous in my opinion. Just the facts.

My post was a simplified analysis of the leverage...
** ANY B/D ** can legally employ (if they can get it financed)...
** In the context of the NASD Net Capital Rule **.

Your post was nothing more than Hot Air... devoid of relevant factual material.

You people keep trying to isolate individual positions at Bright.
The only thing that matters is that the entire Bright holdings be close to 50/50 long/short...
Which qualifies for an NASD haircut of about 7.5% = 13.33 leverage.
(Naked = 15%... hedged = 7.5%)

THAT IS COMMON STOCK.

For example, a closed end muni bond fund on the NYSE would be HALF of that.
If you are Long $10 million and Short $10 million in Muni Bond Funds...
The Net Capital Rule would require a MAX 7% haircut on ONE side...
So the B/D needs to put up only 3.5% in capital = 700K...
IF he can get the rest financed by Clearing Firm or Bank.
(This is actually a very low risk position if managed by a pro).

The point is...
Bright can pretty much give out all the leverage that they want...
IF they can view the entire Firm as one Portfolio for their FOCUS filing...
And if they can satisfy the "risk guys" at the Clearing Firm or Bank.

They do not really need any capital from traders... but it helps weed out the stiffs.
Someone who can't even come up with 50K-100K... is a deadbeat with no history of success.

rm+

 

[cstu]

I fail to see how putting up a nominal amount of money weeds out stiffs or people who can't trade.

I would have to question in the decision making skills and risk management ability of someone who would actually put up $10000 with no experience and think they can be "trained" or make money.

 

[Don Bright]

Quote from Maverick74:

Don and I go way back. It's not harassment.

I appreciate the support from the others, but you're right...I have no problem doing "battle" with you...it's always in good taste (a rarity around here, LOL).

Only 7400 puts left, all below 7.50 now....hardly any risk at all...(I hope, LOL)....

Don

 

[RedManPlus]

Quote from cstu:

I fail to see how putting up a nominal amount of money weeds out stiffs or people who can't trade.

I would have to question in the decision making skills and risk management ability of someone who would actually put up $10000 with no experience and think they can be "trained" or make money.

You make 2 points.

I completely agree with the latter...
But reputable prop firms do not prey on this type of loser.

As for weeding out stiffs...
Let's say you are 30 years old... almost half way through life...
And don't have or can't borrow a relatively small sum like $25,000.

It would be fair to assume...
That such a person has never succeeded at anything complex...
Does not have a lot of initiative...
And is HIGHLY unlikely to become a successful trader...
Which is all about driving initiative and dealing with complexity.

There are exceptions...
But as someone who has hired/trained wannabee traders...
I wouldn't give the time of day to someone...
Who does not have an ** active ** trading account with at least 50K in it.
Scholastic accomplishments are almost totally irrelevant.

rm+

 

[Maverick74]

Quote from Don Bright:

I appreciate the support from the others, but you're right...I have no problem doing "battle" with you...it's always in good taste (a rarity around here, LOL).

Only 7400 puts left, all below 7.50 now....hardly any risk at all...(I hope, LOL)....

Don

Don,

So I can win my free beer, can you please tell us if you use firm capital to buy OTM puts to hedge against trader's overnight positions. Come on Bob, there is beer on the line here.

 

[Don Bright]

Point of reference.....millions of americans have $2K-$10K in some retail account and have no experience in the marekt whatsoever.....they are likely doomed for failure when they attempt to trade with any frequency....If they learn that they cannot make money with that little, hopefully they will decide to do something else with the money.......if they decide to go ahead and work at the business of trading, aren't they better off to approach it with their eyes wide open, with some training, and the ability to use more capital free of charge...and be in a group of successful traders??

BTW, I told several people today that they should not attempt trading with a few grand in some retail account, and that they aren't prepared to join BT either....why would I want to add someone to my group who isn't prepared...like a hospital hiring untrained doctors...not a good idea....

Don

 

[Fraserj]

Let's say you are 30 years old... almost half way through life...



I don't post very often but this one got me. I just wished Eddie Franco Happy 60th Birthday a few months ago because he is a few months older than me running joke we have. (I worked for Eddie & Bob ran an office in Boston 97 - 03) But to the point RedManPlus
I really like to think I have a few more years of trading before I am holding a flower on my chest.

 

[Don Bright]

Quote from Fraserj:

Let's say you are 30 years old... almost half way through life...



I don't post very often but this one got me. I just wished Eddie Franco Happy 60th Birthday a few months ago because he is a few months older than me running joke we have. (I worked for Eddie & Bob ran an office in Boston 97 - 03) But to the point RedManPlus
I really like to think I have a few more years of trading before I am holding a flower on my chest.

Hi Fraser...actually your name came up recently from a new trader who was checking out BT and a "secondary" firm....he chose BT (not my point)..... Bob says Hi, and we both hope all is well. You missed Eddie's 100th birthday party in Cocanut Grove, Miami....60 for Eddie, 40th for Sarah.....

(And I hope at my age that I may have a couple good years left as well, LOL).

Don

 

[Don Bright]

Quote from Maverick74:

Don,

So I can win my free beer, can you please tell us if you use firm capital to buy OTM puts to hedge against trader's overnight positions. Come on Bob, there is beer on the line here.

The answer is "rarely" - options are meant to be sold..... hopefully that's an adequate answer to get you that beer!

Don

 

[TradeCobalt]

Make love...not war.

How about talking about a way to make money for your traders vs. banter about leverage and splitting hairs.

I was a Bright Trader and learned to trade NYSE from the SF office manager. I had a few up months and some down months, but just churned most of my initial account into commish for Bright. 1 cent stock back than was the average deal. I did not like that one bit and thus studies and educated myself on Futures and currency. I already had an option education.

I was using an outside account to trade options and Bright was not big on options. I believe you had to have a 250K account.

I needed leverage from my trading vehicle and low commish to make my scalping method work. There was no way I was getting that from stocks and no way to scale up that business.

I left, went through a Program in SF to learn the entire trading industry, not just day trading. GoldenGate Univ. www.ggu.edu has a very good program with a masters in Finance along with the trading courses.

I went out to start our own small trade group to trade futures, options and currency with a plan, a method and some money management (bet sizing) skills.

What the hell is my POINT?

Here is comes: USE THE MOST EFFICIENT TOOL TO GET THE JOB DONE.

A mix of Index futures and Cash Options allows a trader with some capital to make a living and in some cases a boat load of Money.

I will ask the trader that I am speaking about, if I can post some sheets to make my point. As a teaser:

He made 56% last QUARTER after a 25% incentive on about
$8 Million is capital. He did 37% the previous quarter after fees and 27% 2 quarters ago.

In his personal accounts, he was double that as he uses max haircut to maximize his own money. That is DAM impressive.

That is what I am talking about. Let talk about how to mentor others on something along these lines than bicker about some commish model and sucking $5K a month from some newby trader.

Don Bright, Give me your best trader.............. trading more than 5 Mil and let go heads up in a 3 month trading competition?

Trader vs. Trader

Who cares about leverage and commish if you can not make consistant returns> Bottom line.