Prop firms for position options traders?

I'm at TOS now (among a couple other places), and couldn't be happier from a retail options trader perspective. Certainly a huge improvement over the full-service no-nothing firms that I had the misfortune of trading at in the past. However, the point of my question was to find out whether there might be alternative types of relationships beyond the traditional retail one that might make sense for a positions options trader.
 
I did some checking and I think I need to clarify our position on "proprietary options traders". We currently do not have *any* options traders that trade in the "prop" account, only in our customer accounts......we service them and are happy to open accounts for them, but not in the "proprietary" accounts.

Sorry for any confusion this caused.

rttrader -
 
Quote from Hello_Dollars:

Trajan,

Thanks for the info. I actually have significantly in excess of the amount of capital you mentioned that I use for risk capital. So the direct clearing firm relationship you suggested might make sense. When you get a moment, could you tell me how that works or where I might go to get some further information?

Thanks again.

Regards,

HD
More...
Typically these firms cater to floor traders on the various echanges, with different ones focusing on different aspects of the markets. For instance, SLK, a sub of Goldman, goes after the Don Bright type business; option clearing is only a part of what they do and typically didn't go after the floor trader business. Off the type of my head, firms like, FOC(sub of SLK), LIT(Sub of SLK), Kessler/Asher(Sub of SLK), Sage, O'Conner, PAX, Bear Stearns. These aren't the firms retail trader brokerages clear their trades through, although Bear does have significant retail operation, but that's different. Mostly they service and clear floor traders/market makers. However, people leave the floor eventually and trade "upstairs", although there were people hanging around who didn't sdtart on the floor.

I'm not really familiar with the licensing requirements for these type of traders, it's probably similar to prop shops nowadays. The downside is that you would be a Broker-Dealer, which affects how you execute orders on the exchange. Although, I'm not sure this hasn't changed in the last couple of years. I tried to find out this information from my own firm's prop shop, but didn't get anywhere. As far as the capital requirements go, for floor traders it is now around 200k, for off floor traders it is most likely more than that. Also, they may not take you directly but refer you to a sub-group which clears through them(most likely).

This business is fairly decentralized; talking to somebody in Chicago may mean missing finding information about something in New York. It also means as a professional, your own expenses will be higher in some areas, you would pay a higher rate for exchange data and for clearing by the exchange, in addition to what your own firm charges. These guys are no different than prop shops which is that volume is what's important.

The only way to find out is to call. Google them to find their websites for conatact info. Tell them you have been trading for X number of years through Goldman, Solie and Lehman(the fact you mentioned ths is the reason I made the suggestion) and are looking for a risk-based haircut for off floor trading. If they say they can't help, get references for sub-groups or other firms who may take you on. The best place to start maybe FOC, although a small firm like O'Conner may not be a bad idea(I have cleared at the CBOE). I had looked for their clearing services by googling but couldn't find anything but their retail operation.
 
Trajan,

Thanks a lot for all the great information. While I obviously have much to learn about how this works, you've certainly armed me with enough info to at least determine whether such an arrangement would make sense. I'll be sure to share whatever I find out in the course of my research. Thanks again!

Regards,

HD
 
Quote from Hello_Dollars:

Thanks Pabst.

That's pretty much the impression I got from the boards. Still, despite my obvious niaivete regarding how the prop world works, I thought I'd pose the question anyway given the various outlandish claims about the endless benefits of prop shops from the myriad recruiters that seem to live here.

But with regard to the hedge fund idea, I've been advised to explore that route by a few others on a "sub-fund" basis. I just

need to think through whether my proven inability to work well
============================================
for others and my neurotic need to be in total control of my
==========================================
trading would be a hindrance to such a relationship.
======================================

Thanks again for setting me straight.

Regards,

HD
More...


***


Probably will be a helpful search anyway;
and interesting read with typical sellers contracts.:cool:

''Inability to work well for others'' is a good probability pattern for running a
=========================================
trading business;
============
more so than as an employee & related structures.
=========================================

''Discretion shall preserve you -Solomon-trader king.
 
Quote from Hello_Dollars:

Oy!! That would make my unfortunate experience at, in turn, SSB, Goldman, and Lehman, where I was charged exorbitant commissions for poor execution, a complete ignorance of options, and irrational margin treatment of iron condors, etc., pale by comparison. Thanks again for warning me before I took a step in that direction.

Regards,

HD
More...

so many names for similar trades

what are Iron Corridors?

I would suppose a series of spreads covering both the cap and the floor and a few mid-swing scenarios?
 
Phoenix,

An iron condor is simply a short strangle combined with a long further out of the money strangle. Or, another way to define it, is a combination of both a bear call spread and a bull put spread. For example, long OEX Sept 480 put/short OEX Sept 490 put/short OEX Sept 500 call/long OEX Sept 510 call.

It's a limited risk, limited reward, theta positive, vega negative trade that does well in range bound markets and which I have on virtually every month. Though, to be precise, I actually trade "iron albatrosses", which are simply iron condors but with a wider distance between the short puts and shorts calls than are between the short and long puts on one side and the short and long calls on the other. As a result, if I trade the position correctly, I'll have a profit range that approximates the standard deviation of the underlying without sacrificing anything in terms of my max profit. (Sorry about the unnecessary confusion, but I'm a stickler for detail.)

Hope that helps.

Regards,

HD
 
refreshing to my ears to hear another Greek, talking Options,

In our country, we invinted.....oh, that's another conversation


The mathematics of advanced option trading can not really be done on your feet, you must have charts, calculated coefficients in real time or currend EOD, and the most important facet is knowing when to mix Euro exercises with American exercises.

That really adds flavor to the stew.

The most profitable option trading I've ever done was adjusting positions daily based on their returns, instead of just keeping the spread on, as if there were some inherent magic to just getting the trades on. Some purists insist on keeping the spread on through the full duration from start, however, the objective is profits not comfirmation.

Sure you heard that one?, huh?
 
Quote from Hello_Dollars:

Phoenix,

An iron condor is simply a short strangle combined with a long further out of the money strangle. Or, another way to define it, is a combination of both a bear call spread and a bull put spread. For example, long OEX Sept 480 put/short OEX Sept 490 put/short OEX Sept 500 call/long OEX Sept 510 call.

It's a limited risk, limited reward, theta positive, vega negative trade that does well in range bound markets and which I have on virtually every month. Though, to be precise, I actually trade "iron albatrosses", which are simply iron condors but with a wider distance between the short puts and shorts calls than are between the short and long puts on one side and the short and long calls on the other. As a result, if I trade the position correctly, I'll have a profit range that approximates the standard deviation of the underlying without sacrificing anything in terms of my max profit. (Sorry about the unnecessary confusion, but I'm a stickler for detail.)

Hope that helps.

Regards,

HD
More...


No wonder you got poor margin treatment for your short iron condors. The margin clerk probably thought that you were trying to sell a "Pumping Iron" video to him.:D
 
Phoenix,

Yes, I've come to learn that knowing when and which adjustments to make with the Greeks in mind is the true key to success in the options game (that is, unless you're the house). Of course, it's often the adjustment not made, particualrly when selling theta, that makes the difference between profit and woulda, coulda, shoulda (to quote the esteemed Mr. Cottles).

Regards,

HD

****************

Firehouse,

So that's why the margin clerk sent me $20 and a return envelope. I thought he was just a deviant. Wait, that's redundant.

Regards,

HD
 
You must log in or register to reply here.
Back
Top