Proprietary Trading Firms

As a new trader to stocks, I STRONGLY advice against trading earnings stocks and anything Cramer is talking about (on an intraday basis). The bottom line is, you wont be quick enough to compete with the pros nor will you be able to handle the big intraday swings on some of the earnings stocks. Its better to learn on the less active stocks, though more boring, but at least you'll be able to learn how the equities game works without putting yourself in those risky situations.





Quote from optionzztrader:

jmowery
do u trade earnings? wait until earnings day and then trade in direction stock gapped, usually works? also, u watch cramer? he moves stocks, BIG TIME!!!!! as long as he mentions them, it goes either way. i don't buy on his recommendations, i just watch and wait for stock to move for next month or two in huge daily ranges. he likes RACK, ANDE, SIRF, FTI, etc.

just curious.
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Quote from Steve Tvardek:

As a new trader to stocks, I STRONGLY advice against trading earnings stocks and anything Cramer is talking about (on an intraday basis). The bottom line is, you wont be quick enough to compete with the pros nor will you be able to handle the big intraday swings on some of the earnings stocks. Its better to learn on the less active stocks, though more boring, but at least you'll be able to learn how the equities game works without putting yourself in those risky situations.
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Guess I should stay away then, I'm happy with AAPL and VLO and all those that move very nicely during the day anyways.

Steve, do you trade fast or slow moving stocks?
 
Fast and volitile SOB's :D

Quote from JMowery1987:

Guess I should stay away then, I'm happy with AAPL and VLO and all those that move very nicely during the day anyways.

Steve, do you trade fast or slow moving stocks?
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Quote from FaderTrader:

Wow - I love how these paper traders always take things to the extreme.

If you think in these extreme hypotheticals, how do you expect to be able to pull the trigger, ever?
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Hey, this is a serious question...and I pull the trigger hundreds of times a day! - on real money. Actually, it is BECAUSE I have real money on the line that I am concerned with this hypothetical situation...

Things that may be unimaginable do happen sometimes, people do lose millions of dollars, and I'd like to know what kind of risk is on my shoulders - that's the whole thing with risk...we're dealing with possibilities here - might never happen, but I want to know what I'm responsible for.

So I'll post it again, and see if anybody can provide some info:

Quote from Don Bright:

a trader would have to lose all his money, plus $10 million of ours before even having a potential loss assigned...beware of firms who lock up money for 12 months or have more traders money than their own....bad, very bad.

All the best,

Don
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What kind of loss assignment are we talking about? At a prop firm, say a trader is long full buying power, $5million in a trade...the stock gets halted, the company is going under, and the guy just lost $5million.

Say there are 50 traders in total, are we saying that each trader might be assigned 1-50th of the loss? Would each trader be liable for $100,000 even if they each contributed a $5,000 or $20,000 deposit or whatever? Are we talking about those kinds of loss assignments or just about risking up to the trader's deposit amount at prop firms?
 
Quote from LU Trader:

Say there are 50 traders in total, are we saying that each trader might be assigned 1-50th of the loss? Would each trader be liable for $100,000 even if they each contributed a $5,000 or $20,000 deposit or whatever? Are we talking about those kinds of loss assignments or just about risking up to the trader's deposit amount at prop firms?
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.... now that just somehow made me scared... I'd be ......... destroyed if something like that happened.
 
Quote from Don Bright:

OK guys....let's review....LOL.

You put up a bit of capital...
You use our money to trade with...Free of Charge (intraday).. perhaps a $million or two.

You keep all your profits....you are responsible for losses

You get interest on your money...

You get interest on short stock ...(retail does not give that to you)

If your strategy requires large overnight positions, you MAY be charged what is called "haircut" (a risk fee)....as follows...

For "hedged Positions, such as pairs, mergers, etc.

You use 6 times your equity with NO haircut.
6-12 times your equity, you pay 2% per year
12-18 times your equity =4% per year....(charged daily)..
18-30 times your equity = 6% per year....

Over 30 times, we discuss....

Same exact business model used on the exchanges for their floor traders....for as long as I can remember....

You are taxed on "triple net" with a K-1 ...

You are exempt from FICA withholding....

Hope this helps a bit...

Don
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Quick Question Don... What is the haircut on un-hedged long or short overnight diversified positions with a max of 4 to 5 % in each positon.

Thanks
 
Quote from NKNY:

What kind of rare cases...:)


NK
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Oh, I think a few traders were "grandfathered in" and some exchanges allow some off-floor trading for their members and groups.

Don
 
Quote from NKNY:

Quick Question Don... What is the haircut on un-hedged long or short overnight diversified positions with a max of 4 to 5 % in each positon.

Thanks
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Maximum would be 1% per month for naked positions.

Don
 
Quote from LU Trader:

Hey, this is a serious question...and I pull the trigger hundreds of times a day! - on real money. Actually, it is BECAUSE I have real money on the line that I am concerned with this hypothetical situation...

Things that may be unimaginable do happen sometimes, people do lose millions of dollars, and I'd like to know what kind of risk is on my shoulders - that's the whole thing with risk...we're dealing with possibilities here - might never happen, but I want to know what I'm responsible for.

So I'll post it again, and see if anybody can provide some info:





What kind of loss assignment are we talking about? At a prop firm, say a trader is long full buying power, $5million in a trade...the stock gets halted, the company is going under, and the guy just lost $5million.

Say there are 50 traders in total, are we saying that each trader might be assigned 1-50th of the loss? Would each trader be liable for $100,000 even if they each contributed a $5,000 or $20,000 deposit or whatever? Are we talking about those kinds of loss assignments or just about risking up to the trader's deposit amount at prop firms?
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You have a right to be concerned ...check most of the other firms, they have had to use their traders money for "net capital requirements" - you can tell by checking balance sheets, and if they "Lock up" your money for some period of time. Our LLC members will not be liable for anything above their deposit, unless they are in some sort of regulatory violations or something like that.

Imagine being with a Firm that does not put up the $10Million, or who use their traders money to be able to comply with regulations...that's where you all should be directing your legitimate concerns.

(Due Diligence, balance sheets, etc......"security" is one of the most important factors in developing a "comfort level" for your trading).


Don
 
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