Question about HFT accounts

A

Aston01

I was reading an article on High Frequency Trading that covered basic math on the subject.

$10,000 - Position Size
x $.001 - Expectancy
x 100,000 -Trades a Day

$100 - Daily Yield​


Thing I don't understand, and was hoping someone could clarify for me, is the article mentioned this was unleveraged trading. If you do the math, the above scenario required $1 Billion cumulative buying power to make $100. The way I understood account structure a typical equities margin account could have a 4:1 buying power, so a $25k account had $100k total daily buying power.

I must be missing something because nobody trades their entire $100k buying power to make $.01 a day. Can someone please clarify this for me ?
 
Aston01 said:
I was reading an article on High Frequency Trading that covered basic math on the subject.

$10,000 - Position Size
x $.001 - Expectancy
x 100,000 -Trades a Day

$100 - Daily Yield​


Thing I don't understand, and was hoping someone could clarify for me, is the article mentioned this was unleveraged trading. If you do the math, the above scenario required $1 Billion cumulative buying power to make $100. The way I understood account structure a typical equities margin account could have a 4:1 buying power, so a $25k account had $100k total daily buying power.

I must be missing something because nobody trades their entire $100k buying power to make $.01 a day. Can someone please clarify this for me ?
More...

10,000 * 0.001 * 100,000 = $1 million (per day)
 
Sorry ... the way I wrote my calculation was a bit confusing. It was $.001 cent gain per $10,000 position.

Not 1/1000th% per $10k position which would be $10 per trade as you calculated above.
 
Aston01 said:
Sorry ... the way I wrote my calculation was a bit confusing. It was $.001 cent gain per $10,000 position.
More...

You probably misread the article. In the P&L calculations, the gain is normally referred to as "cents per share", such as "1/10 of a cent per share".
 
Ok assuming I miss read the article I am basically trying to understand the below question.

Does an unleveraged HFT account turn over the whole account more than once? By that I mean, if the account started the day with $25k and purchased and sold that amount within the first minute of the day... Would it be out of buying power for the rest of the day? or is it allowed to turnover the account multiple times a day?

That is the part that I am most confused about.
 
I cant speak for HFT, but way back when I was market making, you generally had a lot more leverage, and a lot more flexibility to be able to offset positions. eg; you were long one instrument and short another, your used risk capital was practically zero, even though both may have attracted a margin call.
Additionally - in the old days, so long as you made sure you were within risk and margin requirements by the end of the day you could turn over an account many times during the day. It was the close of day that was important. Theses days I am sure its more instant and allows the same thing.
Basically - the risk and margin metrics are different and not really comparable for retail accounts.
 
You must log in or register to reply here.
Back
Top