Should I consider a prop firm? Or just trade my own funds? ($2 mil)

[Overnight]

...Case in point. You sound quite confident here. Care to wager? I'd be glad to take your money in 3 years.

I'll wager it. If you loan me $500K, I'll wager you $250K. If I win, you owe me $250K. If you lose, I owe you $500K. But I'll sweeten the pot and add on my own $250K, so if I win you will owe me $500K. If you lose you will owe me the extra $250K I gave you, plus the extra $250K you put in the pot. So you would owe me $750K. lol!

 

[SpreadOption]

I'll wager it. If you loan me $500K, I'll wager you $250K. If I win, you owe me $250K. If you lose, I owe you $500K. But I'll sweeten the pot and add on my own $250K, so if I win you will owe me $500K. If you lose you will owe me the extra $250K I gave you, plus the extra $250K you put in the pot. So you would owe me $750K. lol!

Sold!

 

[marketsurfer]

Take $100k and join a prop firm. You will get the leverage needed and not have to risk your core capital.

surf

 

[Majulah]

Hi guys,

thanks for all the great posts. In fact, I am finding myself in a similar position like SpreadOption (how did you do btw?).

I am in my mid 20s and have been trading for many years now. I managed to develop a strategy that returned me extremely high profits so far (last year I nearly tripled my account, December took a small toll). I now managed to accumulate close to 150k in my account. Due to an inheritance, I have come into the possesion of another roughly 500k.

My strategy should be highly scalable, however, so far I have traded with relatively little capital.

I have established my own firm and would be ready to completely focus on trading once finishing my master's degree.

Do you have any suggestions for me?

As I am not yet married (no kids) and becausr I am living in a shared apartment, I hardly have any fixed expenses.

Best,
Majulah

 

[Robert Morse]

Do you have any suggestions for me?

Is your question-Do I join a prop firm where I risk my capital 1st to get excess leverage or continue to use my own funds?

If that is the question, what benefit would you be looking for at a prop firm?

 

[Majulah]

Hi Robert,

thank you for your reply. I have not put any thought into joining a prop firm yet (I am also not fully aware of how a prop firm operates in detail). I am based in Switzerland and well familiar with the local financial sector but have not come across prop trading firms operating out of here. What specific prop shops were you thinking of?

Generally speaking, I do not need additional funds to trade as options offer me enough leverage so far.

Best,
Majulah

 

[Robert Morse]

What specific prop shops were you thinking of?

I was thinking of talking you out of using a prop firm. So, what is your question?

 

[Majulah]

Hi Robert,

thanks for asking. I have a specifically liquidity related question (I know slightly off topic). If I am trading positions in underlyings in the mid cap space I quite often use options with limited to no open interest. My turnover is high and I never hold until expiration. Do you have any idea until what level market makers are going to fill my orders?

Best,
Majulah

 

[Robert Morse]

Hi Robert,

thanks for asking. I have a specifically liquidity related question (I know slightly off topic). If I am trading positions in underlyings in the mid cap space I quite often use options with limited to no open interest. My turnover is high and I never hold until expiration. Do you have any idea until what level market makers are going to fill my orders?

Best,
Majulah

I do not. I would recommend avoiding illiquid equities with wide option spreads. Not only do you have to pay to get in, but out too. And on the way out, if it is a time of stress in the market, the markets will be wider. that cost means you have to be too right too often.

 

[WLDCO__WGD]

Taking some time to think about it as @smallStops says is a good idea.

If you want my two cents, I'm a quant trader in a systematic hedge fund and I invest my bonuses in other (systematic!) hedge funds and small/mid-sized CTAs. So far my portfolio has been positive every quarter, I am allocated to 9 external managers and have two prop systems running so that gives me 11 diversified streams of return, which I consider much better than stocks/bonds portfolio.

I manage to get 20-25% a year on my cash without too much vol and I can sleep at night. On my capital base, that's way enough to live in London / New York city with a wife not working and two kids, so I could leave my job. Although this is not a Job per se, that still involves me flying to Chicago / New York / Miami once a year (so 3 trips of 4-5 days each) to meet new managers and a lot of due-diligence which takes time.

That's a fair pair!