Sounds reasonable to me.
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Sounds reasonable to me.
thanks Maverick and Coach for a realistic no fluff discussion. Usually most people I know would keep churning their account and the their brokers wouldnt care less about it.
I trade with about 100k of capital and would be happy if I make 30k off of it at the end of the year. As I work fulltime and trade part time, I dont really try to swing for the fence. I wish I could have a better capitalized account though.
Hey coach... love your book and threads here as well as on yahoo. Do you think prop shop is somthing I should even look into as I currently only devote 2-3 hours on trading a day (learning phase) and dont plan to quit my day job anytime soon.
I currently have a great deal at TOS.
thanks
SS
I trade with about 100k of capital and would be happy if I make 30k off of it at the end of the year. As I work fulltime and trade part time, I dont really try to swing for the fence. I wish I could have a better capitalized account though.
Hey coach... love your book and threads here as well as on yahoo. Do you think prop shop is somthing I should even look into as I currently only devote 2-3 hours on trading a day (learning phase) and dont plan to quit my day job anytime soon.
I currently have a great deal at TOS.
thanks
SS
Let me ask some overly simple questions.
Why can only prop shop traders and market makers get a risk based haircut?
Do they have to be registed as/with a JBO or BD?
If that is the case, is the Risk BH the same as SPAN margin?
Is this what is spoken of when people say they like trading futures because they use SPAN and not Reg t?
My bottom line question is basically how can current retail traders with account sizes betweek 100k-200k get a RBH without being a full time trader? Or is this just a sec reg T issue?
Thanks,
sd
PS: Oh, and if your not yet tired of answering questions...If you currently trade in a LLC for tax reasons, how hard is it to just "become" a JBO, with one employee....me?
Why can only prop shop traders and market makers get a risk based haircut?
Do they have to be registed as/with a JBO or BD?
If that is the case, is the Risk BH the same as SPAN margin?
Is this what is spoken of when people say they like trading futures because they use SPAN and not Reg t?
My bottom line question is basically how can current retail traders with account sizes betweek 100k-200k get a RBH without being a full time trader? Or is this just a sec reg T issue?
Thanks,
sd
PS: Oh, and if your not yet tired of answering questions...If you currently trade in a LLC for tax reasons, how hard is it to just "become" a JBO, with one employee....me?
Risk based haircuts are given by the exchange, not by the firm. In order to receive these haircuts, you need to be a member of that exchange through a JBO.
Haircuts are not the same thing as span although they are often confused with each other. They are similar only in that neither is based on REG T margin.
Getting a haircut has nothing to do with being a full time trader or not. It's very simple really, you need to join a JBO. In order to start your own JBO you will need 1.5 million dollars outside your trading capital and set up your own BD with a clearing firm. There is also a lot of regulatory issues you will need to comply with and you will need to pay a lot on legal to not only set it up, but to maintain it.
The easy thing to do is just become a member of a firm that has a JBO.
It is not your lack of caffiene but my flapping tongue. The two comments which were meant to answer two different questions.
Number 1 was in reference to the fact that my returns are not a factor of my 200 contracts size, it is scalable. If you only have capital to do lots of 20 or 30 you can still make the same returns. I wanted to make sure people were not focusing only on my contract size and dollar value of premiums. You can scale down the trades or scale them up and the dollar value changes but the returns can still be the same with the same % of risk.
Number 2 was related to the conversation involving Maverick and returns in general, not related specifically to this strategy. Someone with $10,000 in general can probably make 30 - 40% returns taking on nice risks but as accounts move into $100,000 and $500,000 levels shooting for 40% returns could involve putting too much of that capital at risk and shooting for 25% returns might be better. It is ironic but the larger the account is the lower relative returns you are satisfied with since you are not willing to take on as much risk and lose all that hard earned capital. What I mean is the $1,000,000 account would rather get 20% conservatively than swing for the fences to get 50%. The mentality of the $10,000 account is that 20% a year is so small ($2,000) when they can see they could potentiall make that in one trade. Therefore they swing for 50 - 100%. The $10,000 account wants to double their money in a year while the $500,000 account is quite content with 25% returns and working to manage risk.
So I apologize for the confusion, the comments were not meant to be connected with respect to credit spreads.
Number 1 was in reference to the fact that my returns are not a factor of my 200 contracts size, it is scalable. If you only have capital to do lots of 20 or 30 you can still make the same returns. I wanted to make sure people were not focusing only on my contract size and dollar value of premiums. You can scale down the trades or scale them up and the dollar value changes but the returns can still be the same with the same % of risk.
Number 2 was related to the conversation involving Maverick and returns in general, not related specifically to this strategy. Someone with $10,000 in general can probably make 30 - 40% returns taking on nice risks but as accounts move into $100,000 and $500,000 levels shooting for 40% returns could involve putting too much of that capital at risk and shooting for 25% returns might be better. It is ironic but the larger the account is the lower relative returns you are satisfied with since you are not willing to take on as much risk and lose all that hard earned capital. What I mean is the $1,000,000 account would rather get 20% conservatively than swing for the fences to get 50%. The mentality of the $10,000 account is that 20% a year is so small ($2,000) when they can see they could potentiall make that in one trade. Therefore they swing for 50 - 100%. The $10,000 account wants to double their money in a year while the $500,000 account is quite content with 25% returns and working to manage risk.
So I apologize for the confusion, the comments were not meant to be connected with respect to credit spreads.
My personal opinion is that with $100K in capital and your part-time approach and learning phase, ToS is great for you. You need a good specific reason to want to go prop route and for me it was risk-based haircut and lower commissions and access to multiple markets at once for cross margnining. I can only get that at an option prop. So in my personal opinon I think you are doing fine at ToS.
SkDoyle:
With respect to the comment on being a full-time trader, remember that my option trades are month to month and I do not daytrade options. Therefore once I put a position on, I am really not doing anything but monitoring. So I would not classify my option trading as full-time and I assume there are many prop option traders who simply use the set-up for the advantages and are not necessarily full-time traders.
As I have said, I am joining a prop for the benefits I outlined based on my trading strategies and the fact that I want access to professional-levels of risk management. But for those considerations I think places such as OX, ToS, IB or Tradestation or fine for option trading. After all, good risk management works no matter where you trade and this thread has showed many aspects of risk management with these strategies. I do not want to give the wrong impression that this or any other strategy's success is based solely on whether you are prop or retail.
I have pulled the prop conversation into this thread so that we all are exposed to different ideas and set-ups. Also I have a bad habit of sort of pulling you all in to what I am thinking or doing as it is happening so since I am getting involved in option prop, it was something I figured others would be curious about. My first interest and education in prop also begin by diving into discussions of it here. The more you know.... the more you know!
With respect to the comment on being a full-time trader, remember that my option trades are month to month and I do not daytrade options. Therefore once I put a position on, I am really not doing anything but monitoring. So I would not classify my option trading as full-time and I assume there are many prop option traders who simply use the set-up for the advantages and are not necessarily full-time traders.
As I have said, I am joining a prop for the benefits I outlined based on my trading strategies and the fact that I want access to professional-levels of risk management. But for those considerations I think places such as OX, ToS, IB or Tradestation or fine for option trading. After all, good risk management works no matter where you trade and this thread has showed many aspects of risk management with these strategies. I do not want to give the wrong impression that this or any other strategy's success is based solely on whether you are prop or retail.
I have pulled the prop conversation into this thread so that we all are exposed to different ideas and set-ups. Also I have a bad habit of sort of pulling you all in to what I am thinking or doing as it is happening so since I am getting involved in option prop, it was something I figured others would be curious about. My first interest and education in prop also begin by diving into discussions of it here. The more you know.... the more you know!