Some answers to your questions:
1) I will trade remote from home on one of their trading platforms through the web which are used at a lot of firms. So you just need a good computer and good internet connection. You can go to the office locations if they are in your city but you might have a desk fee. Most prop traders from what I have been told (so a little hearsay) trade remotely through the web like you do at your retail account.
2) All firms vary on what minimum is requried from $10,000 to $35,000 to $75,000. Unlike with stocks where you get like 40:1 intraday buying power, you need a sizable account to trade options at a prop shop IMHO. If you only have $10K maybe stay retail until you build it up. This is only MY opinion and someone at a prop shop may have a different opinion. Needless to say I am doing this with 6 figures but is that required, not specifically.
3) Prop shops are all about volume so commissions are low as long as the volume is there. The real beauty about prop from what I have seen is that it is completely negotiable based on your account and monthly contract volume, instead of a ToS or OX fixed commission. Commissions can be in the range of $0.70 to $1.00 per contract with no other ticket charge- so less than retail. There is usually a software/platform fee of $100 - $300 a month depending on what you need and some forms rebate this fee depending on your volume. It usually includes all market data fees as well. For options there are not high market fees anyway. All firms have their own cost structures and fees so you have to really ask around.
4) I spent about a week pouring over many of the postings in the Career Trader and Pro Firms threads here at ET going back months and months and researched the net. For the one I am joining I spoke to someone at their offices and got a lot of direct information from a very helpful person. Put that all together and there is enough research to decide.
The only issue you need to break down is cost, commissions and platform fees. In all honesty your costs will probably come out less at prop even with software fees since commissions are so low. 200 spreads is 400 contracts in and 400 out for 800 total a month at $0.80 a contract is $640 roundtrip plus $200 software fee (estimates). Opening and closing 200 spreads in a month (800 total contracts) at a total cost of $840 is a per contract cost of $1.05 per contract. So even with software fees, it is cheaper than OX and ToS and close to IB but better margin.
Now you might do half that volume so 400 contracts at $520 total a month in commissions/software fees is $1.30 per contract. So you see how volume matters. But even if it comes out to an extra $0.05 over ToS and OX, the risk-based haircut may allow you to trade more contracts than you did at retail using hedges and this bring that cost down. You have to play with the numbers. Hope I have not scrwed up the math!
Quote from skdoyle1:
I think this is a very relavant issue, and I would like to learn more about it. To me the more "professional" we can all become the better off we are. After my time trading CS's and IC's, I have become a risk manager first and foremost. So if you don't mind answering specific questions, let me pose a few more.
1) When you join this prop shop, are you going to be using a trading system from your "home" or will you have to walk into a physical place or office?
2) How much capital is required to begin trading this way, or for the prop shop to consider you a "client"/"trader"?
3) Are the fees higher than OX or TS since you will probably be paying for market data and other pro tools? (obviously the advantages being spoken of do require some cost)
4) Where did you go to find this prop shop that you are joining?
I don't want to become a "full time trader", but I also do not see the advantages of saying a retail trader forever. For example, I was dying to trade the market decline in japan, but had no way to do it. Is there a middle ground somewhere? And does that middle ground just require more money, which for some might be a issue, and some it may not.
skd
