Why is portfolio margin only available to those with >=$100,000

[Doobs789]

There are Long biased customers that have leveraged portfolios of dividend paying equities. Many also add selling naked puts and buy writes. This is more common than you think. They will tend to use more like 3X then 6X.

1245

Of course there are plenty of people who have PM, and run their portfolio in such a way. The majority of market participants that are at a certain age level typically have enough money to qualify for PM. What I meant was that PM wasn't developed with this group in mind.

We are still talking about customers though. Obtaining PM-style haircut does not mean that you are a professional.

 

[1245]

Of course there are plenty of people who have PM, and run their portfolio in such a way. The majority of market participants that are at a certain age level typically have enough money to qualify for PM. What I meant was that PM wasn't developed with this group in mind.

We are still talking about customers though. Obtaining PM-style haircut does not mean that you are a professional.

What is your definition of a professional trader? Mine would be someone that trades as their primary source of income. Most independant traders that are professional by my definition should use a PM account even if they don't use the leverage, but many don't have that much capital, which is why they join prop groups. I would rather learn to trade futures and options on futures with less capital than join a prop firm.

1245

 

[1245]

They're not really focused on the customer then. They should ask for a detailed description of your proposed trading strategies, goals, and methodology.

All institutional brokers do ask for this. To be approved for PM at non-online brokers you must pass the risk department. They ask for a description of your strategy, sometimes a sample portfolio and a description of your experience and they do a credit check. Some brokers give you a PM test to show your knowledge of both equities and options, even if you intend to only trade equities. They don't offer PM accounts to everyone that applies. Some get rejected. More than you think.

1245

 

[Doobs789]

What is your definition of a professional trader? Mine would be someone that trades as their primary source of income. Most independant traders that are professional by my definition should use a PM account even if they don't use the leverage, but many don't have that much capital, which is why they join prop groups. I would rather learn to trade futures and options on futures with less capital than join a prop firm.

1245

I agree. I am an independent trader, and have traded with RegT and PM. My account size meets the requirements to receive portfolio margin, although I opt not to use it. I have found that PM doesn't give me an advantage over RegT. I also, decided that being independent made more sense than joining a prop firm. I am saying that you are still a customer/market-taker, no matter the margin treatment., which is fine. But those who struggle to be profitable with an account under $100k will almost certainly struggle more once they have PM.

 

[Doobs789]

All institutional brokers do ask for this. To be approved for PM at non-online brokers you must pass the risk department. They ask for a description of your strategy, sometimes a sample portfolio and a description of your experience and they do a credit check. Some brokers give you a PM test to show your knowledge of both equities and options, even if you intend to only trade equities. They don't offer PM accounts to everyone that applies. Some get rejected. More than you think.

1245

That test means nothing, they ask the same questions as they have for years (if they even bother with it). Just like how they ask for your net-worth and annual income; you are supposed to be truthful, but they don't run a credit check. Bottom line is that brokers want your money, especially if you are going to give them six figures plus. They will not hinder you from opening an account.

 

[1245]

I agree. I am an independent trader, and have traded with RegT and PM. My account size meets the requirements to receive portfolio margin, although I opt not to use it. I have found that PM doesn't give me an advantage over RegT. I also, decided that being independent made more sense than joining a prop firm. I am saying that you are still a customer/market-taker, no matter the margin treatment., which is fine. But those who struggle to be profitable with an account under $100k will almost certainly struggle more once they have PM.

If I were you and would apply for PM if the account has the assets. Then you can use the leverage you want. Also, you will never know what opportunity might come up in the future where for a short time you need the PM.

Some day-traders can trade with $50K to $75K and be profitable. Without PM it's hard to trade from the short side. So a bigger account with PM opens up opportunities that were not there before. Same with options. Very hard to trade from the short side with Reg-T. So having a PM account can help make a trader be more profitable.

1245

 

[1245]

That test means nothing, they ask the same questions as they have for years (if they even bother with it). Just like how they ask for your net-worth and annual income; you are supposed to be truthful, but they don't run a credit check. Bottom line is that brokers want your money, especially if you are going to give them six figures plus. They will not hinder you from opening an account.

I agree. Everyone that opens an account can have someone else do the test and lie on the entire application. However, if you lie about your strategy and say that you speculate by buying puts/calls and you open an account and only sell options and use 90 %to 100% of your haircut, someone will notice. Maybe not at an online broker with a million accounts but at an institutional broker they "should."

1245

 

[Doobs789]

If I were you and would apply for PM if the account has the assets. Then you can use the leverage you want. Also, you will never know what opportunity might come up in the future where for a short time you need the PM.

Some day-traders can trade with $50K to $75K and be profitable. Without PM it's hard to trade from the short side. So a bigger account with PM opens up opportunities that were not there before. Same with options. Very hard to trade from the short side with Reg-T. So having a PM account can help make a trader be more profitable.

1245

The trades I make are treated equally under Reg T and PM. There will not be a time when I decide to add risk if something comes up, if it does not fit my strategy I do not trade it. Also, you can have an account over $100k and use Reg T.

I wouldn't want to request margin from a firm if I do not intend to use it. Why worry about being on variation all the time. Firms extend margin to those who use it.

 

[zdreg]

When 6.6x isn't enough, its time to open your own brokerage. Then you can give yourself 100 to 1.

nonsense. you know nothing about the brokerage business.