Why would successful traders join/stay in a prop firm?

Thanks so far to everyone who's replied. If I short equities (both nasdaq and nyse), do props offer an advantage as well? I got a sense from reading other threads that props usually have alot of short inventory available, and, specific to NYSE stocks, they don't adhere to the uptick rule. Is this true?
 
Quote from HotTip:

Thanks so far to everyone who's replied. If I short equities (both nasdaq and nyse), do props offer an advantage as well? I got a sense from reading other threads that props usually have alot of short inventory available, and, specific to NYSE stocks, they don't adhere to the uptick rule. Is this true?
More...

Props don't have inventory. You use bullets or just hit the bid on a SHO stock.

It's all about BP, BP, BP - oh and having someone pay all the fixed costs of office space, equipment etc.
 
Not true, the firm I work at has inventory on probably 100+ NYSE stocks that allows you to short on downticks. They charge a fee for using this firm product, but , believe me, its worth it when you wanna get short.

Quote from FaderTrader:

Props don't have inventory. You use bullets or just hit the bid on a SHO stock.

It's all about BP, BP, BP - oh and having someone pay all the fixed costs of office space, equipment etc.
More...
 
"If the arcade provides 50% margin, you only keep 50% profit - yet still have to pay the fees."

That doesn't make any sense. Or, maybe I got lost in the translation.
 
Quote from Maverick74:

One to one is not a haircut. A haircut is what is offered to market makers, a risk based haircut I should say. A haircut is where you are not putting up the notional value of your position but rather the risk capital. Using the word leverage to describe it is rather tricky. Because it can be anywhere from 10 to 1 to 100 to 1.

Haircuts usually consist of using the max loss your pos would incur today with a 15% up move and 15% down move in a stock. With indexes it's 10% for nasdaq and for the dow and s&p it's 8% to the downside and 6% to the upside. This is all you put up. Everyday your haircut changes as the underlying moves.

The biggest advantage to haircuts is not the initial leverage, for lack of better word, but rather the fact that when you make adjustments to your position, rather then having to put up more capital, you put up less capital. This allows you to trade the underlying at will, trade synthetics, and lay out premium at no cost.

When one is long gamma, since there usually is no risk outside of daily decay, the exchange makes you put up a minimum of $25 per contract on equities and 1$ per contract for indexes.

So an example. If I bought 100k worth of long NDX premium today, at IB, I would have to put up 100k in cash, with a haircut account I might have to put up 1k. That's it. It's a huge difference.

I personally do not believe it's possible to trade options for a living in a retail account. You need haircut margins unless your managing OPM in large amounts. Even then, it's beneficial to have a haircut account. I hope this helps.
More...

This sounds like margin for a futures trader. Is there any difference?
 
Quote from heavy:

"If the arcade provides 50% margin, you only keep 50% profit - yet still have to pay the fees."

That doesn't make any sense. Or, maybe I got lost in the translation.
More...

Say you put in 10k, the arcade also funds you 10k. So your account is 20k.

Say in the first month you make 2k. Your account is now at 21k because...

You keep 1k, the arcade takes 1k (50%).

Out of your 1k, you must then pay desk fees, platform fees, commission etc.

Say in the first month you lose 2k on that 20k.

Your account is now at 18k, but you take the full 2k hit, so your split of the account is at 8k, the arcades is still at 10k.

Out of your remaining 8k, you must pay desk fees, platform fees etc.

I hope thats clear.

Of course i would imagine the accounting varies slightly between arcades, but this is how it was explained to me at several when i applied. This is why i never joined an arcade (what you americans call prop)

I should point out though that all arcades in london tend to trade interest rate based futures as their bread and butter. I know of only 1 arcade that lets you trade stocks.

In the usa it seems to me that most arcades are trading stocks or equity futures.
 
Maverick,

Your writing style has improved markedly. Nice explanation.

nitro
Quote from Maverick74:

One to one is not a haircut. A haircut is what is offered to market makers, a risk based haircut I should say. A haircut is where you are not putting up the notional value of your position but rather the risk capital. Using the word leverage to describe it is rather tricky. Because it can be anywhere from 10 to 1 to 100 to 1.

Haircuts usually consist of using the max loss your pos would incur today with a 15% up move and 15% down move in a stock. With indexes it's 10% for nasdaq and for the dow and s&p it's 8% to the downside and 6% to the upside. This is all you put up. Everyday your haircut changes as the underlying moves.

The biggest advantage to haircuts is not the initial leverage, for lack of better word, but rather the fact that when you make adjustments to your position, rather then having to put up more capital, you put up less capital. This allows you to trade the underlying at will, trade synthetics, and lay out premium at no cost.

When one is long gamma, since there usually is no risk outside of daily decay, the exchange makes you put up a minimum of $25 per contract on equities and 1$ per contract for indexes.

So an example. If I bought 100k worth of long NDX premium today, at IB, I would have to put up 100k in cash, with a haircut account I might have to put up 1k. That's it. It's a huge difference.

I personally do not believe it's possible to trade options for a living in a retail account. You need haircut margins unless your managing OPM in large amounts. Even then, it's beneficial to have a haircut account. I hope this helps.
More...
 
You must log in or register to reply here.
Back
Top