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

Quote from StreamlineTrade:

This sounds like margin for a futures trader. Is there any difference?
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It's similar to span but not the same. Span uses a very weird and complicated formula. Haircuts are very easy to figure out. Anyone that has software that can graph an options position can calculate haircut.

BTW, one of their weird oddities of span is that the exchange can out of nowhere decide to increase maintence margins during times of increasing volatility. That would really tick me off if I had a huge core position that was predicated on forward risk assumptions that I already calculated. No such thing will ever happen in a haircut account.
 
Quote from StreamlineTrade:



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.

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I intend to change that. I can't believe a city the size of London, arguably the financial capital of the world, does not have more to offer in the way of prop firms. It's time to bring american equity and index options to London.
 
Yeah, StreamlineTrade... the deal you metioned would be horrible for a prop trader in the US who trades equities. Unless you were given millions in buying power, I don't even think deals like that exist.
 
few prop shops let one carry more than 5 -1 or certainly not more than 10-1 overnight. so to get good buying power one msut have 30-50k in the account and to me thats risk if the prop shop or in many peoples case on here the individual llc one's under goes belly up.
 
There are definitely firms that will let you carry heavy leverage on overnight positions.

It's dependant on what you are trading, it's volatility, hedges, your track record, how well the principals or risk dept of the firm know you and of course how much capital you have.

In the right situations, 20, 30 even 50:1 leverage on longer term positions is possible.
 
Great thread. I'm still trying to figure out what type of shop would work for me. I've been swing trading for the past couple of yrs as a side gig. Looking to trade equity/commodity derivatives as well as listed equity with a 100k account. Does anyone know any solvent firms that that provide low fees, good buying power and access to multiple mkts in NYC or LI? Been to Hold Brothers. They presented the class B member route. Not sure if that's for me. I guess I could stay at home and trade on IB in my pjs. Would prefer a place that provides mentoring though

thanks
 
Mav-

It's my understanding that the clearing firm could change the percentage moves that they use at anytime as well. For example, if vol picks up in a big way on the S&P, they may go 8%/6% to whatever they feel is applicable given current conditions. I haven't seen them do that, but I wouldn't be surprised. I could be wrong here, but haircut calcs are really up to the individual clearing firm.

Also, to add to your description of haircut, I think of it as what is the worst case for tomorrow (as opposed to today). Typically your biggest concern with options positions is Gap risk, and in Phil's credit spreads, he is going to have value in his wings unless the index is pinned on them on expiration day - that's the only time that you are going to have a max loss, which is what you are charged for right off the bat with a retail account. If you backspread the wings it can reduce your haircut to ridiculous amounts.

Like you said, just graph out your current PnL to get a good picture of your haircut. ThinkOrSwim is great for this, if you aren't already using OptionVue or something along those lines.

I'm sure that I just convoluted your clear explanation, but what the heck!



Quote from Maverick74:

It's similar to span but not the same. Span uses a very weird and complicated formula. Haircuts are very easy to figure out. Anyone that has software that can graph an options position can calculate haircut.

BTW, one of their weird oddities of span is that the exchange can out of nowhere decide to increase maintence margins during times of increasing volatility. That would really tick me off if I had a huge core position that was predicated on forward risk assumptions that I already calculated. No such thing will ever happen in a haircut account.
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And I am looking into ways to roll into pergnant butterflies if need be and most retail accounts only apply butterfly margin if the strikes are equidistant unless you goad the compliance department. At least the risk-based haircut will actually look at your position as a whole and, as you said, take into account actual risk and make a position quite cheap to leg into if it hedges an exisiting leg.

Looking forward to that little freedom lol.


Quote from Arb Under Par:

Mav-

It's my understanding that the clearing firm could change the percentage moves that they use at anytime as well. For example, if vol picks up in a big way on the S&P, they may go 8%/6% to whatever they feel is applicable given current conditions. I haven't seen them do that, but I wouldn't be surprised. I could be wrong here, but haircut calcs are really up to the individual clearing firm.

Also, to add to your description of haircut, I think of it as what is the worst case for tomorrow (as opposed to today). Typically your biggest concern with options positions is Gap risk, and in Phil's credit spreads, he is going to have value in his wings unless the index is pinned on them on expiration day - that's the only time that you are going to have a max loss, which is what you are charged for right off the bat with a retail account. If you backspread the wings it can reduce your haircut to ridiculous amounts.

Like you said, just graph out your current PnL to get a good picture of your haircut. ThinkOrSwim is great for this, if you aren't already using OptionVue or something along those lines.

I'm sure that I just convoluted your clear explanation, but what the heck!
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Quote from Arb Under Par:

Mav-

It's my understanding that the clearing firm could change the percentage moves that they use at anytime as well. For example, if vol picks up in a big way on the S&P, they may go 8%/6% to whatever they feel is applicable given current conditions. I haven't seen them do that, but I wouldn't be surprised. I could be wrong here, but haircut calcs are really up to the individual clearing firm.

Also, to add to your description of haircut, I think of it as what is the worst case for tomorrow (as opposed to today). Typically your biggest concern with options positions is Gap risk, and in Phil's credit spreads, he is going to have value in his wings unless the index is pinned on them on expiration day - that's the only time that you are going to have a max loss, which is what you are charged for right off the bat with a retail account. If you backspread the wings it can reduce your haircut to ridiculous amounts.

Like you said, just graph out your current PnL to get a good picture of your haircut. ThinkOrSwim is great for this, if you aren't already using OptionVue or something along those lines.

I'm sure that I just convoluted your clear explanation, but what the heck!
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No, the haircuts are fixed by the exchange. You are thinking of span margin. With span, they can an do increase maintence margins during times of high volatility. Volatility does not play a role in equity haircuts. In fact, even on your sheets, there is no haircut per se for vega. Although you will have risk reports run on sharp increases and decreases in vol, that is information for your firm and does not play into what you have to put up.

And yes, the more backspread your positions are, the lower your haircut is going to be. Long gamma positions have no haircut so they revert to a minimum contract charge of $25 per contract per equity and $1 per contract for indexes.
 
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