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Why would successful traders join/stay in a prop firm?
- Thread starter HotTip
- Start date
Quote from Steve Tvardek:
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.
is this Bright?
they maintain a short order system that's awesome!
manytime one forgets to check the inventory, when news comes out and you need to get short, whilest you're doing your other trading strategies...
Maverick
Thanks for working with me here.... I come from a different end of the business but I must say I would not take any risk with 99% of the people that post here. First, are there any prop firms that are actually at risk of losing any of ther money? I mean if they are throwing money at everyone that opens an account with haricuts it would seem I would be damn sure the numbers work out to a "no-risk" scenario. Certainly, I have never worked where I was at my own risk, yes I could get fired for being stupid or lose my bonus in December but having to go to the wallet is different. Now based on my wanting to go to the wallet. If I put up $100,000 what can I go totally long at the end of the day and what is the "risk-based" haircut? Now what about if I have an even long/short portfolio?? I just want a typical example.
I also don;t see how this can be truly "risk-based" if no determination is made to how the portfolio will react when there are stresses to the system.
I do know my VAR was $140,000. Point being just reaching that would need an extraordinary event. For instance 10/87 would have been a $230,000 loser. Now my point is if this is my VAR, why am I not paying a % on this figure? and margin on the balance? It seems this "haircut" in the equity markets is just another way to insure NO RISK at all and is getting awful close to the corner schylock.
My desks return to VAR was 34. I am told this was average for all of BAC trading business. I will also say that our box was bigger than the $1.5 million we talked about by multiples.
I guess what it comes down to is are there places that treat professional backgrounds and records differently than the guy who puts up $25000 with no skills or knowledge and thinks he is going to make a career.
Thanks for working with me here.... I come from a different end of the business but I must say I would not take any risk with 99% of the people that post here. First, are there any prop firms that are actually at risk of losing any of ther money? I mean if they are throwing money at everyone that opens an account with haricuts it would seem I would be damn sure the numbers work out to a "no-risk" scenario. Certainly, I have never worked where I was at my own risk, yes I could get fired for being stupid or lose my bonus in December but having to go to the wallet is different. Now based on my wanting to go to the wallet. If I put up $100,000 what can I go totally long at the end of the day and what is the "risk-based" haircut? Now what about if I have an even long/short portfolio?? I just want a typical example.
I also don;t see how this can be truly "risk-based" if no determination is made to how the portfolio will react when there are stresses to the system.
I do know my VAR was $140,000. Point being just reaching that would need an extraordinary event. For instance 10/87 would have been a $230,000 loser. Now my point is if this is my VAR, why am I not paying a % on this figure? and margin on the balance? It seems this "haircut" in the equity markets is just another way to insure NO RISK at all and is getting awful close to the corner schylock.
My desks return to VAR was 34. I am told this was average for all of BAC trading business. I will also say that our box was bigger than the $1.5 million we talked about by multiples.
I guess what it comes down to is are there places that treat professional backgrounds and records differently than the guy who puts up $25000 with no skills or knowledge and thinks he is going to make a career.
It's really a whole different world, and Maverick understands it well. Most "working" strategies are very capital intensive, but not extremely risky...big difference between "using" capital, and "margin."
Pairs trading, opening only, M&A, etc. all require the "use" of (not "abuse" of), from $2-$5million (sometimes much more). These low risk, high reward strategies simply cannot be done by the average PDT with $25K-$100K in their retail account.
If you have a good, working strategy at blackjack, for example, with consistent returns...wouldn't it be nice to go from $5 chips to $100 chips, and still keep all the profits.
This Stock Exchange floor trading business model has worked well for decades...but certainly is not for everyone.
All the best,
Don
Pairs trading, opening only, M&A, etc. all require the "use" of (not "abuse" of), from $2-$5million (sometimes much more). These low risk, high reward strategies simply cannot be done by the average PDT with $25K-$100K in their retail account.
If you have a good, working strategy at blackjack, for example, with consistent returns...wouldn't it be nice to go from $5 chips to $100 chips, and still keep all the profits.
This Stock Exchange floor trading business model has worked well for decades...but certainly is not for everyone.
All the best,
Don
I would love to increase my stakes at the blackjack table but at what cost? We keep talking "risk" based borrowing with no talk of the risk.
I will make this easy What is my per annum charge if I put up $100,000 and buy and hold one position of SPY $1.5 million worth?
What is my per annum haircut if I put up $100,000 and have two positions short $1.5 million QQQQ and long $1.5 milllion SPY.
I am not looking to hold anyone to this but want to better understand how someone is coming up with a "risk-based" calculation in markets that don't set "haircuts"?
I will make this easy What is my per annum charge if I put up $100,000 and buy and hold one position of SPY $1.5 million worth?
What is my per annum haircut if I put up $100,000 and have two positions short $1.5 million QQQQ and long $1.5 milllion SPY.
I am not looking to hold anyone to this but want to better understand how someone is coming up with a "risk-based" calculation in markets that don't set "haircuts"?
Quote from cstu:
I would love to increase my stakes at the blackjack table but at what cost? We keep talking "risk" based borrowing with no talk of the risk.
I will make this easy What is my per annum charge if I put up $100,000 and buy and hold one position of SPY $1.5 million worth?
What is my per annum haircut if I put up $100,000 and have two positions short $1.5 million QQQQ and long $1.5 milllion SPY.
I am not looking to hold anyone to this but want to better understand how someone is coming up with a "risk-based" calculation in markets that don't set "haircuts"?
Do some checking into pairs trading, for example (www.pairtrader.com) and into the opening only strategies used on the NYSE (see "Don's openings and more" thread, check out "Lescor" s recap for 2005 as an example of someone "using" capital, not "risking" capital.
Another easy example: (Opening Only orders on NYSE, to trade "with" vs. "against" the Specialist). If you send in 2,000 shares to buy, 2,000 shares to sell short on 40 stocks each day prior to the opening (assume average price of $40.00)...that equals $6,400,000.00 worth of "Opening Only" orders. You cannot be filled on both buys and sells, so the "use" is cut in half immediately. ($3,200,000.00 now) You look for a 10-20% "fill ratio" so you are actually involved in between $320,000 and $640,000 worth of stocks at any given time. Your goal is $5,000 per week doing this (or more). If all 8 stocks move 10 cents against you at one time (very unlikely) then you "risk" $1600 for this.
This use of capital relationship is how traders on the exchanges work with their Clearing Firms. Firms like ours do the same thing, except you don't have to be a seat on the Exchange or be responsible for "making markets."
Just trying to help explain the concept, hope this helps.
Don
To answer your question if you put up 100K a typical firm would give you anywhere from 2 to 5 times leverage overnight. Your VAR is irrelevant. If you lost $20K they would start staring at you or call you. $50K, they would make you chop your positions in 1/2. they would do this all the way down, so that as you get close to your capital, theirs is never at risk. Then if they sense it might touch their capital they will immediately shut you down or ask for another $25K. Think of a casino.
To "hairdresser" - yes, since it's illegal to allow either retail customers or licensed traders to trade with deficit accounts, I agree. In the instances when traders have a large gap, and get into "our money" - then we have to cover it immediately, and since our traders are "limited liability partners" - they have no obligation to pay it back.
(again, just for clarification).
All the best,
Don (still waiting for the market to break today, LOL).
(again, just for clarification).
All the best,
Don (still waiting for the market to break today, LOL).
Quote from mskl:
Look for risk based haircuts/portfolio margin to be available to retail accounts within the next five years - long, long overdue. It's about time they laid Reg-T to rest.........
CBOE/NYSE are currently talking about such a system.
I've heard the same thing but since the retail firms make most their money by not paying interest on short stock, and by the interest differentials, they are unlikely to embrace the change. FWIW,
Don