I know that Bright charges a haircut for overnight leverage, 20:1 is 4%, and 30:1 is 6%. I thought that 4% and 6% where Margin interest APR(anually per year). However recent conversation with someone made me believe otherwise. I did a search on ET and it seems Echo has the same setup. None of the firms I have traded with had this type of setup, can some one explain how it works to me? For example: 1) If I have $10k deposited and take a $200k lLONG position overnight, what am I charged and how is it calculated? 2) If I have a $10k deposit and take a $200k LONG position and a $100k SHORT position overnight, what am I charged and how is it calculated? PLEASE, no sales pitches or offers am am happy where I am and have what I need. I am just curious about this because it isn't what I thought it was.
I think you are a class B member of an LLC, which means pooled capital, which they extend leverage off of.
i have a great idea... talk to your risk manager at your clearing firm... he's probably the guy who asseses those charges... when all else fails read the instructions... sometimes i just don't believe what i read on this board...
the only way to get that kind of overnight leverage is for your longs and shorts to be hedged within 20%. exa.. if you're long $100,000 worth of KO, HD, and XLNX, you have to be short between $80,000 to $120,000 PEP, LOW, and LLTC.
Most of you guys would be shocked at how much leverage some firms will extend to experienced, capitalized traders. Haircut is a negotiable expense, some firms don't charge it. They don't all calculate it the same either. I've tried to get Echotrade to explain their haircut calculations to me several times and I just couldn't understand it.
Sorry guys but I come from the world of "margin". Please explain with numbers the concept of "haircut". What is 4%, what is 6%. Is this per annum? How different is it to margin?
This thread is old, but it helps to explain "haircut" at Bright and Echo. http://elitetrader.com/vb/showthread.php?s=&threadid=1865&highlight=haircut