Bullets

Discussion in 'Trading' started by white, Feb 4, 2002.

  1. nitro

    nitro

    As I stated above, I have an IB account, and I have put on a conversion by hand through them.

    I appreciate your caution, and commend it.

    nitro
     
    #41     Feb 6, 2002
  2. For those traders who employ them. Do you always carry the option position with an end of day nuetral stance with the 3 elements of the bullet? Do you continually hold the options as you manage the equity position? When do you close out the position completely? Going into expiration? And do you always use bullets with stocks that you trade on an ongoing basis?
     
    #42     Feb 6, 2002
  3. Bullets are done completely electronically and automatically expire at the end of the day without me doing anything. I don't see the bullets in my account.



    It is possible to hold a bullet short overnight though if I want to.

    If I trade the same stock over and over again I 'll do a conversion. As it is a lot cheaper (problem is it takes up capital which is charged a haircut)

    Robert
     
    #43     Feb 6, 2002
  4. It is fully electronic

    I hit an icon on my desktop

    I window for my bullet software comes up

    I type in my account #

    I than type in my password

    Once I've been recognized I can do whatever I want

    Usually I'll type in 5000 IBM
    and it goes working
    ..
    about half a second later filled with a message brought up
    bought 5000 IBM (which is 5000 bullets for IBM)

    I can enter as many as I want

    and just need to hit the F key on the software to see all of my bullet positions.

    Robert Tharp

    I imagine Bright is the same thing
     
    #44     Feb 6, 2002

  5. I was just stating the new rules. Not trying to sound like a smart*ss or anything. Sorry if it came out that way.

    Robert
     
    #45     Feb 6, 2002
  6. Well said The professional firms recognize this is a completely neutral /risk free position. You are only charged margin at a professional rate(very low) and the short will usually cancel out the majority of the long part of the margin. This isn't recognized at retail firms.


    Robert Tharp
     
    #46     Feb 6, 2002
  7. RTharp,say one person at your firm sells short the regular way on an uptick 1000 shares of ABC stock,and someone else goes long 300 shares of the same stock;can the one who is long sell his 300 shares on a downtick or must he sell it on an uptick since the firm is net short 700 shares? And are these 2 trading accounts considered separate accounts unlike proprietary accounts where everyone is basically trading one(the firm's)acount?
     
    #47     Feb 7, 2002
  8. nitro and rtharp -

    RE: conversions at retail brokers:

    It depends on the broker but for instance Mr. Stock and a few others margining systems DO know that the combo position is essentially riskless.

    But they then have to follow the SEC guidelines for maintenance margin on such positions which is basically 10% of the exercise price of the conversion.
     
    #48     Feb 7, 2002
  9. Ok, here's a dumb question from a non-prop trader: why wouldn't you hold a bullet or a conversion overnight and reuse it the next day? Is it just a matter of the margin or haircut charges? Also, how do the firms do the transaction? Do they actually go out and buy the put on the market or do they write it internally? If you buy a 1500 share bullet, is your buying power reduced by the cost of 1500 shares plus the bullet cost or what?
     
    #49     Feb 7, 2002
  10. A. Bullets are a 1 day only event.
    B. Conversions are kept until expiration.

    :)
     
    #50     Feb 7, 2002