Can any broker do this?

Discussion in 'Index Futures' started by Seven, Oct 8, 2002.

  1. Seven


    If the Fed Funds contract moved 50 - 75 basis points on the day of an announcement and you were ready and positioned for the move what is the REALISTIC opportunity to pyramid.

    One broker told me there's no chance at all. Another 'full service' broker thought it was so easy and straight forward nothing could possibly go wrong. Of course all I have to do is open an account right away...

    I wouldn't be so concerned except I have a fairly small amt. of capital and the opportunity to pyramid is so great. (If I was right my 5K account could go to over 135k+ adding contracts 4/5 possible times.) If I can't pyramid at all it would be only be a 3K gain on a 75 basis pt. move.

    The Fed Funds is now on a/c/e but I'm nervous about me having stacked orders through an electronic platform and every time the order going through 'mark to market' or whatever the phrase is to get the margin 'ok'. If dealing with a full service broker would help I'd bite the bullet and pay the commissions. I'd greatly appreciate the voice of experience if someone wouldn't mind.

  2. dottom


    In the old days your SPAN margin calculation didn't take place until the end of the trading day, so you could quite easily pyramid your futures position. In fact, one of the best 'get rich quick' scheme was to pyramid S&P futures or T-Bonds on a major announcement day. You either raked in mid 6-figures or had to declare bankruptcy.

    These days every futures broker that I know of that has electronic order entry will limit your position based on their initial/maintenance margin requirements. Many will immediate liquidate your positions if you have fall below minimum margin requirements, so if you do pyramid as your equity increases, all you need is a minor correction and you're liquidated.

    I haven't dealt with full service brokers, but if it's the traditional full service broker where you have to call in your orders, they will know if you are over leveraged.

    As always, standard pyramiding caveats apply.
  3. def

    def Sponsor

    3K on a 5K account ain't so bad for one days work.

    Personally, if I had an account with a broker that allowed someone to get away with that, I'd get my funds out ASAP. Why? I don't trust that another client wouldn't blow the firm and/or it's clearing firm out. It has happened before and I guarantee it will happen again.
  4. Seven


    I've learned a lot from posting this including the PM's I got and since there were so many views I thought maybe someone would appreciate reading my new info.

    John at EFT (advertiser at ET) very patiently explained that in the event of a Fed Rate move that the mkt. hasn't priced in inadvance all bids and offers are withdrawn until everyone sees what the market is trading at. So it may be theoretically possible to pyramid with stop orders but in reality you could be filled at the fed announced rate and have no profit even though you were right direction wise.

    I then proceeded to ask him about the same scenario in the ED contract. Couldn't I get a few fills from retail client's/stop limit orders. Surely they wouldn't all withdraw all their orders and I could maybe double up at least once? He commented that it's possible but what if the same scenario occurs as in the Fed Funds. Do I want to take that chance? After all I could end up with a flat day when good $ could've been made.

    Right now I like his reasoning as I've never watched the financial mkt.s real time on the day of a rate change so I'd rather be safe than sorry. This is still all hypothetical but I like to have a plan...