Extra leverage on options at prop firms?

Discussion in 'Options' started by hedgeyourbets, Aug 17, 2005.

  1. Can you normally increase leverage on options as well (more than your typical 20% margin to write naked calls/puts) by going to one of the prop firms? Or the leverage can only be increased to trade shares?
    Thank you!
  2. I hear prop firms will give you 10,000-1 leverage, but you have to wear a suit and tie.

    Few are wiling to make that sacrifice.
  3. Thanks for nothing, smart ass!
  4. If you find a firm that has a JBO (joint back office) with one of the larger clearing firms, you can get a risk based haircut. Won't help you significantly with naked options, but sure will if you use spreads, or hedge your positions.

    Not many prop firms are set-up for it, or understand it. Understanding of options seems to be the main culprit. Not too many smart prop firms.

    There are a couple out there, if you search hard enough.

  5. How much leverage you need bro? You need the kind that if you guess right you buy the Mazzerati, and if you guess wrong you don't come back to the office, and move out of state?

    Good traders don't need humungous leverage, bad traders don't deserve it.
  6. CalPumper


    What the hell is a prop firm?

    FWIW, the platform I use has some loose margin requirements - for instance, one only has to have margin for one side of an iron condor, not both, likewise double diagonals and probably some others I'm not aware of (or trade). Think or Swim - those guys have been good to me.
  7. Risk Based Haircut:

    Look into this feature. It will be a help when selling premium and flies and some tax relief also. You need to be a MM or part of a JBO pool to take advantage of this.

  8. Nordic


    What TC is saying is you need to be part of a BD that clears it's MM business with an Options Clearing Firm. These days that means SLK/First Options or Merrill Pro. JBO or Joint Back Office arrangements are strictly catered to larger $ capped market Maker broker dealers. The JBO allows them to extend the MM margin to off- floor/upstairs traders who are part of the BD. It is very hard to become a participant with these firms. I know I paid my dues for 5 years on the CBOE floor first. Yes you get the JBO margin/cross-margin benefits, but you need to produce capital/results into the firm itself. These types of positions are very hard to get into. You have to work your way up the ladder. Not trying to be negative, but you can't just look into this feature and find it.
  9. Well, it looks like you could just lease a seat at CBOE. Would that give you the privilege you're describing?
    In any case, if you still have to come up with close to 20% margin then I would not bother. NASD and exchanges dictate margin requirements on options. I just wanted to know if there is way to get around them by being classified as an institutional/professional trader.
    People normally go around the Reg T for shares by trading at various prop firms... At this point it looks like it would not help you if you trade options.
  10. Actually it can be quite easy. Just like joining any other trading arcade. You have to be licensed and bring in your own capital to deposit into the pool.

    If you have a couple mil lying around and want to avoid the pool risk, just purchase a B/D for around $40k, join an exchange like the PCX, and form a JBO with one of several firms (GSEC, Merrill Pro, O'Conner, Fimat, etc.). Most will require about a $2mil minimum deposit.

    I'm not trying to pump this firm, but look at VTrader. They have given JBO benefits to individual traders. It's a good business model that all prop firms/arcades should have.


    #10     Aug 22, 2005