I know options trading is moving towards electronic trading but meanwhile i'm contemplating to spend a few years on the floor. I do know the greeks and have worked as an market maker for an institution in Europe. (Been living here practically all of my life, I was however born in Philadelphia so I am an American) Therefore I was wondering how much capital is needed to start of as an options local. Additional comments are welcome.
You should just call the exchange you want to trade on. When I left in 1990, the min. capital requirement on the CBOE was 50k. Also had a seat on the Philadelphia and Pacific exchanges, but I don't recall what the min. Cap. Req. was there...probably the same, but that's a guess. I am sure a lot has changed in the intervening years. But you need to talk to the membership department of whatever exchange you are interested in trading. Of course, capital requirement is only one part of what you need. Cost of leasing a seat, enough of a cushion to live on (don't count on an immediate income), etc. Exchange membership department will help you out a lot. But even more than that, I found that the membership department of the clearing firm I used (First Options) was EXTREMELY helpful in giving guidance in virtually every way you can think of .... certainly in more ways than I would have thought to even have asked about. They saved me unimaginable time, effort and money in bypassing so much I could have wasted in trial and error. They really made life easy for me. I would have been lost without them since I started a new company from scratch. Never could have done it without their very capable, very friendly, and very free help. Maybe I just was lucky and had a good person as my contact, but really, it's their job to get clients, and a client is what you will be to your clearing firm. Good luck, Rs8.5
While the focus tends to be on equity options, IMO the best opportunity for a floor trader in options is at the CBOT or CME. Volume in options on futures dwarfs individual stock options. Futures options do not yet face strong competition from the screen, in fact they don't trade electronically period! While that of course may change, one can rest assured that soybean or Eurodollar options will be traded by open out cry for some years, while options on QQQ may have an open outcry longevity of several months, if Boston gets regulatory approval.
Very difficult as an individual. There are well-financed groups that make markets on the CBOT and CME floors. No free money here, either. These groups exist because the capitalization requirements are substantial - they carry positions, especially with out-of-the-money options, for many days and weeks. These groups buy or sell several hundred futures at a whack just to adjust delta on a daily basis.
Agreed Bone. No way a small local is going to compete in 10yr. opts. But I think a 50k capitalized local could trade grain options be 10-20 up, trade against a lot of retail flow, and make a living.
I bet it is probably 50k right now. The best way to find out is to call First Options or Sage, I ditto the recently upgraded RS8.5's description of people at these organizations. Foc would be the best place to start with since it a huge organization with many subgroups. Itself is a sub of SLK. Being on your own, it would probably be better to go with a firm which offers some services. I would say 50k is enough including seat costs but excluding salary. Membership application is going to cost about $2000. I generally agree with Pabst's comments. It may not be worth the expense for something that may go away soon. Something to consider, the Ag options only trade 3 hours and 45 minutes a day. Besides the BOX, the Pcoast is planning on offering remote MarketMaking. On the other hand, it may not be a bad idea to go on the floor for a while to get used to U.S. markets. It would offer a chance to meet people and learn the ropes so to speak. The only place you will get exposure to this stuff is on the floor or in the offices above. While people on the floor can be nasty and cantankerous, upstairs they will be civil and you'll be able to squeeze some good info out them.
Thanks for all the info: i called first options (Philadelphia) and they informed me that the minimum requirements for new traders is 150.000 USD.
150k is actually on the low end. Most firms want 200k to 250k now. What you might try doing is looking for a backer. If you have experience, you might be able to find someone who will front you the 250k in exchange for a 50/50 split. Very common on the CBOE. Good luck.