Is there any reason to join a prop firm if your capital is 500K?

Discussion in 'Prop Firms' started by noob_trad3r, Apr 7, 2010.

  1. What would be the benefit of joining one if your capital is 500K for trading?

    I like the fact that you do get SIPC for 500K and under etc.. but I keep hearing about propfirms etc..
  2. buylo


    Depends on the prop firm. If you can contribute some capital, you could get a better split sometimes. Also, depends on what your looking for. Prop shops can offer ideas, analysts, platforms, software, accounting and other back office costs you might be somewhat blind to.
  3. Put up $50k and still have $450k to put into something else. Allows you to diversify but still trade without bp limitations. Or if you can meaningfully put more capital to work than retail margin will allow.
  4. cstfx


    With 500k, you can extend your buying power beyond Reg-T limits using Portfolio Margining, giving you an effective 6:1 buying power (depending on your portfolio balance) plus you get your SIPC protections that you can't get in ANY prop firm scenario, whether licensed or not. (some retail outfits have increased protections, like IB, that extend that coverage into the millions) To some people, that is a good thing. But like lescor says, you can utilize a fraction of your equity with a prop firm and get the same BP you would in a retail account, freeing up monies for other endeavors, with only that fraction at risk in the event of firm failure.

    If it is just a matter of using prop platforms, they all have retail options (except Redi) using the same trading platforms that the props use.
  5. PM is 500k for ria`s. 1mm for pros and 1.5mm for individuals as per GSEC.
  6. cstfx


  7. LeeD


    Other considerations:

    1) Commissions. These are split into exchange fees and clearing fees. Futures traders get massive discount on exchange fees if they are exchange members. Leasing exchange membership is certainly an option but may not be the cheapest one for an individual.

    2) Lifestyle. Some people prefer clear separation between work and fun, that is they work in the office... and personal interaction is not to be underestimated.
  8. DGunz


    I have been trading retail for years and never looked into prop shops once. I am currently unhappy trading retail because it is quite boring at home all the time. I was thinking about a prop shop in the bay area and started to research them. I have enough capital and the leverage to kill myself many times over again so IMO trading when you have an account large enough the motivation to go prop shop is to either use less capital for same BP or dramatically increase the BP you already have or simply access to other traders and ideas....

    I trade just fine at home but I would like to have human interaction like Leed above me said.

    I called one firm and they said that they are interest in partnerships of capital contribution of atleast 150k. I know there are many different structures for prop shops and I am researching them all now but what is generally the structure when it comes to losses and profits. For example does an 80% pay out schedule mean that if you contribute 150k and the prop gives you 850k and your PNL for the month is +10k, the split will be 8k for me and 2k for the firm? And does this ratio hold true for losses as well? If PNL is -10k the split is -8k for me and -2 k for the firm? Or is it that all losses are taken by the trader first?

    I will find out more from the particular firm I am speaking with but I was just wondering what the word on the street is.
    #10     Apr 9, 2010