good point always call at least 3 or 4 firms like the ones above and see what they all offer. See what deal you can get, BP and commissions, and if you really want the 7.
I must admit I am new to the prop trading world and not completely sure I understand 'haircut'. I get the basic concept but I am under the impression you are only charged that when you do not have capital of your own as collateral. Firms such as Simplex claim to offer 20:1 leverage with no mention of haircut, is it possible they will charge me haircut on each transaction and I must ask about that? Thank you
I've never heard of them (which doesn't, in itself, mean much)...but their website only cites "intraday" leverage...charging for all overnights (see below) ....Big (very big) difference if a firm won't allow overnight use of capital, at least not charge for 2:1 unhedged or 6 to 1 hedged...IMO. Do they pay interest on short stock sales? That's a major way that retail firms make a lot of money, by keeping all the proceeds from short stock sales. From their site: Equities Options 20/1 Intraday 5/1 Intraday **Traders will be charged .0025 daily for capital used overnight over and above existing capital.** **All rates are subject to change.** **Simplex Leverage Trading is not a broker dealer. ** Lescor pretty much sums it up a couple of posts ago. Don
Thank you all for your responses. I'm out of the country until Monday, I will call you then Mr. Bright. lescor - I am looking to trade primarily equities but occasionally options so that is of interest to me. <b>**Simplex Leverage Trading is not a broker dealer. ** </b> What does "broker dealer" signify exactly? Should I be worried by this disclaimer? Bright trading is a "broker dealer"?
Can anyone explain or reference me to a site about haircut? Do the better prop firms such as Bright trading charge haircut?
"Haircut" is a risk fee, charged by clearing firms and trading firms when they allow their traders to take home large positions. We allow 6 times your equity on hedged postions overnight with no haircut. Between 6 and 12 times your equity you may pay 2% per year. Since most workable strategies tend to be capital intensive, our trading groups calculate that potential charge in their business plan. If you're making $100K per month, you might not mind paying $10K for the capital required. Firms that don't charge any fee (see the fee for that simplex firm), probably won't allow use of large quantities of money over night. And we pay interest on your short postions, which allows for M&A and pairs trading. Just FYI. Don
Ah, so haircut is just a fee charged? I was under the impression it was a more secretive kind of thing, i.e. getting filled at a worse price than the market price. So, there is no haircut on intraday positions. What do you mean by hedged positions? (I know what hedging is but I'm not sure exactly how I would be expected to hedge a position.) 2% per year seems very cheap, Simplex is apparently .1% overnight now, contrary to the website, which is still of course very steep compared to 2% annually. That difference alone would make doing the Series 7 worthwhile. Still wondering about the 'broker dealer' thing.
Very few traders keep much in the way of "naked long" or "naked short" positions for very long, most are, for example, long $400K of 8 stocks, and short $450K of 8 "paired" stocks, this counts as a hedged position (as long as the long short ratio is within 20%. For excessive "naked" overnights (above 2 times your equity), you may pay 1% per month...but this is pretty rare. We have pretty solid, sophisticated traders who prefer to be market neutral or close to it most of the time...let the general public and the crazy fund managers try to guess market direction (obviously most do not even beat basic ROI, LOL). Give me a call Monday if you care to...glad to chat. I'm heading out now...Have a great weekend everyone. Don
Thanks everyone for your help, in the end I have decided to go with an SIPC insured retail firm and make less money for now. Most props seem too risky, especially the ones not requiring a license, and I have enough money to make a decent living at 4:1 leverage though I'd obviously like more. Bright trading does seem trustworthy though and I will definitely consider doing the Series 7 and looking into that operation at some point. I went with RML btw. Very cheap commissions and I get to keep using the software I'm comfortable with. A little concerned about their relatively small shortable list, but we'll see how it goes.
S7 isn't too hard of a test especially if you already have a basic knowledge of the securities industry, and the right prop firms really aren't really much cause for worry. Why not keep it in mind down the road? The leveage and commissions can be very helpful for an already successful trader.