You have missed a very important 5th option. Continue to trade and build your own account until you won't have the need for additional capital. This is the route I am taking unless a really good situation falls in my lap.
I spoke to a dear friend of ours, Bob Morse, a few nights ago after he saw this thread. He pointed something out that should've been obvious to me, but wasn't: why go first loss when you can just use portfolio margin or even better, futures. It struck me that margin is basically the broker (or CME) being your backer where your capital is first loss. You get to decide how much reserve you want to put up and can leverage ~10x on ES if you wish. All roads seem to lead back to risk-adjusted returns. I used to try to balance a smooth equity curve with high returns, but I realized the answer should have been just to strive for a high sharpe, even if the overall returns are low. I could've always turned around and levered that sucker up. Of course, that's typically how everybody blows up so take this with a grain of salt.
You're right, but it wasn't until Bob spoke me through it that I realized just how much margin was available for retail traders. For some reason, I kept thinking margin topped out at Reg-T for retail guys if we wanted to hold overnight.
There is some protection for the first loss model that you are not on the hook for the debt if some black swan occurs and lose more than your account equity. If you leverage over 3x (or maybe even 2x) with portfolio margin things get rough quickly in a downturn. Also with index futures you don't get to pick your stocks, although the financing is very efficient.
Is there any First loss providers based in Chicago? I have noticed they are primarily on the east coast, but I am more interested in Chicago. Thanks
. Welcome to the club. This is the slow road but with a lot higher probability of success because of less pressure and profits can compound over time to build trading asset base.