Pro firm leverage and risk management

Discussion in 'Risk Management' started by huby, Jul 20, 2001.

  1. DarynC



    Your point is a good one. I was looking for a Firm that would charge 0.00 per share, no desk fee and no haircut. Then I thought for a while.... If the firm makes no $$$ where does the capital that I need to trade would come from? How does the clearing firm make $$, how does the specialist get paid? It's an endless circle but as long as everyone is treated fairly and we are all making money and having fun, what is there to complain about?

    #31     Dec 2, 2001
  2. Someone once told me something that took a while to sink in. (I was young and drunk when he told me.) He said, "No thanks, I can't afford a bargain." Firm's like Bright and Gene's gig -- they need to pay the bills too. Don makes a great point. If it were that easy, more firm's would be in business and stay in business. I want a firm with a reasonable cost that I know will be in business for the long run. A firm run by traders not some businessman selling a commodity.

    The point is when picking a firm look at the intangibles not just the price.
    #32     Dec 2, 2001
  3. Good point about the intangibles, many don't realize how tough it can be to work with a few hundred with strong and forceful "type A" personalities (which at times is the "intangible" I find challenging :)).

    I wish you would take some time to visit our other Bay Area might like them better than the exchange office (open, light, and full of good traders).

    #33     Dec 3, 2001
  4. Have to agree with the pro firms on this one, they could have been charging much higher fees for years. E-trade offers cuts rates because of things like selling order flow and profiting off the bid/ask spreads, yet these pro firms offer lower rates without compromising order speed or integrity by doing those things.

    Bravo for Bright, Echo, L&W, and Worldco for being able to give us all the opportunity to trade for the rates that we do, if they can make money at that, I am all for it. If they don't make money, where will we all trade? Anyone complaining about rates has not been in this business too long, I can remember paying a LOT more in the early nineties.

    #34     Dec 3, 2001
  5. And as I said to Mr. Tharp, we will be amazed at how much we as traders have in common as opposed to all the rivalry. We have tried to cut costs and add benefits every year, and will continue to do so. (I won't say anymore, I am getting tired of being yelled at)..:)
    #35     Dec 5, 2001
  6. Why in the world would you concentrate so heavily on one stock? Especially when you're leveraged? I can absolutely ASSURE YOU that not a single one of these prop firms that are mentioned here would EVER ALLOW YOU to concentrate like that AT ANY TIME!! You would be disconnected before you knew it and U-5'd within a few seconds.

    I know that concentration is the key to superior performance, but at the most extreme, we're talking 30% of portfolio in one stock.
    #36     Dec 22, 2001
  7. Professional traders should understand risk well enough to keep their intra-day numbers under control. We ask our new traders to limit their share size to 5,000 shares in any one stock. In 99.9% of all cases they will not even get close to that, and if they did, they would show up on our "risk radar" and we would have a discussion.

    We have had the "kamakaze" types who come in (usually with other people's money), and start taking shots right away....they get sent out pasture right away....and are now out trying to scam someone else out of money.

    We expect our traders to be honest business people, and treat them accordingly, and hope that they respect the firm and other traders the same.

    If an experience trader falls into a trap as explained above (which has happened), but was within normal parameters, we would work with them to get their money back. Even though we are a "nationwide" business, we are a "family run" business, and we have some flexibility with our people.
    #37     Dec 22, 2001
  8. Pejman Hamidi,

    While we advertise 10 to 1 intra-day margin, in reality all trading firms have "concentration" risk parameters. We ask daytraders not to carry more than 5 to 1 in one position (most of the time), unless the trader is experienced and put on a large position for a quick "scalp". Overleveraging is one of the reasons for new traders losing money. No responsible trading firm would let a rookie trader with a $25,000 account carry 10,000 shares of XYZ @25. In this environment, all traders should limit exposure,
    since the markets could be halted at anytime due to the political situation. There is an old saying, there are bold traders and there are old traders, but there are no old bold traders. True professionals limit their exposure, even during the day.

    Gene Weissman
    Lieber & Weissman Sec., L.L.C.
    #38     Dec 22, 2001
  9. Gene,

    I believe you and I are saying the same thing, no?

    Pejman Hamidi
    #39     Dec 22, 2001
  10. Pejman,

    Yes agreed. Leverage is to be used and not abused.....

    Gene Weissman
    Lieber & Weissman Sec., L.L.C.
    #40     Dec 22, 2001