For stock guys they put 25k and instead of having the regular 4x leverage the prop firm will give them 20x leverage. This is leverage over leverage. What you seem to talk about is deposit 25k trade futures contracts that are levered products (initial and maintenance margin depends on contract) and pop up that leverage by having the prop firm letting you trade many more contracts than you really are capable with the margin of a retail trader. It seems like it is leverage over leverage.
CME Member electronic trading firms are not allowed by exchange rule to take trader deposits. And they must pay their traders on a W-2 and essentially treat them as an employee. http://www.cmegroup.com/company/membership/files/Rule106RECMApp.pdf
No dude, you are confused. Futures have leverage, stocks don't. So the prop equity model basically gives guys leverage where they can't get it retail. For example, stocks are 2 to 1 levered over night retail but can be levered 10 to 20 to one or more with prop. Futures, at the retail level are already levered 20 to 1!!!!!!! So what you are saying is you want to go to a prop firm to trade futures to get more leverage on top of the 20 to 1 you are already getting? That is called leverage on leverage. The purpose of trading futures prop is not to get extra leverage on directional bets, but to actually engage in non directional strategies one does not have access to or can execute in a retail account. For example trading the cash basis. Or trading inter-market spreads. Or trading HGT strategies that are very commission sensitive or technology dependent. Do you understand now?
Well, I was just assuming a well funded prop firm not to use leverage on futures, since I knew them to be levered already. But, yes, I understand what you're saying now. In terms of feasibility, yeah, I guess difficult. Probably need a firm structured as a hedge fund.
I think where our communication breakdown is, you originally said you wanted to be backed. Then you said you were willing to put up risk capital. If you put up risk capital, then you are essentially getting extra leverage from a prop firm to trade a leveraged product, futures. If you don't put up capital, you are being backed by the firm and leverage is irrelevant. But like I said, prop firms are not backing people to trade futures using directional strategies. So either you need to apply to a firm to get hired to trade more non directional strategies, or open a retail account and get 20 to 1 leverage. If you want to get hired, I should warn you that they hire about 1 guy for every 100 to 200 resumes they get. And you better have some programming experience.
Actually, what you need is a strategy that you can shop to a sophisticated futures prop firm or a hedge fund. They want ideas from smart individuals that they can leverage the piss out of. And taking outright directional risk is not in their vocabulary at the moment. They have superfast ECN infrastructure to a gazillion exchanges for a very good reason. As mentioned earlier, look at arbitrage and spread trading. And all permutations and iterations thereof.
It should be pointed out that if, in the unlikely event, you'd get hired by a reputable prop or hedge fund, the system you bring will no longer be exclusively yours. They will take ownership of it, dissect it and ascertain how it works, so be careful before you take the plunge. And don't be believe they won't be interested in directional trading. These folks are in the business of making money. If you got something that's scales, they'll listen.
You are offering a different viewpoint than bone and Mav - both respected traders. I am curious - what is your source of knowledge - do you work in a futures prop firm ? Or are you making an intelligent guess, especially about your 2nd paragraph? Thanks.
By definition, all directional strategies can be scaled. These firms have a certain culture, I know that's hard for a lot of guys to understand, but it's true. They don't need to hire you to make a directional trade. They can do that themselves. And many of them do! BTW, just to prove my point, I have lots of friends that have successful CTA's. They have "audited" track records. Many of them tried to tap the prop route because they were getting tired of the audits and thought it would be easier to raise money. Not a one of them could get hired. Not one. All of them have documented performance going back years. The problem was, they were all directional guys.