transaction costs

good morning everyone

I would like to know what types of transaction costs should I consider for pairs trading strategy and what their percentages are.

Thanks to all for the help

regards

 

Are you asking about commissions, platform, ECN or other fees?

 

hello
I do not know what types of transaction costs have to be considered for this strategy.
Furthermore I do not know what their measure

thanks

 

You haven't even specified your asset class. How can we provide accurate information? It's also probably unwise to assume transaction costs will be some fixed percentage. That's how it works in academic papers, but is not always the case in reality.

 

-pairs trading equities?
-day trading or over night?

 

thanks you for your answer
I have shares of American, Canadian and Italian society.
I also operations over night ---(1245)
correctly as you say (cjbuckley4) I'd like to have something more realistic.
thanks again for your cooperation

 

-you need a platform that has access to securities from different countries
-you need a prime broker that can custody and clear these securities
-if you trade dollar neutral, you need a platform that does that
-You will need enough capital to cover margin on these securities, as there are no offsets
Cost wise:
-Ask about borrow rates for long stock
-Ask if your prime broker has a min rate for easy to borrow securities
-If what you trade is hard to borrow, ask for a sample rate for a simulated portfolio
-You will need to ask about execution fees-commissions, is it ticket charges or per share. Will you be on a route that avoids ECN charges. If not, does your strategy take liquidity on all the trades. That can add as much as 30 mils to your cost. On the sell side, you will have SEC 31 SEC fee. About $22/$1M sold.

Does that help? What broker do you use now?

 

BTW: What is Italian society?

 

On a side note, Is pairs trading feasible with just portfolio margin? Or do you need much more with prop margin? Is the margin haircut the same?

I need to sit down with the math. Cliff Notes appreciated if you have them.

 

Pairs trading is very doable with PM. I see it done all the time. You can get 6:1 both during the day and over night. Most prop firms either don't allow over night position or reduced leverage over night. You asked is the margins the same. A prop firm can provide you with leverage vs their total capital, not your contribution. In general, because they never want to risk their capital, just yours, they will provide more during the day than PM but much less overnight, where risk is greater.