Trying to raise Money

In my next post is the executive summary of my business plan. I have a couple of farmers around 50 years old looking to invest with me. If you could please let me know what you think of it.

I just want everyone to know that I am not looking for money from anyone here. I know that traders by nature are users of capital not sources of excess capital. So please flame me about unclear ideas or awkward wording but not about my intentions

 

Business Type: Stock and Futures Market Making
Looking to raise: $50,000
Manager: ZF Trader
Payback: Monthly dividend of 75% of funds in excess of $50,000, 20% of dividend to fund manger.



The Opportunity:

Market making in the stock and futures market is a very profitable business. Historically it has a return on equity of 45-50 percent. Access to this highly profitable business has been limited by barriers to entry including the expensive exchange seats and having enough capital to provide continuous bids to buy and offers to sell. The recent trend of trading volumes moving from floor traders (the ones you see on the news wearing funny jackets with their hands in the air) to electronic screen trading means that small players can enter the market making arena with the main barrier to success being skill.

A market maker in the stock and futures market attempts to bring buyers and sellers together to make a market run smoothly. Market makers attempt to buy at the bid and sell at the ask in order to profit from the spread. A market maker provides a very similar service to those provided by and auctioneer or a real estate agent; that is getting paid to bring buyers and sellers together.

Special Advantages:

In today’s stock and futures market the main barrier to entry for market makers is skill. I have developed this skill with three years of direct market trading experience and over 100 million dollars worth of trade. I have traded successfully in many markets over different time segments of the 24 hour trading day. Trading will be done multiple un-correlated markets around the clock to trade many conservative limited risk market making strategies.

The biggest expense and at large bank market making divisions is paying for talent. This limits the shareholders claim on profits. This investment will give you a greater share of profits than an investment in Knight Securities or Goldman Sachs. Operating without the overhead of an exchange seat will greatly improve profitability and the profits of investors.

The “Special Sauce”

All market making trading strategies will have strictly limited risk. This means that events like the London Underground bombing will have only limited effect on the overall trading account.

Market making will be done in markets that have a tendency to re-trace themselves. This means that the market covers the same ground again and again so you can get in and out either long or short and get out at a profit. These markets also tend have low insurance (options) costs meaning it is cost effective to limit risk.

The market making strategies employed will not try to predict market direction; however they will try to predict when the market will become more volatile. Strategies will be based on predictions like “the bond market will become more volatile when the pit opens at 8:20 am” or “the stock market will become more volatile Tuesday at 2:15 when the Federal Reserve releases its interest rate decision”. Increases in volatility will be used to exit positions, especially insurance (options) positions that increase in value due to volatility.

Risks:

The primary risk is skill risk. The performance of your investment is dependant on my skill as a manger. Another risk on performance is unpredictable volatility. Things like terrorist attacks, surprise interest rate announcements, special dividend announcements or overly impactful statements by central bankers can cause the markets to become unstable and could have negative impact on trading performance. There are also some regulatory risks and technology risks.

 

I don't want to sound harsh, but if you are looking to raise 50k and keep 20% of the profits you couldn't possibly have much of a track record. Any kind of real success and you'd have a lot more than 50k of your own by now.

Why not trade a smaller amount and forget about outside investors? You'll keep 100% of a smaller amount, but you won't have investors haggling you about insignificant sums. Is 50k what you really feel you need to enter this market? What kind of leverage will you have access to? I would look for better leverage before outside investors.

 

i will give a few comments.

"All market making trading strategies will have strictly limited risk. This means that events like the London Underground bombing will have only limited effect on the overall trading account."

"Another risk on performance is unpredictable volatility. Things like terrorist attacks, surprise interest rate announcements, special dividend announcements or overly impactful statements by central bankers can cause the markets to become unstable and could have negative impact on trading performance. "


which is it? you are contradicting yourself.


"Historically it has a return on equity of 45-50 percent."
this is misleading and probably untrue.


"I have developed this skill with three years of direct market trading experience and over 100 million dollars worth of trade. I have traded successfully in many markets over different time segments of the 24 hour trading day."

my question would be. you have done all of this and you need to raise a small amount like 50k?

 

Seems pretty unethical to me. You are really not a market maker as you will be bringing so little liquidty to the table, you are really just a trader. Also don't know what returns you expect to make to think that 20% on the returns from $50K will even be worth it.

Hopefully the farmers will stick to what they know.

 

IMO, the entire presentation is unclear. If you have traded successfully, that should be your headline, and you should support it with background data. In this, you've buried it in confusing B.S.

After reading this, I have no idea of what you've done, or what you intend to do. Sorry, but I wouldn't give you a dime based on this.

Also, I agree with earlier replies regarding the 50K. If you are successful, and can support those claims, asking for only 50K is a joke. 20% on 50K isn't worth your time. If you believe in yourself, you're better off taping a credit line and trading your own money.

I trade 2 million of private money, in addition to my own, and I sometimes wonder if even that is worth the 20% of profits with the time I put into it. So you need to rethink your entire approach.

 

Maybe Beeks can get you an early preview of the Crop Report!

 

Yes the small amount, I was going to put bigger amount here to avoid criticism but this is why the small amount money. The guys who are interested are seriously rich (net worth of 10-100 million). I wanted to get my foot in the door with a small amount of money, pay them monthly dividends for a while and raise more money from them once they like what I do.

The other reason for the small amount is that I don't think I could handle much more. The leverage that I am going to use will produce ample alfa. I think the farmers are better of pre-paying for chemical to get rebates than having it earn interest in my account.

As far as "not really being a market maker goes" all my trades will be providing liquidity. I am definetly not a "designated market maker" but I think calling myself a market maker gives my investors a better sense of what I am actually doing than calling myself a trader or a hedge fund.

Thanks for all the responses

 

In other words, you are deceiving your investors before they even write you the initial check!

 

alfa sprouts?

j/k ... it's alpha. but seriously, if you have a resource like those guys, you're (and them too) much better served to learn what you're doing first, establish some sort of record, then solicit that great resource. not many people have people like that to ask, don't waste it. could always be wrong, but your pitch is way way newb, and if you had any sort of record you'd have spelled it out beyond total notional amounts which are meaningless

now if you know these guys well enough to ask for a learning loan with potential reward, that's another story. just be honest