I don't know any prop firms that encourage traders to use leverage. Not even Bright. I also don't know any firms that threaten their traders to leave if they don't trade. This is all hyperbole. Robert, you get one chance in this world to establish credibility. Don't blow it.
Yes, but I can control and take responsibility for my trading and my risk. I know of a situations where the was a trading group where 3 of 10 traders were up big money, and got paid $0.00 because 2 of the 10 blew out the firm. I was not part of the group. I will never commingle my money with strangers again. I will not allow my capital to be used for other's leverage. I will not lock up my money in a firm with strangers. I will not be subject to their rules. This is what I've learned. I'm sure there are many happy traders in prop firms that get what they need. For the most part, I think their capital at risk averages $25k. Traders with $250k or more, don't need a prop firm to trade. Just my opinion.
I know your firm. They do not. I have met and spoken to many prop firm managing members over the past few months, they all tell me if guys are not active, they lose their desk, or their rates go up, a lot.
I've been in the business for over 10 years Robert and I can name only one firm where this happened. And that was Harbor Securities run by Warren Sulmasy. Now there have been some cases with sub LLC's which have blown up. Don Bright and myself have always warned about sub LLC's. But I can't name another firm outside of Harbor that had that situation and that was back in 1999. If you want to establish credibility, name the firms that blew out. I can. I can give you the firms, their owners and links to the court documents. Because that is how I roll. I won't throw out stories in an ambiguous manner simply to drum up business for my introducing broker. Robert, let me help you out in your sales efforts on this board. Less then 1/2 of 1% of the guys here have trading accounts over 250k and those that do probably don't need portfolio margin. Just a heads up.
Look, I have no incentive here to go to bat for other firms, but I know guys at almost every prop firm in NY and Chicago and I've never heard this happen. I have heard of disgruntled traders that like to say stuff like that after they leave firm XYZ. But when I followed up on these stories, I've never found them to be true.
The firm I'm referring to was not a prop firm, but the traders had commingled money. No, I won't give the name. It's not the issue. By the way, you firm does not take those accounts either. Our target market is hedge funds, trading groups and active traders. We don't target retail accounts and either do you. Retail accounts are well covered by online brokers.
OK, well you were insinuating it was a prop firm. Robert, I'm trying to be very clear with people here as these are very real concerns people have and they should have those concerns. But when I speak on this matter I will speak very clearly and directly because of the seriousness of the issue. JBO's are very heavily regulated with very intensive capital requirements. It's a serious business. And I can say when one looks at all the hedge funds that have blown up over the years and the fact that firms like Goldman and JP Morgan needed tax payer bailouts to save their firms, prop firms come out looking really good.
I have been using portfolio margining to trade for myself for the past five years and it has worked out great for me. The argument that you get autoliquidated in a pm account while with a JBO/ prop firm u are given some time to come up with money does not hold water for me. First of all, most of my liquid net worth is already in my account and I do not have a lined up line of credit to tap, nor do I think that would be wise to do if I had one. Second, long before I come close to a margin call, I take measures to reduce my exposure and in case of overnight gaps my clearing broker /custodian gives me until the close to come within the risk parameters. So again, if someone liquidates positions for you it means you are not on top of your risk. I have not traded prop before, but from reading posts here on ET it seems that with prop vs. pm you have the following advantages: - a little more leverage perhaps 10 to 1 instead of 6.7 to 1 at the discretion of the owners disadvantages: - give up control of your funds having them locked up - take the risk that one of the other members trading will blow up the partnership - take the risk that the managing member will leave with your money never to be heard of again - pay extra commission in overrides (if partnership is a BD it will charge members on top of what it clears for) - pay extra financing charges on overnight positions (most firms will charge serious vig on top of what they can borrow at from their clearing firm) - have someone else decide what risk you can put on Am I missing something here? It does not seem like a good tradeoff.
Also, for option traders trading as firm, the floor charges are much higher than customer. Where do you have your pm account?