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>Even if you are a professional trader you'll take a bath on margin over the long run. Huh? It would be difficult to find a professional trader that doesn't t
by rl3 10y ago
>Even if you are a professional trader you'll take a bath on margin over the long run.
Huh? It would be difficult to find a professional trader that doesn't trade equities on margin. They pretty much have to due to the way the settlement process works.
The returns of a professional trader depend on many factors, including available capital and the capacity or manner in which the trader operates. That said, they're enough that the employment of margin and the leverage it affords is simply mundane and considered a cost of doing business.
- dsacco 10y ago> Professional traders presumably make their living trading, so their returns far exceed 5%. In theory, sure. But most do not "far exceed 5%", and instead have the fees of their employing funds to subsidize their strategies. For traders who are working independently, or in prop shops, I suppose it might be true by definition (if they last in the market they are either re-upping and gambling, or at least profitable). But that's still not the rule. More importantly, retail investors are not professionals, and Robinhood is basically catering to /r/wallstreetbets with this sort of product offered to them.
- rl3 10y ago>More importantly, retail investors are not professionals, and Robinhood is basically catering to /r/wallstreetbets with this sort of product offered to them. I agree with this and never asserted anything to the contrary. The scope of my reply was addressing a single point concerning margin in context of professional traders. Also, the statment that most returns "far exceed 5%" probably wasn't the best choice of words. I've edited my original post accordingly.
- scott00 10y agoTypical margin rates for professional traders are far below 5%. See https://www.interactivebrokers.com/en/index.php?f=1595 https://www.interactivebrokers.com/en/index.php?f=1595. And IB is basically the most expensive professionally focused brokerage. If you've got a million bucks you can probably get Fed Funds + 50 basis points.
- rl3 10y agoThanks for pointing this out. 5% is probably more representative of typical major retail margin rates. I removed the statement in question.
- morgante 10y ago> And IB is basically the most expensive professionally focused brokerage. Uh, IB is not a professionally-focused brokerage. It's the most professional retail brokerage though. On what basis are you calling it most expensive though? It's much cheaper than any other brokerage I know when you look at fees holistically.
- scott00 10y ago> Uh, IB is not a professionally-focused brokerage. It's the most professional retail brokerage though. It's sort of in the middle. They have plenty of retail customers for sure, but they also have hedge fund and proprietary trader accounts. I doubt you would find a single hedge fund among Etrade customers. > On what basis are you calling it most expensive though? It's much cheaper than any other brokerage I know when you look at fees holistically. It's much cheaper than most retail brokerages. It's more expensive than firms that cater to professionals; for the most part those firms don't put their pricing on their website because they're individually negotiated with each customer. Some example firms: all the big banks, Apex Clearing, eRoom Securities, TJM Institutional Services. For the banks you're probably looking at a minimum $20 million account size just for them to accept you as a customer. The smaller players require $1-$5 million for decent rates, but might accept smaller account sizes.
- morgante 10y ago> It's much cheaper than most retail brokerages. Ah, I see what you meant now. Yeah, I was just comparing it to most retail brokerages since I see the others (Apex, etc.) as in a different category. IB is something which the average HN user could actually use.