Trading capital as percent of net assets

[Trembling Hand]

I can see why going to a prop shop can be quite advantageous. One essentially removes significant risk to his/her own wealth, increase income and free up a large chunk of capital that can at worst earn 5% interest.

Got it right there but there is other ways to leverage up without going in deeper.

 

[skc]

With leveraged products the true level of exposure can be somewhat debatable - one could conservatively argue that under a "worst case" scenario , I had taken on a large multiple of my nett worth. (Yes, I know, I know! - I'm one of those cowpeople! Yippee Kay Ay!)

I generally monitor my exposure during trading in order to limit the risk to between 30% and 50% of nett assets (excluding PPOR).

No I don't mean exposure... my exposure is many times my net asset as well. I am refering to your trading capital in relation to your risk. Say you do 2% risk per trade which is $1000, your trading capital on risk management basis is $50k (and whatever that is in terms of % of net assets). But you can trade 2 SPI contracts with face value of $200k with that $50k capital without violating your risk parameters.

 

[craft]

I can see why going to a prop shop can be quite advantageous. One essentially removes significant risk to his/her own wealth, increase income and free up a large chunk of capital that can at worst earn 5% interest.

Same proposition really for doing any job.

However you have to weigh income foregone. The difference between what you could have made on your own funds verses minimal input returns.

Only if the earnings from employment/prop etc outweigh the forgone income you could make on your own capital does it make sense.

Very quickly becomes a size of capital vs employment earning potential thing.

TH why don’t you trade your capital alongside Prop capital? Best of both worlds.

 

[skc]

Same proposition really for doing any job.

However you have to weigh income foregone. The difference between what you could have made on your own funds verses minimal input returns.

Only if the earnings from employment/prop etc outweigh the forgone income you could make on your own capital does it make sense.

Very quickly becomes a size of capital vs employment earning potential thing.

TH why don’t you trade your capital alongside Prop capital? Best of both worlds.

Sorry my bad.. should move all this over to the prop shop thread.

 

[craft]

Sorry my bad.. should move all this over to the prop shop thread.

I thought it relevant.

Especially interested as to why TH has zero of his net assets exposed to trading. I understand why he’s employing his trading skills but why not trade his own equity along side?

 

[cynic]

No I don't mean exposure... my exposure is many times my net asset as well. I am refering to your trading capital in relation to your risk. Say you do 2% risk per trade which is $1000, your trading capital on risk management basis is $50k (and whatever that is in terms of % of net assets). But you can trade 2 SPI contracts with face value of $200k with that $50k capital without violating your risk parameters.

Thanks for clarifying that SKC. The trading strategy/systems I utilise generally allow for multiple trades as the system progresses. The progress of my system/s will usually be managed at the macroscopic level. Discrete trades are allowed to run rampant provided that the overall system drawdown does not meet or exceed my predetermined allowable level. In the event that drawdown exceeds the maximum predetermined level, the strategy is abandoned and all relevant trades are either terminated or fully hedged (pending future termination). In effect I do allow myself to risk up to 50% of my nett assets (excluding PPOR) on deployment of my strategies. The only "emergency stop/exit" is the overall drawdown level.

 

[Sir Osisofliver]

I think I am different from everyone else so far.

Property (both residential and commercial) makes up ~40% of my asset allocation at present, not including the PPOR. Been doing some fantastic stuff in property lately.

About 30% of my assets is long term share portfolio.. Stuff I've held for a while now +10 years; and will probably never sell, generating passive income. Not too fussed about the current fluctuations in value as its conservatively geared at 35% and it's purpose is passive income stream.

About 10% is in cash at present looking for a home... About 400k is tied up with %#}{~>^ MF Global

I've got about 12% at present being actively traded in two systems, one tiny (but consistently profitable system that doesn't scale well) and the rest plugging away at about 14% return for the year on leverage. (would be higher if it wasn't for MF global) thats where I was live testing the chaos modeling system I was working on. (only the shorts - longs were elsewhere thankfully).

Cheers

Sir O

 

[odds-on]

I think I am different from everyone else so far.

Property (both residential and commercial) makes up ~40% of my asset allocation at present, not including the PPOR. Been doing some fantastic stuff in property lately.

About 30% of my assets is long term share portfolio.. Stuff I've held for a while now +10 years; and will probably never sell, generating pas

I've got about 12% at present being actively traded in two systems, one tiny (but consistently profitable system that doesn't scale well) and the rest plugging away at about 14% return for the year on leverage. (would be higher if it wasn't for MF global) thats where I was live testing the chaos modeling system I was working on. (only the shorts - longs were elsewhere thankfully).

Cheers

Sir O

Hi Sir O,

Nice set up, but why bother with the consistently profitable but tiny trading system? Surely you are better off sticking the cash into your other schemes?
cheers

Oddson