How much capital do you think you'd need to start your own prop trading shop or trading focused hedge fund? I'm sure it depends on asset class so for the sake of argument, suppose you were a commodity trader that hates going into the office and wants to keep working remotely...
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why not just trade futures in an online retail account? why do you need to "start your own shop" ?
if you have less than 2 billion AUM, you can't get an ISDA, so you can't trade swaps anyway.
So, why not just open an account at interactive brokers and trade?
Pretty sure you can't trade ICE products with an interactive brokers account. I honestly don't know though and haven't checked. But I trade Power & Gas so its almost entirely on ICE and their margin requirements are pretty good size. To say nothing of the collateral requirements the ISOs require if I wanted to do physical.
of course you can trade ICE futures at IB....
margin requirements seem reasonable.... around $5,000 initial margin per contract.
If you don't have 50k to trade....go get a job as a taxi driver and save up until you do.
If you have brokers you use, try asking them what their smallest counterparties are.
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Trade up-tos, DARTs, other virtuals.
Little/no credit. Higher volatility
get an IB account. Trade futures. If its to sustain yourself and grow, Id recommend having $250k capital to trade. Obvi with futures thatd give you access to as much as $2MM+ in index positions/gold/oil etc etc.
Probably have $50k set aside for living expenses etc. So If you were to go at it your own, id say $300k. ASSUMING you know what youre doing. If you are not statistically profitable (i.e. p value less than 1%, so you know its not luck, its risk mgmt and skill) do not trade anything in size.
I keep my trading account to ~$200k and i have no problem making fat returns of $20k to $40k a month whilst using maybe half my total buying power. Portfolio Margin is nice to have on IB too.
IDK your question sounds to be one of a student or recent grad. setting up an actual fund is VERY EXPENSIVE and completely unneccesary for an individual. I wouldn't even think about it unless you had $2mm+ of investor capital lined up, and thats the absolute bare minimum.
edit: i should say this has been a very good year but on avg i target 10-20k a month as a long term target.
You're returning 120% to 240% a year on your IB account? Are you doing this full-time?
nope, part time while working. my work is with the markets and all that so its not really a TON of extra time to do it.
I appreciate you taking the time to respond sincerely to what was in all honesty me venting about being forced back into the office after enjoying work from home. Thank you! :)
Agree with GoodBread, you've got some pretty impressive returns! Are you swing trading or what's your general strategy?
No I've been in trading roles at various orgs since graduating college 5 years ago. I trade commodities though, mixture of physical and financial. And lately I've been doing some OTC structured products that I enjoy. Long term the goal is definitely to set up my own fund and do this for myself. I think I'd need that kind of capital or more to set up and do the kind of trading that I want to do.
I guess this post was a shot in the dark hoping to connect with people that have set up their own commodity prop shops or investment funds. I've heard of people doing it so I was curious what it took to get the ball rolling.
AFAIK, $20MM is the bare minimum for a HF. If you can get that seeded, and you're a good trader, could end up being decent post-seed and raise 200-500MM. This is purely generic and not specific to your strategy and edge in your local market (power).
That was kind of the number I had in my head. $20 MM minimum to really get started.
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