What is a good size book to start?
What is a good size book that firms give junior traders? 500k? 1m? 5m? Also, whats a good payout ratio for a discretionary event-driven portfolio?
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I give my junior traders FLEX SEAL
Thank you for the comment, Lloyd
Thank you for not using a condom last night ;P
some kind of risks metric would be more useful. Book size can be manipulated and mean little.
Your income is generated from the size of the book, no? I mean like to make a living without leverage, you would need a $1mm book.
$1mm * 20% recent = 200,000 *50% split = 100,000 salary which is okay for New York.
They hit it below. Book size doesn’t matter. Risks matters. Some of the big multimanagers would start you at 100 million. But you can’t lose 5 and only get paid out 10%.
You can take a million in capital and easily return 2 million in good year with the right risks metrics.
There is no book, you have access to balance sheet. It’s measured in risk
A 100mm position in commercial paper can less risky than a 5mm position in an em bond
the question to ask when prop trading is..."how much money can i lose before getting fired?"
This could very little to so with the size of your portfolio.
You could trade 80mm 1 month TBills....or 2mm 30yr bonds....and have similar PnL volatility
You need to be asking how much VAR is a typical junior trader given. In commodities usually a few million
$1-2m in VaR, with about $1m in fixed costs + outturn VaR + exchange fees etc. to recover from your P&L before you start earning at my place.
At least 500k. And for my opinion the payout ratio would be 40%.
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