Ask the Wall Street Trader

Miscellaneous and Personal Stuff I Must Share
1

Greetings Dopers -

I’m a Proprietary Trader at a Wall Street firm. I’ve been with this firm for over 12 years and I live and work in Manhattan.

I am open to questions.
To pre-empt some questions:
[ul][li] Proprietary trading means you are trading for your own account - not customer accounts. We take risk in the markets in search of profit.[/li][li] My firm has zero outside capital - we manage only our own internal capital.[/li][li] We have had zero contact with the government or any bailout. We are not a bank.[/li][li]The best way to describe my firm is a hedge fund that only manages its own money, with no outside investors.[/li][li]I am compensated solely on the basis of my performance.[/li][/ul]

2

Do you wear suspenders and your hair slicked back?

3

I’ll probably have quite a few questions. I work for a major online brokerage firm.

I’ll start with a couple of simple ones. Which licenses do you hold?
What type of derivatives do you trade?

4
  1. How was your company initially capitalized?
  2. What is the approximate capitalization of your company?
  3. What do you specifically trade?
5

Nope. That stereotype is more of the investment-banking mold.

6

What in tarnation is the stock market doing the last week or two? Trying to give me a heart attack?

7

I have my series 7 & 63.

When I trade derivatives, it’s mostly vanilla equity options.

8
  1. The founding partners put up the initial capital.
  2. I’m hesitant to give this information. Let’s say in the 9 figure range.
  3. Equities and Commodities. Within those groupings, I focus on special situations, risk arbitrage, and gold.
9

Not my place to give investment advice. But I’m personally pretty negative about global economies - I think the global debt situation is even more serious than the press gives it credit for.
Edit: Headed home. Will address later questions tomorrow.

10

So, are we headed for more deflation or some serious inflation? By ‘we’ I mean the US and the dollar…

11

I am a trader at a firm in Chicago that matches the OP’s description exactly. If The Truculent Gentleman doesn’t mind, I can give some answers, as well.

12

What’s the actual breakout of your workday? What percentage of time do you spend:
[ul]
[li]sitting in front of a computer monitoring a market[/li][li]researching how you would trade in given hypothetical situation[/li][li]other categories of stuff I don’t even know that you do[/li][/ul]

Are you concerned that computer programs could be trained to replace what you do, or is programming a computer to trade for you just a tool to leverage your own creativity or decision making?

What’s the order of magnitude of your own compensation? Over or under $1 M/year? I assume it’s over six figures.

What is the career path for most traders in your firm to get where they are now?

13

Do you use a purely mechanical rules-based strategy or a discretionary strategy?

If discretionary, do you take a more fundamental or technical approach?

14

What letter does your firm begin with?

Which blogs do you keep up with?

Would I find you on Nuclear Phynance or Wilmott?

15

Trom are you a local?

16

I am curious about how mutual funds trade stocks.
Suppose a huge fund (Like Fidelity Magellan) decides to buy a huge position (say 10 million shares of firm “X”)-how do they spread out the trade? They don’t want to alert others (it will drive thr price up).
Also, they don’t want to allow brokers to profit by optioning the stock.
So how do they do it?

17

FWIW I used to be a local @ cannon st, primarily short sterling and euromark…

18

This is opinion only. Remember EVERYONE in the market has an opinion, and the majority will be wrong. That said:

I think we are in a near term deflationary period characterized by capacity underutilization (ie idle factories) and low velocity of money (ie most of excess cash isn’t being lent/used).

However, in the medium/longer term, I believe this link: http://www.comstockfunds.com/files/NLPP00000/421.pdf
tells the real story. The only realistic way out of that mess is devalue the USD and print our way out.

Trom, I welcome any other comments or insights by professionals.

80% of my time in front of a computer monitoring markets.
Researching stuff is usually done at my desk while monitoring markets.
20% is spent talking to other traders, analysts, sourcing ideas.

Computer (quant) systems can’t replace what I do. There is a profitable niche for mechanical systems, but they’ll never be able to replace what I do.

Compensation varies by year according to my performance, and has been very wide over the years. I’d prefer not to get to deep into compensation discussions and am more interested in talking about the markets.

About 1/3 of the firm are people that started working here right out of college as junior/assistant traders. The rest are hedge fund managers/traders, sell side traders, etc that like our business model.

Purely discretionary. I always have some fundamental view and use technicals as a timing tool.

Nope - no hints on my firm.

http://pragcap.com/
http://www.cumber.com/commentary_archive.aspx

That’s a sample of the kind of stuff I read.

I’ve never heard of Nuclear Phynance or Wilmott.

This is not what I do and is outside my area of expertise. But ‘front running’ big mutual fund orders has been and will probably continue to be a problem on Wall Street. Our firm doesn’t take customer orders so front running is never an issue.

19

Are you rich?

20

Define rich. But to answer - no. I live in Manhattan, stress about living expenses and paying for my kids school. My wife drives a used car. I don’t own a car. I ride the subway.