Trade derivatives?

[InDebtInDC]

Does anyone here speculate in derivatives, and if so, what broker do you use?

[msnln]

By derivatives, do you mean options/futures, or are you talking more exotic types? I trade both options and futures to hedge my positions and for directional bets. I use Interactive Brokers for my trades. Executions are quick and I get great fills. Options cost $0.70 per contract and futures cost around $5 for round trip but varies by the product. Also, stock trades are 1/2 cent per share with minimum commission of $1. I never traded currencies but they are offered at no commission but you pay bid/offer spread.

[InDebtInDC]

By derivatives, do you mean options/futures, or are you talking more exotic types? I trade both options and futures to hedge my positions and for directional bets. I use Interactive Brokers for my trades. Executions are quick and I get great fills. Options cost $0.70 per contract and futures cost around $5 for round trip but varies by the product. Also, stock trades are 1/2 cent per share with minimum commission of $1. I never traded currencies but they are offered at no commission but you pay bid/offer spread.

I mean anything and everything. I want to start speculating.

Why do you use Interactive Brokers?

[msnln]

To general public, futures and options are about only derivatives available. There are some ETFs that are leveraged or concentrated in particular sector.

In my 18 years of investments, I have used wide spectrum of brokers for stock and commodities trades from full service to those so called discount. I still have IRA with Scottrade and small account with Ameritrade. The reason I like Interactive Broker is following.
1. One account to trade everything from US stocks, international stocks, options, futures, currency.
2. Cheap commissions. Commission I pay is lowest I paid ever for trades. Although there are many firms that offer zero commission for minimum account size, which I will qualify for all, I will not be able to hedge using future from the same account. One caveat, though, is in order to get real time pricing, your monthly commission must be over $30, otherwise they charge $10 fee.
3. They provide excellent trading program called trader workstation. Only downside is that it is Java based and eats up memory.
4. I am not sure if they do this for everyone but I got a secure login card from them that generates ramdom passwords to access my account so I Know my account is secure. My Scottrade account got hacked into few months ago and somebody sold off my largest position and replaced with a penny stock. Scottrade reversed the trades and I was not penalized.

You should definitely look into different brokers. A friend has account at Tradestation brokererage and he is a big fan of their automated strategy trading system. I personally would like to be able to make my own decisions on case by case basis.

[msnln]

If you are high net worth individual with at least $5 million to invest (but to be taken seriously you need more like $50 million+), then you can go with institutional sales desk at major firms like Goldman, Morgan Stanley, Lehman, etc and they can show you some exotic derivatives like credit default swaps, total return swaps, and many others that you can leverage your funds to invest without acutal cash outlay. I have been out of that market for some time since I left that business.

[InDebtInDC]

No way. It's good to dream though

I have maybe several thousands to play with. I've learned about it in school but I never worked in trading so I have no professional experience.


I just want to start playing so I'll be able to pick up the techniques. I generally have a pretty good hunch for the market so I'm hoping I can give my retirement a little boost.

Thanks for the comments. No doubt I will ask you some more questions later.


Do you know of something with a lower buy-in? Right now I just want to learn before I actually roll my 401(k) over and start playing with real money.

[msnln]

Best place to start would be options and futures. Options can be as cheap as pennies and they trade in blocks of 100 (1 option is 100 shares of underlying). Futures trades require initial margin of between $1500 to $4000 depending on the product and the position is marked to market at the end of the day. So, it would be prudent to have at least $5000 per each futures contract traded. I am not sure what Interactives requirements are for futures but most firms require $5000-$10000 minimum for futures. Options can be traded with as little as $1000 minimum.

I have to warn you that these products are leveraged and you can lose 100% with options and more than your investment with the futures. On the upside, though, you can easily double or make multiples of initial investment.

Don't get too greedy and before going into these trades, set your loss limit and target profit points so you don't lose your shirt. Good luck.

[InDebtInDC]

Best place to start would be options and futures. Options can be as cheap as pennies and they trade in blocks of 100 (1 option is 100 shares of underlying). Futures trades require initial margin of between $1500 to $4000 depending on the product and the position is marked to market at the end of the day. So, it would be prudent to have at least $5000 per each futures contract traded. I am not sure what Interactives requirements are for futures but most firms require $5000-$10000 minimum for futures. Options can be traded with as little as $1000 minimum.

I have to warn you that these products are leveraged and you can lose 100% with options and more than your investment with the futures. On the upside, though, you can easily double or make multiples of initial investment.

Don't get too greedy and before going into these trades, set your loss limit and target profit points so you don't lose your shirt. Good luck.

Thanks for the advice.

I definitely want to limit my losses and structure my position carefully so at most I'll just lose the initial investment. I will stay away from the futures for now.

I'm mostly interested in options because I've been successful speculating in the past.