December 30, 2012
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Prop Trading Projected Payouts Example
I saw a proprietary trading firm site while browsing the web one day and discovered they had a projected earnings list for traders with them.
I thought it was pretty interesting so here it is:
To bring everyone up to speed, proprietary trading firms such as Maverick will typically loan a trader money based on the amount that the trader deposits, and in return for that will take a percentage of the profits the trader makes.
So for example, level 1, the trader most likely has $5000 on deposit and Maverick is loaning them the additional $20K. If this trader loses $1K, they are taken off trading for the rest of the week. If the trader loses a cumulative amount of $5K, they are removed from the program. The company is taking out 30% of any profit the trader makes, if any.
The projected earning levels and "rankings" are interesting. Obviously, the title of "Associate", "Master", or "Elite" are subjective to the levels given, but it does show you the open-endedness of trading income potential. It also gives traders working there goals to shoot for.
Clearly, the Associate trader at level one has a tough road to climb since if the projections and minimum trading pace/performance ring true, they are only expected to earn around $10K, and that's before taxes are taken out. I suppose one could do that if they had roommates or were still living with family to keep costs down. But that 30% deduction from the company is a hard hit. It should make people consider just waiting until they build up enough capital to trade on their own without needing a loan so they can keep all profits made. The company deducts less as one builds up money to move up to Master level and higher, but that's still a sizable bite from overall profits, especially considering the tax man will be taking a cut as well.
