Opinion: Trading job opportunity with only profit sharing

tnoob · #1 04-28-2006, 12:13 PM

this is my first post here. i've been lurking and thought that maybe you guys might be able to help me out in a situation because i'm not sure of it all.

i've been out of college for a few years. i've never traded before but i have a basic understanding of the financial markets (emphasize basic). i've heard that it's trading equities or options for a company is not a bad idea and i've been researching/applying for jobs as a junior trader/trainee/assistant/etc.

one offer that has come along sounds interesting, but i'm not sure if it's like some carlton sheets or mlm scam or something. there's this trading firm that asks for a minimum equity contribution of $5000 and they will provide $250000 in a trading account. all compensation is based on a percentage of the profits i make in this endeavor. benefits such as health insurance is provided through the trading account (meaning i would pay for it out of the trading account). i would begin trading on day 1. they have a head trader lead the room and talk trading all day while we try to "trade" using their strategy. the guy i spoke to said that the company will make very little on commissions, but this makes me skeptical as they may just be trying to get people started with their own money and just churn out the commissions while using high turnover to keep the money coming in as these naive people start to fail as traders. does this job sound like a scam? is there potential in this job and worth giving a shot if i don't mind letting $5000 go (it's not a big deal, i just don't want to be scammed). i'm not sure if they set any stop-limits where if i lose too much money, they'll fire me, but i'm only putting up $5000 and they are putting up $250000 so my stake is very small compared to theirs. it doesn't seem like it's worth the money for them to be scamming someone for a few dollars in commissions.

it doesn't sound too good to be true, it just sounds a bit fishy. i'm not sure of the profit sharing percentage yet, but will find out later. just wanted to hear some opinions from some of you.

thanks so much.

IronFly · #2 04-28-2006, 04:12 PM

I think this is a terrible idea. This is not a real job.

All of the losses will come first from your 5k, once you lose that they will shut you down, or get you to put up more.

There is no real training, since you start "on day 1", and you have no experience. These people aren't fools, they're not expecting to make money from your trades (although they're going to get a cut if you win).

They will bleed you dry with commissions, data fees, margin interest, etc until you eventually lose your equity and then you're gone.

This is basically a scam.

AvivaSimplex · #3 04-28-2006, 04:21 PM

I guess they probably have restrictions on what kind of positions you can take with their margin, right? Otherwise you could put up $5000 and gambool with their quarter million. Kind of like a 5000% sticky casino bonus with no wager requirements.

tnoob · #4 04-28-2006, 05:09 PM

yeah, that sounds about right. i guess i shouldn't even bother to go to an "interview" session with him on monday to find out more info...then again, what can it hurt if i just go to find out more info about it as long as i don't get persuaded to do anything. it's not a bad idea to get a better understanding of a scam so i don't fall for any later. (not that this is a scam, but it seems very bad)

crazy canuck · #5 04-28-2006, 08:10 PM

This is most likely a prop shop (aka proprietary trading firm). The advantage is that you get leverage and possibly advice from senior traders (if it's reputable). However, they will most likely not let you do anything else but scalp (profit from small intraday movements) and there is an extremely high failure rate and turnover (sg like 95%), but if the place is reputable it might work for some people. As you guessed they make money from your commissions. Also, keep in mind that if you fail it's not going look good on your resume and pretty much disqualify yourself from institutional trading jobs.

notluck · #6 04-28-2006, 09:30 PM

I agree with most comments, however, you control what goes on your resume, so your last point is a bit moot.

-Alex

crazy canuck · #7 04-28-2006, 11:43 PM

[ QUOTE ]
I agree with most comments, however, you control what goes on your resume, so your last point is a bit moot.

[/ QUOTE ]

You're right (as long as OP doesn't spend much time there).

tnoob · #8 04-29-2006, 12:52 AM

thanks for your input crazy canuck. your comments sound right. they probably are a prop shop, but i'll verify that later. the firm is supposedly reputable. the guy i spoke with said they are on CNBC sometimes and they have a good reputation, but have only been around for 3 yrs or so because they were another firm previously.

i'm worried about the high turnover rate you suggest (95%). i'm going to visit monday just to see what its all about in more detail and also to see in person how things work (although it sounds like i won't be accepting a position with this firm unless i find out some more positive aspects)