muscleman

Ok. Thank you! So I will definitely give it a try. But even for taking liquidity, does cost plus give me better commissions than fixed rate?

Thank you. What you do mean by "take" liquidity and "provide" liquidity? I assume if the bid is 10000 and ask is 100, and I place a sell order, I am providing liquidity, right? I went through IB's examples of cost plus vs flat rate commissions, and it seems like in most cases, cost plus would win. I only have a relatively small account, so I am not sure if this applies to me as well? In addition, could you tell me how to choose "price improvement"? At present, I just know how to place limit and market orders.

+1. Rost and TJX have a huge advantage in operating expense per percent of rev. They are the low cost operators in a commodity business. Yeah. Eddie Lampert is a retail expert but I am surprised that he got all in on SHLD and didn't buy any of these retail stocks. Is it possible that he made a mistake there?

Can you please elaborate on this? I'd like to know what specifically is bad about Etrade. Before placing a trade, I just view live quotes at atleast 2-3 brokers and then proceed to place a limit order. I'm sure that they have a bag full of tricks and I don't feel that it's worth the time to point out all of them. Regulations and markets are constantly evolving so the practices now are very different than the practices in the past. The most salient practices: 1- Avoid market orders. If you really need execution ASAP, use a limit order that is past the bid/ask spread by a little bit. Or just use a limit order and slowly increase the price. 1b- All or none orders are prone to abuse. That's why Canadian regulators banned them. 2- Most retail brokers will route your order to some internalization network (e.g. ATD, Knight, etc.)... there are 10-30 of these companies now. If you are trading a liquid stock with a bid/ask spread of only 1 cent, you can't possibly lose more than 0.5 cents/share to this. So maybe it's not a big deal. 2b- When you take liquidity with IB (you can set your order to "seek price improvement" too), you will sometimes get paid a negative rebate for many stocks. Retail brokers simply pocket these rebates instead of passing them onto customers. When you provide liquidity, you will often be entitled to a rebate. IB passes this onto customers. Ugh... I guess I will try to explain how the whole sub-penny front running and rebate game works. When you bid for a stock at $3.00 for 100 shares, you might think that you are bidding at $300.00. In reality, your order may be routed to some venue with rebates. Somebody buying your shares on NASDAQ might have to pay $300.00 plus a rebate of $0.29. Your bid is effectively $299.71. Suppose that the spread is 1 cent. The ask price on NASDAQ would effectively be $301.29. There are a large number of market makers that will try to constantly collect the spread, making a 0.53% profit on each flip. Due to competition among market makers (and other exchanges with different rebate structures), the effective spread is usually much smaller than this. Sometimess there is a negative rebate- you get paid for taking liquidity. The effective bid/ask might be $300.02 and $300.75. It'll vary from day to day, and fluctuate depending on the time of day (spreads are wide when the market opens). Retail and institutional investors aren't allowed to bid in sub-penny increments. So market makers can continually front run every other order on the exchange by jumping in at the last second and bidding $0.01 higher. (All this is computerized now.) Retail orders will likely get posted to NASDAQ or some other venue with high positive rebates (e.g. Knight, ISE, NYSE ARCA, etc.). It is likely that your order will only get filled if the rebate is paid. So, you will likely be the last in line to get your order filled (especially when market makers front run you by a sub-penny increment). Your broker will typically pocket the rebate. 2c- Many retail orders will have a split second delay... maybe half a second or less. This is because your broker is polling something like 30-40 different venues to see which one offers the best price. Maybe ATD is offering the highest negative rebate. Your broker will route your order to ATD and pocket the negative rebate. IB lets you choose. Some people don't like that split second delay from seeking price improvement. If you are providing liquidity, your order will go to an exchange. It is likely that market makers will front run the order via subpenny price improvement. Retail orders rarely go to an exchange. 3- NBBO rules are supposed to protect investors. There are many exceptions to them. I'm guessing that Etrade (or the company it routes orders to) exploits every one... because I ran into one of these exceptions with Etrade. Value trap, do you choose IB's flat rate or cost plus commission structure? It sounds like choosing cost plus is the only way to get these rebates? I have placed three limit orders with IB so far, but I got none price improvements. They all went through exactly at my price. It sounds a bit weird to me. ::)

Does anyone have a price target for the new Nokia? :)

No, don't keep a zero cash balance, you might have some fees to be paid to IB and then you might get liquidated if excess liquidity is not enough (IB do not issue margin calls, they just liquidate). It's less of an issue with p.margin due to how excess liquidity is calculated but anyhow just play it safe if it's something you are worried about. You might also have payable interest from previous trades or on foreign currency etc. I just had a conversation with IB regarding my concerns with the inconvenience of cash account and risks of a margin account, and they said on their back end server, they have a way to restrict my margin account such that it will only be borrowing against the unsettled cash. I think that is exactly what I needed. I am very happy with that! :) I do not understand it... could you explain? First, I was under the impression IB immediately adds to the cash calculation the sold amount and adjusts the maint/int margins even if it is not settled yet. Is it not so? Second, even if that's not correct and it takes three days, so after three days you cover the borrowing with the settled cash but how does it change anything really? As I mentioned, with excess liquidity at 0 you do not have to borrow to get liquidated, it can come in the form of fees, payable interest or dividends etc. The main issue is to understand how IB calculates margins and initiate liquidation, the algorithm is on their site. It will go into action even if it's just 1 cent. That's the only thing that matters. Of course, maybe I'm wrong... I am currently using a cash account, and after I sell a stock, I cannot immediately use that proceeds to buy other stocks. My fidelity account can. I complained to them about this, and told them that if I upgrade to Reg T margin, I will be able to use unsettled proceeds, but if I have a fat finger and mistakenly used margin, my account is not as safe as a cash account. They said they can make my account pseudo margin, so that it works like a cash account except I could use unsettled proceeds to buy. :)

Thank you for the information! So for self directed lending, if you lend your shares out at rates slightly below market, then how often do you have to re-lend the shares? If it is not very often, then it is probably a good idea to use instead of the stock yield enhancement program.

$791 monthly????? :o I thought Obama said the plan will be very affordable and will cost about $50-70 per month, right? ::)

No, don't keep a zero cash balance, you might have some fees to be paid to IB and then you might get liquidated if excess liquidity is not enough (IB do not issue margin calls, they just liquidate). It's less of an issue with p.margin due to how excess liquidity is calculated but anyhow just play it safe if it's something you are worried about. You might also have payable interest from previous trades or on foreign currency etc. I just had a conversation with IB regarding my concerns with the inconvenience of cash account and risks of a margin account, and they said on their back end server, they have a way to restrict my margin account such that it will only be borrowing against the unsettled cash. I think that is exactly what I needed. I am very happy with that! :)

Could you please give some examples? Does that include American airline? USG , Nextwave M.Maddux & (very similar legal situation) F&F Preferreds . In all these, the value of the equity was increasing in Cpt 11. Thank you! I am hoping to learn more from these situations! :)

I sold all my SHLD holding today. I think Eric is right. Recently all retailers are reporting bad numbers, and SHLD is still losing money. So taking a potential double as the upside does not sound as attractive given the risks. The other reason is that as we approach the year end tax loss sale season, there could be more interesting opportunities and safer.

Congrats! You still made a handsome profit on that! I added that as the 4th reason, but I think it is similar to No.2. As the price drop more, maybe it will be a good time to reenter?

While I think the thread below is probably helpful to members, I think maybe a thread called "what are you selling today?" will also be helpful. This is not for selling short. Just selling. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-are-you-buying-today/ There could be a few reasons for selling: 1. You just found a better opportunity. Please tell us why. 2. You made an investment mistake. Please tell us the story. What was your original thesis and what is your current expectation. 3. You made a handsome profit on an investment, and you are exiting because it has reached your price target. Congrats on that! It will be great if you could share with us some stories about this investment. Now in hindsight, do you think this is pure luck, or it is your hard working being paid off, and why? 4. Exiting a position due to a corporate event and/or loss of faith in management or the major shareholders. :)

But do you think the gap between republican and domestic is so wide that only a big market drop would scare them and force them to agree on a draft? If that is the case, then the market would have to drop before it climbs back up. I don't understand politicians, so I can't answer the above question.

Could you please give some examples? Does that include American airline?

Long suspected but Journal broke it today as confirmed. Apologies if this was posted on another thread. Curious to see when these "different positions" will show up on the 13F or if it will be a separate filing. Nice! I am surprised that this HF started on Jan 1st but there wasn't any SEC filings to show its positions. Is there a way to see what it currently holds? :P

Sure. But let's compare the two scenarios: 1. Buying call options, or buying on margin and then buy put options as insurance, and then paying cash for a house. 2. Taking a mortgage for the house and then use no leverage in the stock market. Which one is better? He said his investment capital would be cut in half if he pays cash for the house. So I think the above two cases are quite comparable, because buying on margin and buying put options roughly allows you to buy twice as you could without margin.

Do you use leverage in your investment? If you can't even get comfortable with a mortgage, I would be surprised that you use call options or even margins in your account.

AIG is reducing the purchase of reinsurance and instead taking those risks themselves. If HF move into the reinsurance business, then it will be good to drive prices down, so I think AIG should move back to purchase those cheap reinsurance contracts, supposes these HF guys don't blow up. :)

Although this article seems to be the opposite, I've wondered for a while about how good gamers would be at value investing. Take Diablo 3 for example, where there is an auction house. There are lots of "flippers" who go and buy items that are far too cheap for their worth, and then immediately put it up for sale at the "rational" price. In fact, most of them are far better at doing this than I am, which is pretty annoying. It is amazing how hard it is to deal with an opaque and relatively more inefficient market, found in games. Sometimes I feel like telling the gamers they could do the same thing with companies, but then, why introduce more competition? Can you give an example? How does one know an object in Diablo 3 is "far too cheap"? Very interesting. I heard that in the early days of diablo 3, a few flippers could make $1000 a day from those trades. :)

I looked at BP before but can't understand it. It doesn't seem to be that cheap. Maybe without the GOM saga, it can trade at $50, but that's it? Regarding the dividend, since I am in the US, I have to pay double tax for the dividend, which make it not so attractive. IRS does not allow deduction from foreign oil companies.

Thank you LC and wachtwoord. My only worry is what would happen if IB's real time margin algo went wrong and thought I would need real time liquidation, but I actually didn't even buy on margin? Or what would happen if I mistakenly put in one more zero for the number of shares to buy, and caused a big margin call? Perhaps I was just being too extreme and frightened myself. Yes these things could happen. To take it to the extreme, the entire SIPC could shut down, our brokers could raid our accounts, and we'd all be left penniless. Obviously an extreme example, but this is a question of where your limit of reasonableness is. As far as I know, they are a pretty reputable broker. Thanks a lot! I am playing with their REG T margin account's platform right now. The UI needs a little bit of time to figure out, but not bad at all. Do you think I would need portfolio margin at all? I bet probably not? :)

Thank you LC and wachtwoord. My only worry is what would happen if IB's real time margin algo went wrong and thought I would need real time liquidation, but I actually didn't even buy on margin? Or what would happen if I mistakenly put in one more zero for the number of shares to buy, and caused a big margin call? Perhaps I was just being too extreme and frightened myself.

Thank you! You are our tax expert here! Do you feel like the reviews here would be some concern? http://www.yelp.com/biz/interactive-brokers-llc-greenwich regarding the reviews. This makes no sense to me "IB force liquidated my positions and created a loss in my account that would have been greater than if all my trades had gone wrong. ". He goes on to say that he had enough liquidity, and then makes the point that these were European style options and couldn't be exercised prior to expiry. Something tells me that IB cares more than just whether or not you need any liquidity before they expire -- perhaps the direction they trade in the interim makes IB nervous about having enough liquidity when they expire. Impossible to know without the whole story. But do you believe him when he says that they created a loss greater than if all his trades had gone wrong? All of them? That sounds nonsensical. Thank you Eric. I am talking to Fidelity right now. If they can't get me a good stock lending rate, I think at least I would open a cash account in IB and transfer my SHLD shares there. If I get comfortable with a margin account, I will apply for margin, but I am a pretty conservative guy and I would like not to actually borrow any money.

Could you tell me a bit more about your SHLD story in 2007? What was your valuation and Margin of Safety at that time?