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Aloha Everyone,
To answer your question about the tax advantages, there are nothing but
benefits for this "Mark to Market" switch, from my stand point. You were
referring to "Market Maker", and I would think that is a totally new ball
game. They are employed by the large "public firms", and usually do not
trade for themselves. I could be wrong though, but I think that the NYSE
specialists are the only ones qualified to uphold such a mighty position.
>>>>>-- market makers can deduct losses greater than $3000 and traders
can't>>>>>>
Yes, that is one of the best advantages. If you have a losing year, far
more than you gained, you could deduct as much as you lost. One of the poor
guys that work s with me, had a losing year of over $130k. I think that it
would take you quite awhile to roll that over each year at only $3k a year.
>>>>>-- market makers can put trading profits into a qualified retirement
account (e.g. IRA) and traders can't>>>>>>
>>>>>-- but market makers have to pay about 15.6% social security and
Medicare tax and traders don't.>>>>>>
>>>>>-- market makers don't have to worry about wash sales>>>>>>
One of the great advantages is to form a Corporation and trade from that.
That way, you have just multiplied you deductions with salaries, if you
choose to pay yourself one. Social Security and Medicare tax should not be
an issue, but welcomed for the future as a retirement plan ( you can all
chuckle and belittle me now). Social Security only pays out what you put in,
from my understanding, so if you avoid this now, God help you if your last
years you go broke and then the retirement check of only $300 comes in the
mail for the rest of your life. To be serious though, I really don't bother
with such a little disadvantage. It would be easily to see that if you put
two traders side by side, with an equal amount of money, lets say $50k, the
trader working at the professional firm will come out on top 5 times greater
if they made the same trades. The money that is saved in commissions, tax
advantages, wash sale rules, and trading capital far out ways the
disadvantage of paying the social security and Medicare taxes.
Now lets remember, about deductions for the Mark to Market status, are only
calculated in one way,
Profits: { Every nice trade that you have had}
minus
Losses: { Every trade that you threw the coffee cup across the room}
minus
Commissions: { Three quarters of a cent for those without volume discounts}
minus
Business Deductions: {Data Fees, Subscriptions, Car Leases, Office
Space(?Home?), Dinners, Salaries, Just keep digging}
Equals
TOTAL PROFIT (INCOME)
From my stand point, there are no disadvantage, but then again, if someone
were to worry about what you have spoken of, it might be a concern. I would
think that if you were a ordinary trader, and you switched over to become a
professional, and you did the exact same thing, such as your trading style,
you would be amazed on how that changes. I have a monthly expense of
$1250.00 of data fees, internet connections, new services, ect. Now being an
average person, that would just be out of my pocket. But it is deducted as
an expense. That nice car that you drive everyday, comes out of your pocket.
Why not take the money from the taxable expense of your profits than to give
the trading profits over to the IRS and then pay for you car with after-tax
dollars. Possibilities are endless, as you can see. Either you pay the IRS
now from all those hard earned profits, or you buy yourself nice things,
have a really nice car(leased), great business trips, and then give the rest
to be taxed. Those advantages far out way paying social security and
Medicare.
Bryan K. Mulholland
-----Original Message-----
From: The Barrington Bear [mailto:schindlertrading@xxxxxxxxxxx]
Sent: Sunday, July 22, 2001 10:35 PM
To: Omega-List (E-mail)
Subject: Re: looking for retail day traders
Hi Bryan,
You've mentioned the tax advantages of being a market maker a couple times
now. Could you please elaborate? As far as I can tell market maker status
isn't necessarily better than trader status, and usually is worse. The big
difference is that because profits and losses are ordinary income for market
makers and capital gains and losses for traders:
-- market makers can deduct losses greater than $3000 and traders can't
-- market makers can put trading profits into a qualified retirement account
(e.g. IRA) and traders can't
-- but market makers have to pay about 15.6% social security and medicare
tax and traders don't.
-- market makers don't have to worry about wash sales
So it seems that _if_ you have a losing year and _if_ you have alternate
income (e.g. from a spouse) to write your losses off against, then it is
better to be a market maker, but otherwise it isn't.
That self employment tax (social security and medicare) is a pretty big
disadvantage. Are there other differences that tip the scales toward being
a market maker?
Aaron Schindler
----- Original Message -----
From: "Bryan K. Mulholland" <speculator@xxxxxxxxxxxxx>
To: "Omega-List (E-mail)" <omega-list@xxxxxxxxxx>
Sent: Sunday, July 22, 2001 8:48 PM
Subject: RE: looking for retail day traders
> Hello Everyone,
>
> To all of those that have responded to my about my e-mail, here is a list
> of some of the firms that can do this great thing for you. But remember,
you
> have to be a licensed Series7 registered rep. through the NASD to trade
with
> what we are talking about. Heck, look at it this way, if you buckle down
and
> study for 6 months, you'll learn more about the overall picture of
> investments and in the end, you get a big giant tax break from Uncle Sam.
> Again, I know that this is not for everyone, but those with ability and
> small account sizes($30k-$100k), they can assist you to your $goals$
faster
> than you ever imagined. This is a powerful tool, and can also have just as
> much negative impact as positive, as it all depends on you!
>
> Here is a list of these type of offices:
>
> ActiveTrade http://www.activetrade.net/
> All - Tech Direct http://www.attain.com/about/branches.cfm
> Andover Trading http://www.andovertrading.com/
> Blackwood Trading http://www.blackwoodtrading.com/
> Broadway Trading http://www.broadwaytrading.com/
> Bright Trading http://www.stocktrading.com/
> BrookStone Trading http://www.brookstonetrading.com/
> Carlin Equities Corp. http://www.carlingroup.com/
> EchoTradeOnline http://www.echotradeonline.com/
> EdgeTrade http://www.edgetrade.com/index?ref=
> Electronic Trading Group http://www.etgtrade.com/where.html
> HeartLand Securities http://www.hrld.com/
> Hold Brothers http://www.holdbrothers.com/locations_2-4.html
> ICAP Direct http://www.icapdirect.com/index2.htm
> Lieber & Weissman http://www.stocktrade.net/
> Louisville DayTrade Exchange http://www.louisvilledaytrade.com/
> MarketWise
> http://www.marketwise.com/index2.cfm?CFID=2088838&CFTOKEN=39481606
> Momentum Securities http://www.trademomentum.com/
> Navillus Securities http://www.navillus.com/
> Off-Site Trader http://www.offsitetrader.com/CareerOpportunities.htm
> Onsite Trading http://www.onsitetrading.com/section01a.htm
> Onsite Trading for Series 7 licensed individuals
> http://www.onsitetrading.com/llc/defaul2.htm
> Point Direx Management http://www.pdgo.com/
> ProTrader http://www.protrader.com/
> Raptor Trading http://www.raptortrading.com/
> Summit Trading http://www.summittrading.com/
> SunState Trading http://www.sunstateequitytrading.com/
> Trinix Securities http://www.trinixsecurities.com/
> Watcher Tech Clients
http://www.watchertech.com/traders/traders-detail.html
> WorldCo http://www.wldc.com/html/index.htm
>
>
>
> Bryan K. Mulholland
> Honolulu, Hawaii
>
>
>
>
> -----Original Message-----
> From: Bryan K. Mulholland [mailto:speculator@xxxxxxxxxxxxx]
> Sent: Sunday, July 22, 2001 1:52 AM
> To: Omega-List (E-mail)
> Cc: Sigstroker@xxxxxxx
> Subject: RE: looking for retail day traders
>
>
> Hello Everyone,
>
> Maybe shedding some light on the subject, I happen to be one of those
> "stupid kind" of traders. It is a great advantage to trade the firms
> capital. Lets say that you have $xxk in your account, and that you have
most
> of that money tied up in short term positions in a few stocks. It gives
you
> the advantage to trade beyond your means during good times, or bad times
if
> you have no control. Up to 10 times of your account size in capitol. It is
a
> great tool for your trading, but it can be very disastrous if used wrong.
>
> They always have a risk manager that is watching everyone's position, so
> you can be put into reality if you do abuse the rules. But most people
have
> their head on straight, and the possibilities are endless to success with
a
> professional firm. Not every Daytrader has 2 million to trade what ever he
> likes no matter what the position. When I started out I had $30k, and it
> gave me the advantage to trade 1000 shares of JNPR, 500 shares of YHOO and
> 1000 shares of BEAS all at the same time. And doing that with only that
> amount. So if you have your head on straight, I don't see why you would
not
> pick up an opportunity like that.
>
> Second, lets talk commissions. On average, the direct access traders have
a
> commission of a complete trade at $13.00-$17.00. With trading
professional,
> the commissions drop to fractions of the cent per share. Traders starting
> off have the advantage of getting $.75 cents for trading 100 shares of
CSCO.
> So if you account size is small, a round turn on a trade only cost $1.50.
> With volume, the commissions per share dramatically reduce to almost
> nothing. I cut my cost of trade commissions by $68K last year by going
> professional. Now I don't think that is too stupid, do you?
>
> Thirdly, by trading in a large firm, you have to be a licensed Series7
> broker. That entitles you to trade the capitol, and receive a term called
> "Mark to Market". From the tax standpoint, all business expenses,
> commissions, and those great trips to New York to see the "Phantom of the
> Opera" are all deductions to the massive amounts of money you can make.
> There are no "Wash Sale Rules" when you are a professional trader. So the
> IRS can kiss my butt!
>
> I am not saying that it is for everyone. It gave me the ability to climb
to
> success faster than I ever imagined. I have met great people, made a ton
of
> money and feel proud that I do belong to a firm. I have made several
> "business trips" to New York, which my wife loves me for. The road has
been
> good. Now, I really can not speak for the firms that trade the futures
> markets with extra capitol, but I am sure that it is the same philosophy.
I
> take no offense to your comment on the "stupid" part, as I think for
anyone,
> it is the best thing to do. But you have your opinion as I have mine. I
hope
> that I helped out a little.
>
> Bryan K. Mulholland
> Honolulu, Hawaii
>
>
>
> -----Original Message-----
> From: [mailto:Sigstroker@xxxxxxx]
> Sent: Saturday, July 21, 2001 10:41 PM
> To: omega-list@xxxxxxxxxx
> Subject: Re: looking for retail day traders
>
>
> So let me get this straight. You want a sucessful daytrader, making
> consistent profits, to stop doing that and instead make profits for a firm
> and keep only a fraction of what they make? I would hope you'd get zero
> responses. Someone smart enough to be a successful trader is not stupid
> enough to screw themselves over in a deal like that.
>
>
> In a message dated 7/18/01 3:20:07 PM Pacific Daylight Time,
> writes:
>
> > I am looking for retail day traders also, but I don't think they
exist...
> I
> > posted a message about a month ago looking for traders who were
interested
> in
> > trading for a large firm (1000+ traders) trading firm capital with a
good
> > payout and generous amounts of trading capital. Guess how many people
> > answered that were SUCCESSFUL day traders who supported themselves
trading
> > and had track records to show (even records from profitable personal
> accounts?
> > ) ZERO!!! I got about 30 responses but not a single experienced trader.
> Maybe
> > the experienced guys had no interest in trading a firm's capital, but I
> found
> > it pretty suprising.
> >
> > So, just out of curiosity, who on this list trades for a living?
> >
> >
> > Just curious,
> >
> > Seth
> >
>
>
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