The investment..speculation, out right gambling thread

Parent Cafe
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<p>Labor can lose their jobs.</p>

<p>Some traders aren’t really risking much. </p>

<p>I wrote earlier that there is a hft firm that hasn’t had a losing day in over 10 years.</p>

<p>Better margin too for the pros.</p>

<p>Yes. The public gets some, not all of the tax benefits, but the public usually loses so it doesn’t do the public any good. :slight_smile:
Plus, the public has to file correctly. I thought you traded futures. Do you file properly?</p>

<p>Floor traders are not as important as they used to be. I am not sure why they still exist. There are plenty of futures markets that don’t need floor traders. I guess the silver market still needs floor traders I don’t know why that market hasn’t switched to electronic traders making most of the markets in silver.</p>

<p>How do you know Rick Santelli is the most informed person on CNBC?</p>

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<p>“It makes sense to create an incentive for them to take a risk with their money so the rest of us have a market in which to invest.”</p>

<p>Not knowing much about futures, please explain to me the connection between the futures market and the stock market? Why does their tax treatment benefit investors and traders in stocks and stock options? I do know that the future traders provide a valuable service in keeping the price of oil, gasoline and heating oil so low -LOL.</p>

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<p>Better lobbyists.</p>

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<p>A question on an entirely different subject.</p>

<p>One of my sons is a real saver with high earning potential. He has asked for long term investment ideas that don’t require a lot of ongoing day to day management. The three possibilities that I came up with are VBINX, PCEF, and the Permanent Portfolio without the cash component. Do they sound reasonable? Anyone else got better ideas?</p>

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<p>"Better lobbyists.</p>

<p>Futures traders and option market makers were trading calendars and doing illegal trades to avoid taxes. Trades that were done to avoid taxes and no other profit motive were illegal. I know some people care about the law. Lol</p>

<p>I know a lot more about how the option market makers would do their trades. I am 99.99 percent sure how the futures guys avoided taxes. I am 100 percent sure how the option guys avoided taxes. </p>

<p>So…you would get two option traders with different tax years. One guy’s
fiscal year would end in march and one guy’s would end in dec, for example. Traders are taxed on their marks. Their pnl is taxed Mark to market, not when they close their positions. </p>

<p>Let’s look at the trader thats year end was similar to most people, Dec. That trader wants to show a loss on the marks on Dec 31. The loss would not be real. It would exist for one day. Dec 31. Jan 2, the loss would disappear. :slight_smile: The traders would find inactive options that they could mark where they want on Dec 31. </p>

<p>Just an example to get an idea how this works. Lets say ABC was trading 20. The dec 40 puts and the jan 40 puts were both worth 20. So the spread was worth zero. And these options rarely if ever traded.</p>

<p>The guy who wanted the loss would buy, for example the jan 40 puts and sell the dec 40 puts for zero. On dec 31, the spread would be marked at -1.00. For tax purposes, if the the guy who wanted the loss did the spread 1,000 times, he would have a loss for tax purposes of $100,000. Mark to market there is a loss of $100,000 for the buyer of the spread. A day or two later, the spread would be marked at zero. The loss is gone. Or, one trader would exercise. Then the other trader could
say, I had to exercise because the other side exercised. If both traders exercised the spread was really back to zero.</p>

<p>Another way to do this was to trade boxes. The stock is 25. You buy the jan 10-15 box for $5. The guy who wants the loss could buy the jan 10 calls and sell the jan 10 puts…and sell the jan 15 calls and buy the jan
15 puts. No economic risk. The guy who wants the loss can buy the spread 1,000 times. On Dec 31, the spread would be marked at 4.5, for example. Presto. The buyer would have a Phantom $50,000 tax loss on a trade with no risk. :)</p>

<p>The guy who didn’t need the losses would be taken care of…he would be
paid a little to do these trades. The IRS would occasionally object to these tax trades, but you could usually argue some bs reason why you did this trade to make a profit. Maybe, these trades were disallowed once
in awhile. I can’t remember. </p>

<p>There are many traders that did not partake in this bs. Some guys
always have to push it. Anyway, Rostenkowski was from
Illinois. A lot of the futures and option traders were trading in Illinois. Tax preference was given to these guys. You could no longer partake in
illegal activities and for your punishment, we will tax you less than other people. Lol.</p>

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<p>I trade futures and options on futures at least 5 times per week. I don’t know if I file correctly since all I do is plug the information into the tax software and hope I don’t have to pay too much to uncle sam. </p>

<p>A company with stock expects to stay in business for years. So it makes sense to distinguish between short term traders (short term capital gains treated as ordinary income) and long term traders (long term capital gains at a lower tax rate). Long term investors add stability to stock investment and are good for the company’s ability to raise capital.</p>

<p>Futures are not investments in a company. Futures with any liquidity usually expire in 3 or 4 months. There is no way to distinguish between long term and short term investors. The leverage of futures is so high that the risk is unbelievable. For example, when I trade WTI with a contract valued at $91,000, the margin is less than $5K. Most of the people trading futures are people who are hedging. Farmers trade futures in the spring to lock in the price they will get for their crops in the fall. Airlines trade trade futures to lock in their cost of fuel for the following six months. If liquidity is limited, there is no market and the spread between bid and ask may be extreme. I think tax policy makers are attempting to create an incentive to have more people enter the market so that there will be liquidity.</p>

<p>I like Santelli because he makes it clear that running up giant deficits does not create real growth and prosperity. It’s just an illusion. I also like him because he takes out that white board and explains financial transactions and events in simple form.</p>

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<p>Most people do not trade futures. Most people are investors in the stock market. Please explain how giving tax breaks to futures traders improve liquidity in the stock market and what is the correlation between the futures and stock market over different time frames.</p>

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<p>:)</p>

<p>So…why don’t you check and see how your futures are taxed? </p>

<p>What did I write? Traders are trading short term and are paying long term rates.</p>

<p>I don’t think you have to worry. I don’t think there is a shortage of people who want to make markets. One of the issues with hft is many people can’t compete with these firms. They want to but they can’t compete, so these people want to get rid of hft.</p>

<p>Back in the 80’s market makers were paying taxes at a 32 percent rate. I didn’t see a shortage of market makers because of that tax rate. Now, it is 23 percent. </p>

<p>You want more market makers? Widen the bid/ask spreads.</p>

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<p>The trades distinguish between long term trades and short term trades. :slight_smile: </p>

<p>Your trade takes over a year to flatten out that is long term. You get in and out of your trade in seconds that is not long term.</p>

<p>Traders can have long term trades and short term trades and they can be taxed accordingly. Buying and selling in seconds is not long term.</p>

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<p>“Traders are trading short term and are paying long term rates.”</p>

<p>which is ridiculous - I haven’t seen a logical argument yet why this should be the case.</p>

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<p>Please explain why holding spx options should be taxed differently than holding spy options for one minute?</p>

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<p>Tax breaks to futures traders does not affect liquidity in the stock market. it affects liquidity in the futures market. They are two different markets. The number of people and the number of trades in the futures market is much less. I can see why congress would create an incentive for people to trade futures. Look at the OJ market. I don’t go there because the liquidity is so bad that you might get in to a trade and not be able to get out if the market goes against you. If you are a big OJ farmer/producer and you can’t get out of a trade, you can lose millions. They need as much liquidity as they can get and still don’t have enough. The risk in future is so much greater than in stocks that I can see why congress would want to reward those who take risk and help make a market.</p>

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<p>That es futures market looks pretty large to me. Why do esfutures get preferential treatment over spy. Es futures market get preferential treatment with margin and taxes.
Why? The esfutures are short term instruments. The spy can be held for years.</p>

<p>“Tax breaks to futures traders does not affect liquidity in the stock market. it affects liquidity in the futures market. They are two different markets”</p>

<p>Is that really true? I have this idea that traders are trading both markets. Actually arbitraging between the two markets. But maybe you
are right. </p>

<p>The gold futures market looks pretty big to me also. Why do the gold futures markets get preferential treatment over gld?</p>

<p>So, you believe in subsidies, razorsharp? You believe in subdizing our farmers and our speculators?</p>

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<p>^^I can’t see what they should be rewarded at all and that’s the point. I was waiting for the answer that it affects the stock market from you even though I figured it didn’t - another reason why they shouldn’t be given any special treatment. This garbage has gone on long enough and needs to be changed. The original intent of futures was to hedge commodities etc for merchants trading goods and services sometime in the future not for traders to skim money off the top and take advantage of ridiculous tax laws that harm everybody else.</p>

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<p>Es futures…Flash Crash.</p>

<p><a href=“http://dealbook.nytimes.com/2010/10/01/lone-sale-of-futures-contracts-led-to-flash-crash/[/url]”>http://dealbook.nytimes.com/2010/10/01/lone-sale-of-futures-contracts-led-to-flash-crash/&lt;/a&gt;&lt;/p&gt;

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<p>No one else is harmed by favorable tax treatment for futures traders. </p>

<p>Again there is no long term holding of futures for the vast majority if commodities and futures instruments. There is no long term investment. It is difficult to reward people by making long term investments when there is no long term. </p>

<p>if you oppose favorable tax treatment for futures traders why would you support it for long terms stock investors? The reason there is favorable tax treatment to long term stock investors is that it encourages more people to invest and everyone else in the market benefits. The futures market is so much smaller in terms of transactions that any incentive to get more people to participate is good for everyone. Most of the people on this thread can trade stocks easily but would get killed trading futures. There are no widows and orphans in the futures market and nothing pays a dividend. </p>

<p>ETFS are poor man’s futures. Until recently there was no way to trade gold except in the futures market. Now there is GLD but for many years if you wanted a market in gold you had to be in high risk futures.</p>

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<p>“Again there is no long term holding of futures for the vast majority if commodities and futures instruments. There is no long term investment. It is difficult to reward people by making long term investments when there is no long term.”</p>

<p>Correct. So why do futures profits, which are almost always short term, receive long term capital gains? You are kind of arguing my side now. Doct’s side.</p>

<p>The futures market is huge. HUGE. I would write the HUGE bigger if I could. :)</p>

<p>The spy market is pretty big too, but it isn’t as large as the es market.</p>

<p>As far as investors getting long term capital gains when they hold
investments long term, I think the key word is long.
That is different than trading SHORT term and receiving LONG term gains.</p>

<p>I am glad to see that you are in favor of subsidizing certain industries or groups.</p>

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<p>Razorsharp, do you file IRS form 6781?</p>

<p>[Futures</a> trading tax reporting](<a href=“http://www.tradelogsoftware.com/tax-topics/futures/]Futures”>http://www.tradelogsoftware.com/tax-topics/futures/)</p>

<p>I hope you do. You are entitled to long term gain treatment.</p>

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<p>Yes, I my software fills out that form. And thanks for assuming I make profits in the futures market.:)</p>

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<p>No, the reason is to create an incentive for speculators to participate and create liquidity. A futures mkt without liquidity would be a disaster. </p>

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That’s true only if you look at the dollar amounts of the trades. If you look at the number of people trading futures, it is very small compared to the stock market.</p>

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<p>What kind of futures are you trading?</p>