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I make money selling covered calls on FX spot options, and some of my friends want to buy in to this without having to trade their own accounts.

One method is for each of them to get an account, and have me trade it, but that doesn't scale well: I really don't want to be trading 10 accounts.

The other method is to let them "buy in" to my account. My question: how do I determine what "portion" of my account someone owns, assuming many people (including myself) deposit and withdraw money?

Is there a better way of doing this? What if I charge my friends a small fee to trade?

I'm guessing the answer is well known, since hedge funds/mutual funds have to deal with this all the time.

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    $\begingroup$ I'd be careful mixing money and friends. You may end up with a choice of keeping one or the other. Common sense and logic aren't as common as you might think. $\endgroup$
    – bill_080
    Feb 26, 2011 at 19:16
  • $\begingroup$ I think you need to start by talking to a lawyer, and not just any lawyer but the one who specialises in finance. $\endgroup$
    – quant_dev
    Mar 28, 2011 at 21:11

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I haven't tried myself but from what I have seen your best bet would be the managed accounts from Interactive Brokers.

There is a nice post about it here: http://leighdrogen.com/the-hedge-fund-structure-is-dead/

  • A quick and dirty option would be to use an API to pass the orders and loop through all the accounts doing that (i.e. one file with the list of orders, one with the list of accounts and a small program to pass the orders).

Btw, do you have a track record? ;)

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  • $\begingroup$ FYI...TD Ameritrade has a similar managed account option. IB is probably cheaper though. $\endgroup$
    – joshayers
    Mar 31, 2011 at 2:56
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treat it like a hedgefund(limited partnership) think of your account as a corporation.
assign a number shares to your account's netliquidating value(equity). let your friends buy a given number of shares at a given price. take your fee out and treat it as a cost to the fund that lowers the equity.

Repeat this process as you take in new money, or when u distribute profits/return funds.

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