PM account vs low commissions

[gowthamn 10]

I have an account at Tradier and ToS.

With ToS I have portfolio margin account. I can buy around twice the number of contracts with the same margin at ToS because its Portfolio Margin. But its commissions are 0.5 per contract.

Since commissions cost around 2% to 2.5% of the profits with SO, I wanted to move to Tradier. But I can only buy half the number of contracts because its a Reg-T account. This means half the profits (and losses) for the same margin. 

Assuming 7.5% profit month with SO, the profits with ToS would be double at 15%. But commissions would take nearly 5%, making the profits 10% per month. So, it would be 10% on average with ToS and 7.5% on average with Tradier. So even though ToS has commissions, the advantage of a PM account outweighs it. 

Is my thinking correct or am I missing something?

[Kim 7,475]

You know that leverage works both ways, right?

[gowthamn 10]

6 minutes ago, Kim said:

You know that leverage works both ways, right?

Yes. But based on SO history, profits are more than loss. I am hoping it continues.

[Kim 7,475]

I hope so too. But last month we had a 20%+ drawdown. If you had double number of contracts, your account would be down almost 50%. Are you willing to accept that kind of drawdown? Remember: to recover from a 50% drawdown you need a 100% gain.

[gowthamn 10]

4 minutes ago, Kim said:

I hope so too. But last month we had a 20%+ drawdown. If you had double number of contracts, your account would be down almost 50%. Are you willing to accept that kind of drawdown? Remember: to recover from a 50% drawdown you need a 100% gain.

Logically it is part of the probability distribution. We also had 18% profit months.

But emotionally I have to think and decide

Edited February 24, 2019 by gowthamn