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TopstepTrader's Michael Patak (Founder) - Ask Me Anything (AMA)


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TopstepTrader's Michael Patak (Founder) - Ask Me Anything (AMA)

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  #1101 (permalink)
Providence, Rhode Island/USA
 
Experience: Beginner
Broker: Tradovate, Finamark
Trading: ES, NQ
 
Posts: 12 since Feb 2020
Thanks: 3 given, 5 received


bobwest View Post
I'm not @TopstepTrader, who probably will answer as well, but it has been answered, I think a few times (the thread is long and hard to read, so it's no surprise that it wasn't easy to find.)

You as a trader would be an independent contractor, and the funded account is not your account, it's the firm's. You just get to trade it. Since it's not your account, the funds in it aren't yours, and the profit isn't yours either. So "you" didn't make 10k in actual profit, the firm did. Under the profit split agreement, they will pay you, on request, 80% of the account's profit, which is reported to you as income on the 1099.

So it's not as if you had your own account with a 10k profit, which would be taxable to you. You are a contractor who is paid, in this case, 8k as income. The firm keeps the remaining 2k. You never had 10k.

Another note -- and I am not a tax specialist or an accountant, so you would need to consult your own tax professional -- if the funds were yours, in your personal account, the profits would not be taxed the same way. You can check the 60/40 rule, which makes the tax treatment very different for derivative trades (such as futures) compared to ordinary self-employed income. This is all self-employed income.

I believe this is all accurate, but again, I am not TopstepTrader and don't represent them. If you want to be sure, and if there is no response from them here, I suggest you email your question to their support to get an official response.

Bob.


Thanks Bob! This all makes complete sense. It is pretty much what I was thinking was the case, but I just needed some verification. I am seriously considering signing up, so I wanted to make sure I was not going to be taxed on money I would not see (the 20% TopStep keeps). Thanks again!

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  #1102 (permalink)
Valencia (SPAIN)
 
Experience: Intermediate
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ONE MORE PIECE OF NEWS BY TST:
Because of the volatility created by the covid19, now you have more restrictions.... basically you buy one contract at 8:40 and you have lost your account.

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  #1103 (permalink)
Providence, Rhode Island/USA
 
Experience: Beginner
Broker: Tradovate, Finamark
Trading: ES, NQ
 
Posts: 12 since Feb 2020
Thanks: 3 given, 5 received



SamJames View Post
ONE MORE PIECE OF NEWS BY TST:
Because of the volatility created by the covid19, now you have more restrictions.... and they care sooo much about their traders that if you break one of the new rules, they just get rid of you.
This is how much they care!! basically you buy one contract at 8:40 and you have lost your account.


My question is, why 8:45, and not 8:30? The market opens at 8:30CT/9:30EST, what is the point of waiting 15 minutes after the open?

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  #1104 (permalink)
Valencia (SPAIN)
 
Experience: Intermediate
Platform: SierraChart
Broker: Interactive Brokers / Infinity / Optimus
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MrGreen1 View Post
My question is, why 8:45, and not 8:30? The market opens at 8:30CT/9:30EST, what is the point of waiting 15 minutes after the open?

well, I guess is to make sure you don't trade with size during high volatility, normally the first 15 minutes are quite volatile.

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  #1105 (permalink)
Site Moderator
Sarasota FL
 
Experience: Intermediate
Platform: Sierra Chart
Trading: ES, YM
 
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Posts: 5,739 since Jan 2013
Thanks: 44,758 given, 19,390 received

@SamJames already posted about TST restrictions on funded accounts during this volatility. Here's the rest of the new changes, including non-funded Combine accounts, as well as "Swing" (micros) and "Pro" (see their site for description.)

Personally, I think trading just one contract as your personal max is a good idea right now, unless you are a truly good, long-profitable trader who has a lot of experience in dealing with high-risk periods, but perhaps that's just me. I would do the same in a Combine, but maybe that's just me too. Control risk and you will be able to trade again would be my motto.

The reference to market limits being reached would be (I'm assuming) when futures go limit up or down. This seems to be giving their trade simulation problems in Combine accounts.

As to the 8:30 to 8:45 period, look at a chart. It can be a meatgrinder then. I would suggest observing this in your own live accounts and even in Combines. There is money to be made now, but accounts will be blown up too. Be careful, all.



Bob.

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-- Cervantes, Don Quixote
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  #1106 (permalink)
Chicago Illinois
 
 
Posts: 25 since Jun 2019
Thanks: 8 given, 9 received


bobwest View Post
I'm not @TopstepTrader, who probably will answer as well, but it has been answered, I think a few times (the thread is long and hard to read, so it's no surprise that it wasn't easy to find.)

You as a trader would be an independent contractor, and the funded account is not your account, it's the firm's. You just get to trade it. Since it's not your account, the funds in it aren't yours, and the profit isn't yours either. So "you" didn't make 10k in actual profit, the firm did. Under the profit split agreement, they will pay you, on request, 80% of the account's profit, which is reported to you as income on the 1099.

So it's not as if you had your own account with a 10k profit, which would be taxable to you. You are a contractor who is paid, in this case, 8k as income. The firm keeps the remaining 2k. You never had 10k.

Another note -- and I am not a tax specialist or an accountant, so you would need to consult your own tax professional -- if the funds were yours, in your personal account, the profits would not be taxed the same way. You can check the 60/40 rule, which makes the tax treatment very different for derivative trades (such as futures) compared to ordinary self-employed income. This is all self-employed income.

I believe this is all accurate, but again, I am not TopstepTrader and don't represent them. If you want to be sure, and if there is no response from them here, I suggest you email your question to their support to get an official response.

Bob.

I am not a CPA/Accountant/tax professional either, but to my understanding, this is where a K1 outperforms a 1099. With a k1 you still get to honor 1256 contracts (40% short term gains/60% long term gains) plus other benefits of a k1. Can be pretty big tax savings. Unfortunately, earn2trade/Helios is the only one out of these similar firms that offer a K1. I am still stuck on who to go with =[

@TopstepTrader will you ever be able to offer a k1 for funded trades? With losing the tax savings and significantly higher round turn costs for true professional platforms(unlike tradovate, ninja etc) It is giving up a lot more than 20%. With the volume of contracts a professional does a month you can get .25 side through an FCM and get platforms like TT, CQG Qtrader, CTS T4 "Advanced"(not CORE that you guys limit your traders to).

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  #1107 (permalink)
Site Moderator
Sarasota FL
 
Experience: Intermediate
Platform: Sierra Chart
Trading: ES, YM
 
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Posts: 5,739 since Jan 2013
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TickTick View Post
I am not a CPA/Accountant/tax professional either, but to my understanding, this is where a K1 outperforms a 1099. With a k1 you still get to honor 1256 contracts (40% short term gains/60% long term gains) plus other benefits of a k1. Can be pretty big tax savings. Unfortunately, earn2trade/Helios is the only one out of these similar firms that offer a K1. I am still stuck on who to go with =[

@TopstepTrader will you ever be able to offer a k1 for funded trades? With losing the tax savings and significantly higher round turn costs for true professional platforms(unlike tradovate, ninja etc) It is giving up a lot more than 20%. With the volume of contracts a professional does a month you can get .25 side through an FCM and get platforms like TT, CQG Qtrader, CTS T4 "Advanced"(not CORE that you guys limit your traders to).

Offering a K1 is a matter of company ownership structure. It is the form that is used to report partnership and similar earnings of people who have an ownership interest in a firm. (Thanks to Google, because I had no idea what it was at first. ) So it's used by firms that are set up as an LLC or LLP or S corp. In the case of trading firms, their traders would be part owners of the firm.

I will have to just let the TopStep people respond on the question of their plans, but the thing that occurred to me is that if someone is already a professional trader, they won't be looking for any of these programs anyway, will they? These things are for people who are starting out, basically. If anyone is already doing high volume a month, is profitable with that volume and is able to negotiate low commissions based on their volume, they generally aren't going to be looking for funding with any of these firms, and won't need it.

I agree that an LLC or similar structure would be nice because of the tax situation and is something to think about. Part of the weighing of pros and cons, and an individual matter. I have no idea if there are any cons or not, and would leave that to professional advice.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
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  #1108 (permalink)
Chicago, IL
 
Experience: Advanced
Platform: TSTrader, NinjaTrader...
Trading: ALL- Futures, Forex, Equities
 
TopstepTrader's Avatar
 
Posts: 246 since Feb 2013
Thanks: 57 given, 690 received

Thank you for all of your questions and feedback over these past few months. We admittedly haven't dedicated enough time to this thread, but that's all going to change! Please continue to engage here, and we will make sure you're getting the answers you're looking for.

We'll get a post up soon addressing questions that have gone unanswered, so keep an eye out! We are eager to jump back into the conversation. Thanks for your patience.

For your urgent or time-sensitive questions, email us at support@topsteptrader.com and we’ll be sure you’re taken care of.

Thank you,

Michael & Team Topstep

If you have any questions about our products or services at TopstepTrader, please send me a Private Message or use the FIO "Ask Me Anything" thread.
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  #1109 (permalink)
Irvine, CA/USA
 
Experience: Advanced
Platform: NT8, TOS, Tradestation
 
Posts: 1 since Apr 2019
Thanks: 1 given, 0 received

Maybe this is answered earlier but being a long thread hard to find specifics.

If I go with Sierra Charts do I use TSTTrader as a broker or someone else ? In either case what would be the RT fees for ES,RTY& NQ?

For Step 1, Do I have to pay additionally for the data feed?

Thanks,
Kal

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  #1110 (permalink)
Chicago, IL
 
Experience: Advanced
Platform: TSTrader, NinjaTrader...
Trading: ALL- Futures, Forex, Equities
 
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Posts: 246 since Feb 2013
Thanks: 57 given, 690 received



kkalpesh View Post
Maybe this is answered earlier but being a long thread hard to find specifics.

If I go with Sierra Charts do I use TSTTrader as a broker or someone else ? In either case what would be the RT fees for ES,RTY& NQ?

For Step 1, Do I have to pay additionally for the data feed?

Thanks,
Kal

Hi Kal,

Thank you for your question. If you elect to use Sierra Chart, NinjaTrader Brokerage is the broker you will use. Here is a breakdown of the platforms supported by TopstepTrader: https://help.topsteptrader.com/hc/en-us/articles/115010515748

For a thorough answer to your second question, please see: https://help.topsteptrader.com/hc/en-us/articles/236068847. Here, you'll be able to see all associated fees laid out.

If you have any further questions, feel free to reach out to us at support@topsteptrader.com.

Thank you!

If you have any questions about our products or services at TopstepTrader, please send me a Private Message or use the FIO "Ask Me Anything" thread.
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June 22, 2020


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