Trade ideas (or trading ideas, or "Electronic Alpha-Capture") are investment ideas, typically equity related, ("long" i.e. buy, or "short" i.e. sell) which are sent by
institutional stockbrokers to their
institutional clients (i.e. this is not a service provided to
private clients); recipients of trade ideas are thus
hedge fund
A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...
s, a bank’s
proprietary trading
Proprietary trading (also known as prop trading) occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm's own money (instead of using depositors' money) in order to m ...
desks, and
money manager
Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institut ...
s.
Trade ideas are sent to the client with a recommendation to buy or sell, an investment value (e.g. $2 million) and often a timeframe and an indication of level of conviction. The most active consumers of Trade Ideas are funds using
quantitative or systematic strategies.
They typically propose a trade in a specific stock and are developed by the individual idea author’s (e.g. a salesman) own knowledge of their client’s particular area of investment interest, and so will take into account: the client’s
investment style
Investment style refers to different style characteristics of equities, bonds or financial derivatives within a given investment philosophy.
Theory would favor a combination of big capitalization, passive and value. Of course one could almost get ...
, portfolio size and the
sector
Sector may refer to:
Places
* Sector, West Virginia, U.S.
Geometry
* Circular sector, the portion of a disc enclosed by two radii and a circular arc
* Hyperbolic sector, a region enclosed by two radii and a hyperbolic arc
* Spherical sector, a p ...
and geographic focus.
Brokers only send trade ideas to their most valuable clients. In return for receiving ideas that provide superior investment returns they are rewarded with increased commission payments from their clients. Trade Ideas are therefore highly performance related.
[The Buy-Side Values Short-Trade Ideas](_blank)
, 30 July 2008, retrieved 2 August 2009[Electronic Alpha- Capture and its Impact on Commission](_blank)
20 June 2011
See also
*
Alpha capture system
An alpha capture system is a computer system that enables investment banks and other organizations to submit "trading ideas" or "trade idea Trade ideas (or trading ideas, or "Electronic Alpha-Capture") are investment ideas, typically equity relate ...
*
*
Sales and trading Sales and trading is one of the primary front-office divisions of major investment banks. The term is typically reserved for the trading activities done by sell-side investment banks who are primarily engaged in making markets for institutional cli ...
*
Securities research
Securities research is a discipline within the financial services industry. Securities research professionals are known most generally as "analysts", "research analysts", or "securities analysts"; all the foregoing terms are synonymous. Resea ...
*
Target price Target price may mean:
*A stock valuation
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, pot ...
References
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Investment