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 Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...
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 customer funds) to make a profit ...
desks, and
money manager
Investment management (sometimes referred to more generally as financial asset management) is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified inve ...
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,
is a term in investment management (and more generally, in finance), referring to how a characteristic investment philosophy is employed by an investor or fund manager.
, portfolio size and the
sector 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
*
*
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 cl ...
*
Securities research
Security (finance), 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 ar ...
*
Target price
References
{{Reflist
Investment