What is a principal trade and what market conditions are favourable for it? Don’t know the answer to this hopefully one of u does
a principal trade is when some dealer is selling to you stock from their inventory vs just acting as an agent and charging a commission to do the trade on your behalf with someone else on the other side. not sure that any particular market condition overall is going to make this better or worse than an agency trade. more depends on who you’re trading with, their inventory, maybe their cost basis on that inventory or desire to get rid of it, how good a client you are in terms of how thin they want to price it, etc.
not sure where this is in the curriculum but a principal trade in the real world is when a firm will take a product (bond, preferred stock usually) and sell it marked up to their clients… this is different than an agency trade, where you are acting in the best interest for the client, or trying to find the best price on their behalf… think GOLDMAN SACHS… trying to earn as much fees from their clients as possible, hahaha.
Ah I see. Thanks guys