IB and cheap money

[ofthomas]

Quote from Butterball:

Good idea fundamentally, but on leverage this will end in tears every once in a while. 1999 is a great example.

there are always going to be warning signs before most black swans... the trick to what I said was active management, I didnt say seat back and collect the divs... also, as I was writing it I though also about increasing yield by writing options against the long positions, mostly spreading, to collect premium... not a whole lot, but it would increase the yield on the overall basket...

 

[nokomisjeff]

Quote from osho67:

IB is advertising on tv that central banks are flooding the market with cheap money and IB is providing that cheap money to their clients. If you have a $200,000 portfolio margin account ,they will allow you to use upto $ 1 million.

The question is how to use this facility and use cheap money to make more money than interest paid without blowing your account. All suggestions and comments are welcome.

Thanks.

One can design their own carry trade. Plenty of possibilities, especially in the interest rate arena.

 

[Achill]

Quote from ofthomas:

there are always going to be warning signs before most black swans...

a real disaster always comes out of the blue, except, perhaps, drought reports for grain futures

 

[bln]

Usually it is more capital at disposal you want, not more leverage.

I took a different route and did borrow $54000 in-blanco on a 10 year loan from a bank at 5.6% interest, with 30% interest rate deduction in my country I pay $2016 (effective rate of 3.7%) in interest on the $54000.

Combined with a ~50% annual profit return of trading, it's a very good deal to boost the account using a private bank loan.

 

[luisHK]

Quote from bln:

Usually it is more capital at disposal you want, not more leverage.

I took a different route and did borrow $54000 in-blanco on a 10 year loan from a bank at 5.6% interest, with 30% interest rate deduction in my country I pay $2016 (effective rate of 3.7%) in interest on the $54000.

Combined with a ~50% annual profit return of trading, it's a very good deal to boost the account using a private bank loan.

If you intended to use this capital for trading, loaning from IB would have been cheaper and involve less bureaucracy ( in case you had enough capital upfront to fund the IB account )

 

[DeeDeeTwo]

Quote from Hurricane:

The idea is that you'll purchase dividend paying stocks that yield more than the low interest charged on margin loans at IB. It's great if you can tolerate the risk of declining stock prices caused by a general market correction, dividend cut, etc.

If you have the infrastructure to stay market neutral...
And you have actual trading expertise...
Then it's cheap money, baby.

 

[osho67]

Quote from DeeDeeTwo:

If you have the infrastructure to stay market neutral...
And you have actual trading expertise...
Then it's cheap money, baby. [/QUOT

I was away for some time and did not reply .

1. How to have infrastucture to stay market neutral.

2. I sell options mostly in SPX -either iron condors or put or call vertical spreads.

My buying power is 688000USD
initial margin 34000
maintenance margin 34000
idle cash 130000

At the moment maybe I earn 1-2% a month. I could earn more if I can safely use more cheap money from IB.

I donot know how to do this.

Please advise. Thanks

 

[Daal]

Quote from osho67:

Quote from DeeDeeTwo:

If you have the infrastructure to stay market neutral...
And you have actual trading expertise...
Then it's cheap money, baby. [/QUOT

I was away for some time and did not reply .

1. How to have infrastucture to stay market neutral.

2. I sell options mostly in SPX -either iron condors or put or call vertical spreads.

My buying power is 688000USD
initial margin 34000
maintenance margin 34000
idle cash 130000

At the moment maybe I earn 1-2% a month. I could earn more if I can safely use more cheap money from IB.

I donot know how to do this.

Please advise. Thanks

I don't think one can earn 1-2% a month safely in USD investments no matter how sophisticated the strategy is

 

[osho67]

Quote from Daal:

I don't think one can earn 1-2% a month safely in USD investments no matter how sophisticated the strategy is

yes you may be right. But then the question how to use this money which is available at low interest rate?

 

[Daal]

Quote from osho67:

yes you may be right. But then the question how to use this money which is available at low interest rate?

A mix of stocks, bonds, REITs, gold and cash. Should return about 6-9% a year with similar volatility(7-8%) and a max drawdown of 15%

Me and Cutten wrote a lot about that in my journal Global Macro Trading for a Living