IB and cheap money

osho67 · Dec 20, 2012

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.

Hurricane · Dec 20, 2012

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.

zdreg · Dec 20, 2012

it works till it doesn't works. since it is a basket the game might last awhile.

justrading · Dec 20, 2012

When someone says "I'll lend you cheap money so that you can make a profit on a sure thing", the logical question I have is "if it's that great why don't you do it yourself and take all the profit....."

2rosy · Dec 20, 2012

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.

what does "they will allow you to use upto $ 1 million" mean? Can I use that 1 million to buy a parking lot?

ktm · Dec 20, 2012

Quote from 2rosy:

what does "they will allow you to use upto $ 1 million" mean? Can I use that 1 million to buy a parking lot?

It's effectively extra buying power added to your account.

Trvlwanderer · Dec 20, 2012

Buy 1 million in OIA before ex-d, sell after. Dividends are over 5% annual, paid monthly.

Many more just like it.

Traveler · Dec 20, 2012

No free lunch in the carry trade.

hajimow · Dec 20, 2012

Quote from justrading:

When someone says "I'll lend you cheap money so that you can make a profit on a sure thing", the logical question I have is "if it's that great why don't you do it yourself and take all the profit....."

Perfect

oldtime · Dec 20, 2012

Quote from hajimow:

Perfect

kind of small minded man. That's not how it works. If you have so much money, you don't need me. If you don't you do. I don't make money by taking risks. That's for borrowers. I make money by loaning it to risk takers. I got the money, you got the collateral, let's make a deal. Every now and then one of you makes money. But we almost always do. Before you start finding fault with portfolio margin, you ought to first find fault with pawn shops. Then at least maybe you will understand how the deal works.