IB and cheap money

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.
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Yeah and they'll take away the punch bowl right when you need it the most.

Weren't you awake in late 2008?

Access to capital dries up precisely when you need it the most.
 
Well 6:1 on LQD, JNK, HYG, etc would've been a home run trade in 2012, that's for sure.

I doubt we'll see such a smooth ride up for high-yield corporate like we just saw since Oct '11. These ETFs are getting awfully rich..
 
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.
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flipancy: (which means flip flop) or was it flip chart ? Dunno. Oldtime, never invite me to your @#*# birthday party again.

Ok where was I ? Oh, right, I was about to flip my chart for your visual edification: .....

......so you are about to see on my flip chart the stock plots presented on it of a paired trade: Go long the dividend paying stock as you suggested, Hurricane, and do an appropriately paired short on a low- or non- paying dividend stock. Works to the advantage of your first statement, Hurricane, and neutralizes the risk of declining stock prices by a "general market correction" as you are fearful of in your second statement.

Or flip flop it: Go short the most likely prospect for a declining stock or laggard in an up market to protect the long, dividend-paying stock from a "general market correction."

Now isn't that more important than the answer to the question about how to find world peace ?

Hmmm.....I lost my flip chart. How long do I have to find it ? I don't recall what pair that was. Will the deal expire from the brokerage before I find the flip chart ? ..... before I remember the pair ? ....before I recover ?

Is there still time to be nominated for the best post of the year ? Where is that thread ?

When is your next party, Oldtime ?
 
Birthday parties? Oh, I'll still have one every year. But I'm kind of cutting back. We probably won't have as many in the future as we had in the past.
 
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.
More...

Need to control downside risk.

Possibly a collar trade: long stock, short call, long put + dividends.

This can work nicely for long term leveraged trades on the right stocks.
 
Quote from oldtime:

Birthday parties? Oh, I'll still have one every year. But I'm kind of cutting back. We probably won't have as many in the future as we had in the past.
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LOL. I was bad at arithmetic, but I think I got that one figured out ! You're funny.

My question was rhetorical as I was trying to be funny closing my last post. I entered into the beginning of that post with hangover blues and swearing to stay away from yours.
 
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.
More...

sadly, no portfolio margin allowed on IRA accounts.... in any event, here is what I would do... if they would allow me on the IRA account...

IB pm allows for 6:1 leverage basically... so leveraging to 1MM is not bad, it is "conservative" to some extent and should allow for some volatility on the basket... about 15% or so... I would focus on trading pairs, and I would try to find pairs of div paying stocks against non-div paying stocks and short the ones not paying them clearly.... I would try my best to keep my basket as neutral as possible and diversified properly across multiple non-correlated sectors, which means I would manage the positions actively as I would identify new candidates, retire others, close trades, etc ... it should be a decent yield at least because of the leverage... ideally, the whole thing would be on a spreadsheet that would just send the orders and manage the positions... it wont make you "rich" but it will be a good return at least...
 
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....."
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You can apply that same logic to people selling indicators, too.

If that indicator really worked, you wouldn't need to sell it for $197 to random people on the internet :D
 
Quote from ofthomas:

pairs of div paying stocks against non-div paying stocks and short the ones not paying them
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Good idea fundamentally, but on leverage this will end in tears every once in a while. 1999 is a great example.
 
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