Is it possible to get more than usual leverage on stocks and options?

CFerret · Mar 27, 2007

I have developed a combined stocks/options strategy which has very low risk. The only problem is that reward is very low too.

Now the question comes: is it possible to find a brokerage firm where I would be able to trade stocks and sell stock options with more leverage than usual 1/4?

Happy trading!

Janis

crgarcia · Mar 27, 2007

Quote from CFerret:

I have developed a combined stocks/options strategy which has very low risk. The only problem is that reward is very low too.

Now the question comes: is it possible to find a brokerage firm where I would be able to trade stocks and sell stock options with more leverage than usual 1/4?

Happy trading!

Janis

The SEC limits margin (or any borrowed money) to 50% of a trade. There's just no way around it, at least no legal way.

You need more money, your alternatives are:

1. Get more from your daytime job
2. Save
3. Sell something
4. Get other people to invest their money with you
5. Borrow

They are ordered in ascending risk.

CFerret · Mar 28, 2007

Quote from crgarcia:

The SEC limits margin (or any borrowed money) to 50% of a trade. There's just no way around it, at least no legal way.

You need more money, your alternatives are:

1. Get more from your daytime job
2. Save
3. Sell something
4. Get other people to invest their money with you
5. Borrow

They are ordered in ascending risk.

Thanks for advices, but I don't exactly need more money, cause if it is my money % return for me would be the same low.

What I thought about is more leverage (though basically it's the same as your point 5 - borrowing money) to maximize profit.

But if no then no, after all for a living I have futures to trade usual way and will leave this strategy for times when I have enough money to be satisfied with small % return.

atticus · Mar 28, 2007

SEC is tossing out rule-based Reg-T in favor of a risk-based system. So-called "portfolio margining" will be enacted at many brokers on April 2.

Apparently there is PDT applied to all PM accounts under $5mil. Hedged-transactions will be exempt, but that fuzzy-logic headache will be a migraine.

Forming or joining a joint back-office will allow you to receive a true, risk-based haircut. Prime brokerage is another VaR-based possibility which can offer a more aggressive haircut than even the JBO provides.

poohbear · Mar 28, 2007

Quote from CFerret:

Thanks for advices, but I don't exactly need more money, cause if it is my money % return for me would be the same low.

What I thought about is more leverage (though basically it's the same as your point 5 - borrowing money) to maximize profit.

But if no then no, after all for a living I have futures to trade usual way and will leave this strategy for times when I have enough money to be satisfied with small % return.

Just wait for a few months, soom the 50% margin rule will be replace with risk-based margin rule, which should be significantly lower for your strategy. One example: if you buy IBM at 100 and buy an IBM put of 90 as protection, your margin will be calculated as (100 - 90) * 0.15 = 1.5, instead of the 50 dollars now required. plus the price of the put.

From what I read, even margin requirement for the naked long position
will be reduced to 15%, but I am not sure about this.

CFerret · Mar 28, 2007

That's really great news! I also think it's nonsense to demand a full 50% of stock position when it's almost completely hedged!

Well, will wait for this news rules to apply and try it again.

Best wishes
Janis

DeltaSpread · Mar 28, 2007

Quote from CFerret:

I have developed a combined stocks/options strategy which has very low risk. The only problem is that reward is very low too.

Now the question comes: is it possible to find a brokerage firm where I would be able to trade stocks and sell stock options with more leverage than usual 1/4?

Happy trading!

Janis

I am curious to hear about your strategy. Are you opening the trades simultaneously going like long stock and long at the money put or collars or something else?

deviltrader · Mar 28, 2007

Quote from poohbear:

From what I read, even margin requirement for the naked long position
will be reduced to 15%, but I am not sure about this.

For initial maintenance, long options positions are not 15%. It's still 100% of the premium

CFerret · Mar 28, 2007

Quote from DeltaSpread:

I am curious to hear about your strategy. Are you opening the trades simultaneously going like long stock and long at the money put or collars or something else?

Yeah it's basically much like collars (stock is also hedged by synthetic position made of one sold and one bought option), but I just found a criteria to choose stocks which allows to build it with very low risk. Sorry, but I wouldn't like to disclose what this criteria exactly is.

If only leverage in stocks would be like in futures.

Waiting for SEC rules changes...

shelupinin · Mar 28, 2007

Quote from CFerret:

I have developed a combined stocks/options strategy which has very low risk. The only problem is that reward is very low too.

Now the question comes: is it possible to find a brokerage firm where I would be able to trade stocks and sell stock options with more leverage than usual 1/4?

Happy trading!

Janis

Cferret, check PM, I sent a message to you... I can tell you where to get 1:10 and more...