6:1 sounds good, but in practice my long short stock and ETF portfolio starts hitting the IB risk limits a bit over 3:1. I wouldn't expect much more than that, and I'm usually mostly dollar/sector neutral too.
Portfolio Margin
- Thread starter Whistlingleaf
- Start date
I do realize at 6:1 with a 15% loss that I'd be wiped out.
I figure I could go 2-2.5x with high yield instruments like
Prefd stock & Prefd ETF's (6-8%)
mReits & mReit ETFs (paying 10% +)
Muni CEF's (tax effective rates of ~7%)
High Div stocks & Stock Div ETFs (plenty of 4-5% choices like PID)
MLP's 7-10%
I'd keep a good mix of high yield. The problem for high yield is if interest rates go up significantly (which I don't see happening for some years to come) or if there is another market crash.
I'd buy puts to offset the risk in high yielders - in 2011 one of my best trades was 2$ OTM puts on PFF that I bought for like .25 and I sold them for a monstrous gain after the US Govt AAA downgrade.
I'd like to be able to use at least .5 of the money to buy stocks - I am a very good stock picker (which is what I've been doing since 1998 by myself using my OWN money at home.) I've never used margin before cause paying ~8% doesn't make sense.
With another .5 of the money I'd buy inverse ETFs and sell calls on them. I've done extremely well using EDZ and TZA over the past couple years to hedge my stock portfolio.
I am a value stock guy and I am able to pick through the ruins of the 52 week low list, and find the gems. (I know some of you disagree with that style, but I can not bring myself to buy high to sell higher - it just doesn't work for my style of stock picking.)
The % of money invested is approximate and the approximate part is why I created this thread. I'm looking for holes in my plan.
ps I don't sell naked calls or fly spreads - I rarely do credit spreads. I do some debit spreads (not many), and some naked put selling (on stocks I'm willing to own), and of course CC's on stock I do own. I also buy longer dated puts on stocks I think could crash 5-15 small positions).
pps I don't short stocks & I don't day trade. I let inverse ETFs, and put buying protect me. (Anything else I didn't mention I don't do! )
I figure I could go 2-2.5x with high yield instruments like
Prefd stock & Prefd ETF's (6-8%)
mReits & mReit ETFs (paying 10% +)
Muni CEF's (tax effective rates of ~7%)
High Div stocks & Stock Div ETFs (plenty of 4-5% choices like PID)
MLP's 7-10%
I'd keep a good mix of high yield. The problem for high yield is if interest rates go up significantly (which I don't see happening for some years to come) or if there is another market crash.
I'd buy puts to offset the risk in high yielders - in 2011 one of my best trades was 2$ OTM puts on PFF that I bought for like .25 and I sold them for a monstrous gain after the US Govt AAA downgrade.
I'd like to be able to use at least .5 of the money to buy stocks - I am a very good stock picker (which is what I've been doing since 1998 by myself using my OWN money at home.) I've never used margin before cause paying ~8% doesn't make sense.
With another .5 of the money I'd buy inverse ETFs and sell calls on them. I've done extremely well using EDZ and TZA over the past couple years to hedge my stock portfolio.
I am a value stock guy and I am able to pick through the ruins of the 52 week low list, and find the gems. (I know some of you disagree with that style, but I can not bring myself to buy high to sell higher - it just doesn't work for my style of stock picking.)
The % of money invested is approximate and the approximate part is why I created this thread. I'm looking for holes in my plan.
ps I don't sell naked calls or fly spreads - I rarely do credit spreads. I do some debit spreads (not many), and some naked put selling (on stocks I'm willing to own), and of course CC's on stock I do own. I also buy longer dated puts on stocks I think could crash 5-15 small positions).
pps I don't short stocks & I don't day trade. I let inverse ETFs, and put buying protect me. (Anything else I didn't mention I don't do! )
That's not what I meant. What I meant is do you ask for additional margin for concentrated positions in stock?
I think that's fair. And that is what I stated on this thread. Portfolio margin is the margin the clearing firm gives the broker, not the broker the customer. Most brokers have another layer they add on for risk.
This is why I was telling the OP that the idea of simply leveraging straight directional high dividend plays may not be as affective as he thinks.
If a position is 30% of the portfolio then it's not eligible for PM and has a 30% margin req - iirc.
Hey IB rep can you clarify on the prefd bond question ? A guy on a Yahoo board has stated several times his prefd's did not qualify for PM.
In theory could I use 200k to buy 1M of (100 different) prefd bonds (from 100 different companies ?
Just asking in theory as obviously (or not) that would be much risk in one asset type.
I don't know what the disclaimer says for the commercial talking about buying 5%+ dividend stocks (using 200k to buy 1m), but I bet there is one ...
Hey IB rep can you clarify on the prefd bond question ? A guy on a Yahoo board has stated several times his prefd's did not qualify for PM.
In theory could I use 200k to buy 1M of (100 different) prefd bonds (from 100 different companies ?
Just asking in theory as obviously (or not) that would be much risk in one asset type.
I don't know what the disclaimer says for the commercial talking about buying 5%+ dividend stocks (using 200k to buy 1m), but I bet there is one ...
Of course they can do it. I was advising against it. LOL. I can also leverage FX 50 to 1. I advise against that as well.
I was referring to my present portfolio, which has ~40-50 equity positions, long and short, including big ones in some broad ETFs. In my experience over the past year or so, I start hitting the risk limits around 3.25-3.5:1 or so. Maybe it's just my trading style or security selection that shows up as more risky?