Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

BlueHorseshoe

Bespoke Leverage

Recommended Posts

Hi,

 

I was wondering whether anyone who has a wider knowledge of the derivatives universe than I do could suggest any instrument that offers a moderate amount of leverage?

 

As far as I am aware there is a complete jump from the x3 ETFs to the Futures that are 50:1. The ETFs are obviously geared towards Buy-and-Hold, and the Futures towards very short term traders with smaller accounts or longer term traders with lots of capital.

 

Is there anything in the gap between these?

 

Thanks,

 

BlueHorseshoe

Share this post


Link to post
Share on other sites

Just because the leverage is there does not mean you have to use it, hence anything with 50 to 1 means that its just the maximum.

It is up to you to have determine what leverage you want 'in between' and while providers may offer instruments, I dont know if there is much of a market for them to be offering too many varying structures/products just because.....

Plus dont forget the various futures leverage does change depending on volatility and exchange margins.

Brokers also may offer various leverage in different accounts - sometimes they offer portfolio accounts with more leverage based on offsetting positions (one long one short) or simply cash accounts that need to be fully funded.

Basically - there are already enough options available.

Share this post


Link to post
Share on other sites
Just because the leverage is there does not mean you have to use it, hence anything with 50 to 1 means that its just the maximum.

It is up to you to have determine what leverage you want 'in between' and while providers may offer instruments, I dont know if there is much of a market for them to be offering too many varying structures/products just because.....

Plus dont forget the various futures leverage does change depending on volatility and exchange margins.

Brokers also may offer various leverage in different accounts - sometimes they offer portfolio accounts with more leverage based on offsetting positions (one long one short) or simply cash accounts that need to be fully funded.

Basically - there are already enough options available.

 

Hi SIUYA,

 

Thanks for your reply. I'm confused . . . :confused:

 

I understand that you don't have to use the leverage, but trading an ES contract with a $12.5 tick value means that (as I write) you'd need about $76,000 in the account not to require any leverage. A single share of the SPY ETF (also un-leveraged) is currently about $152. What lies between the two in terms of borrowed funding, anything?

 

Or to put it another way, if my worst drawdown using a 3:1 ETF is 15% and I'm happy to weather a 30% drawdown, how can I get 6:1 leverage? To get that on a single ES contract requires $13,000 deposited, but if I want to hold a portfolio of 10 similar instruments then that's $130,000 - a bit more than I can afford!

 

Any suggestions are much appreciated.

 

BlueHorseshoe

Share this post


Link to post
Share on other sites

maybe i am confused.

 

For the ES - if no leverage is requiring $76,000 in an account BUT you only have to have (I dont trade the ES so i am guessing at $5000).... $5000 per contract so you can have a wide range of leverage options if you have the full $76,000 (between 1 to 76/5=15 contracts)

So you can have anywhere between 1-15 times in this example here.

If you want 6 times, then deposit only $35000 to trade 6 contracts, and leave the rest in a separate bank account maybe?

 

For your example of getting 6:1 from a 3:1 instrument - well either a broker allows you to buy on margin, OR you borrow twice as much externally and deposit twice the amount more money. No different - look at total exposure.

 

If you are then talking about holding 10 similar instruments well then you will effectively be holding 10 times 1 instrument. Thats a lot of leverage - some brokers offer portfolio margin accounts that use offsets, but even then they still usually dont offer too much leverage - they have limits. A 30% drawdown if you are leveraged three times will see your account pretty much gone!

I reckon you are correct that one way of viewing it is how much can you borrow separate to the broker - this is not the easiest way, but a way of looking at it.

 

Whats to stop you borrowing 100k against a house that worth 500k with house equity of 400k then leveraging that up 10 times and trading like you have 1 mil....do you have 10 times leverage, or not???

or do you only have 400k leveraged to 1mil.

With 100k in an account you can probably manage to control that pretty easily. Make 10% a year on a mil, but its 100k on the account - sell that to someone!

 

(I am conservative and look at over all exposure - not just how many contracts can I trade, but everyone is different)

Share this post


Link to post
Share on other sites
maybe i am confused.

 

For the ES - if no leverage is requiring $76,000 in an account BUT you only have to have (I dont trade the ES so i am guessing at $5000).... $5000 per contract so you can have a wide range of leverage options if you have the full $76,000 (between 1 to 76/5=15 contracts)

So you can have anywhere between 1-15 times in this example here.

If you want 6 times, then deposit only $35000 to trade 6 contracts, and leave the rest in a separate bank account maybe?

 

For your example of getting 6:1 from a 3:1 instrument - well either a broker allows you to buy on margin, OR you borrow twice as much externally and deposit twice the amount more money. No different - look at total exposure.

 

If you are then talking about holding 10 similar instruments well then you will effectively be holding 10 times 1 instrument. Thats a lot of leverage - some brokers offer portfolio margin accounts that use offsets, but even then they still usually dont offer too much leverage - they have limits. A 30% drawdown if you are leveraged three times will see your account pretty much gone!

I reckon you are correct that one way of viewing it is how much can you borrow separate to the broker - this is not the easiest way, but a way of looking at it.

 

Whats to stop you borrowing 100k against a house that worth 500k with house equity of 400k then leveraging that up 10 times and trading like you have 1 mil....do you have 10 times leverage, or not???

or do you only have 400k leveraged to 1mil.

With 100k in an account you can probably manage to control that pretty easily. Make 10% a year on a mil, but its 100k on the account - sell that to someone!

 

(I am conservative and look at over all exposure - not just how many contracts can I trade, but everyone is different)

 

Hi SIUYA,

 

I think that's pretty much the answer I was expecting, but it's useful to compare my understanding - leverage is the sort of "boring" thing that books like to skip over.

 

I've been looking at a long-only trend-following type strategy with ETFs that ought to be suitable for a retirement account. The average yearly return in testing is about 8% but the drawdowns are relatively small (and unlike a stock, I can't see an ETF tracking all commodities or world real estate etc falling to zero), so I was wondering whether it is possible to get more juice out of it with a little leverage. But clearly the increased return is going to be hit by the cost of borrowing (wherever that's from).

 

Thanks for your help!

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
Hi SIUYA,

 

I think that's pretty much the answer I was expecting, but it's useful to compare my understanding - leverage is the sort of "boring" thing that books like to skip over.

 

I've been looking at a long-only trend-following type strategy with ETFs that ought to be suitable for a retirement account. The average yearly return in testing is about 8% but the drawdowns are relatively small (and unlike a stock, I can't see an ETF tracking all commodities or world real estate etc falling to zero), so I was wondering whether it is possible to get more juice out of it with a little leverage. But clearly the increased return is going to be hit by the cost of borrowing (wherever that's from).

 

Thanks for your help!

 

BlueHorseshoe

 

The other great miss use of leverage is in quoting returns as well - today i made 500% - tomorrow I lost the lot!

Its boring and skipped over because often its a tough one to explain to people as everyone has their idea about what is safe, whats not, what is leverage, what not.....try telling people how to use lots of leverage using options with little exposure these days - they think you are selling sub prime, even if you are not.

 

The only book I know of that will help you do exactly what you are describing is this one

http://www.amazon.co.uk/Practical-Guide-ETF-Trading-Systems/dp/1906659273

 

(There may be others) I have not read this but have seen enough reviews from people who I know trade like this that it has some relevant information to be worthwhile.

Share this post


Link to post
Share on other sites
The other great miss use of leverage is in quoting returns as well - today i made 500% - tomorrow I lost the lot!

Its boring and skipped over because often its a tough one to explain to people as everyone has their idea about what is safe, whats not, what is leverage, what not.....try telling people how to use lots of leverage using options with little exposure these days - they think you are selling sub prime, even if you are not.

 

The only book I know of that will help you do exactly what you are describing is this one

A Practical Guide to ETF Trading Systems: A systematic approach to trading exchange-traded funds: Amazon.co.uk: Anthony Garner: Books

 

(There may be others) I have not read this but have seen enough reviews from people who I know trade like this that it has some relevant information to be worthwhile.

 

 

 

Thanks for the recommendation - that looks good! Amazon are listing it alongside the Ivy Portfolio which is one of the other good books I've read on this topic.

 

Cheers!

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
Hi,

 

I was wondering whether anyone who has a wider knowledge of the derivatives universe than I do could suggest any instrument that offers a moderate amount of leverage?

 

As far as I am aware there is a complete jump from the x3 ETFs to the Futures that are 50:1. The ETFs are obviously geared towards Buy-and-Hold, and the Futures towards very short term traders with smaller accounts or longer term traders with lots of capital.

 

Is there anything in the gap between these?

 

Thanks,

 

BlueHorseshoe

 

The more is supposed period of holding the asset (and the more is amount of investment) the less is leverage. Standard rule of investment game.

Share this post


Link to post
Share on other sites
The more is supposed period of holding the asset (and the more is amount of investment) the less is leverage. Standard rule of investment game.

 

I guess investing in any avenue is always associated with certain risks so it is good to understand those risks while investing in any where.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • XRP trading: Still Bearish, Ripple May Bounce Up After Testing a Close Support   Ripple (XRP) Price Analysis – April 16 Regardless of the current green market, XRPUSD bearish sentiment moves in a descending channel with a slow price action towards close support. XRPBTC, on the other hand, has further fallen in a new direction. Still, XRP market is falling.   XRP/USD Market Key Levels: Resistance levels: $0.35, $0.37, $0.39 Support levels: $0.30, $0.28, $0.26   Looking at the medium-term chart, Ripple appeared bearish as price trades within a descending channel in since early April. While sitting at the lower channel, XRPUSD market has been consolidating for the past five days as a swing high is expected at $0.35 resistance level. A further push above the mentioned resistance may resume XRP on a bullish trend.   Meanwhile, a possible swing low could plummet price to $0.3 support and beyond. Evidently, the trend lines are still a defensive line for the bulls and the bears.   Viewing the 4-hours RSI, a gradual buying momentum is compounding as it points upward. More importantly, the 4-hours Stochastic RSI pressure nears overbought territory. A slight drop is likely once the indicator reaches the overbought zone. Nevertheless, XRPUSD market is still respecting a descending channel pattern.   XRP/BTC Market Ripple, as a hedge, is on a downtrend trend. The massive sell-off in early April has led the sellers to more significant downward movement as price faces 6000 SAT low.The coin’s value is dramatically depreciating as a new low is yet to be established. The bearish scenario is now revealed to be strong; following a new purple line.   Since the drop, the 4-hours RSI has positioned trading below the 50 level; currently swinging on the oversold line. A clear breach above the purple trend line could fly price to 6600 SAT resistance and above.   The current 4-hours Stochastic RSI faces the oversold zone; showing an ongoing selling pressure. A long position may switch the Oscillator on an upside trend. At the moment, the sellers are gaining control of the market.     Please note: insidebitcoins.com is not a financial advisor. Do your own research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results.   How to trade Bitcoin successfully:  https://insidebitcoins.com/trading/bitcoin       Best cryptos exchanges:  https://insidebitcoins.com/cryptocurrency-exchanges  
    • Hello colleagues I found an automatic strategy that trades on Ichimoku. I got a trial, interesting work with Renko charts ,where only the closing prices of Renko are perceived. The results of my testing on the tick history for the entire period of downloading I apply, the settings were provided by the author of the strategy.  Has anyone else tried it?  What you think ? Their site amntrader.com 
    • Date : 18th April 2019. MACRO EVENTS & NEWS OF 18th April 2019.FX News Today 10-year Treasury yields corrected -2.7 bp to 2.567% and JGB yields are down -1.4 bp at -0.0033%. Asian bonds were generally supported, as stock markets sentiment turned sour again, with South Korean paper underperforming after the BoK left interest rates unchanged, but cut its growth and inflation forecast to 2.5% and 1.1% respectively. Record household debt was one of the factors holding the BoK back from cutting rates for now, and South Korea’s 10-year yield jumped 5.9 bp as the bank tried to calm recession fears. Stock markets generally corrected from the six months high seen yesterday with uninspiring corporate earnings and problems with a new Samsung phone preventing further gains for now. Topix and Nikkei lost -0.96% and -0.80% respectively, after Wall Street closed with slight losses. The Hang Seng is down -0.58%, CSI 300 and Shanghai Comp down -0.44% and -0.39% respectively. The ASX dropped -0.10% and US stock futures are also broadly lower, suggesting ongoing pressure on markets. The front end WTI future meanwhile is trading at USD 63.77 per barrel. Charts of the Day Technician’s Corner EURUSD is still trading around the 1.13 level, and in a channel with key Resistance at 1.1320 and Support at 1.1279. Both are still strong after having bounced yesterday. Indicators are issuing mixed signals. GBPUSD has been stable around the 1.30 level, still unable to break through, fluctuating between the 1.3067-1.3026 Resistance and Support levels. Indicators are giving positive signals. USDJPY started the day below 112.00 mark, as indicators are suggesting a downwards movement. Support remains at 111.80. XAUUSD is trading at year-to-date lows, after breaking through the 1275 Support level. 1270 is the next Support level, with indicators are showing signs of stabilization. Main Macro Events Today EU PMIs (EUR, GMT 08:00) – Manufacturing and Composite PMIs are expected to increase in April, to 47.9 and 51.8 respectively while the Services PMI is forecasted to have remained at 53.3. Retail Sales ex Fuel (GBP, GMT 08:30) – UK Retail Sales ex Fuel are expected to have increased to 4% y/y, compared to 3.8% y/y in March. Retail Sales ex Autos (USD, GMT 12:30) – Retail Sales are expected to have increased to 0.4% in March, up from the negative 0.2% surprise in February. Retail Sales (CAD, GMT 12:30) – Retail Sales are forecasted to have registered an increase in Canada as well, to 0.2% compared to 0.1% in January. Philly Fed Index (USD, GMT 12:30) – Philly Fed index is expected to have eased to 10.3 compared to 13.7 in March. Markit PMIs (USD, GMT 13:45) – Mixed signals are expected from the PMI release, as Manufacturing is expected to have increased to 52.8 from 52.4, while the Services PMI is expected to have declined to 55 from 55.3. Support and ResistanceAlways trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Dr Nektarios Michail Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Hi all does anyone use forex signals here? i want to try some out but not sure if its worth paying for it or just use free ones. anyone got recommendation for signal providers?
    • Hello, Samuel. I am a new member to this forum. Great to be here.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.