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

    • NFLX Netflix stock, with a solid top of range breakout, from Stocks to Watch at https://stockconsultant.com/?NFLX  
    • NFLX Netflix stock, with a solid top of range breakout, from Stocks to Watch at https://stockconsultant.com/?NFLX  
    • It depends. If you have lots of money that you can buy a house without a loan and if you don't have any parents to sponsor then it is a good idea. Otherwise it might be a bad idea depending where in Canada you are heading to. I earned a good middle income in my home country and I migrated to Vancouver 5 years ago at the age of 35. I had to start right from the bottom, lowest of the low.. Now i am finally earning a middle income in Canada but I still cannot afford to buy a one bedroom apartment. Having left behind friends, family and home, most of the times I think it is not worth it.   In short, do not migrate if you already have a good life in your home country and you are happy. Only migrate to Canada if you really have to leave your home country say there is a war or something really bad. Discrimination still exists here and its really tough for newcomers unless you are super rich. Good luck. David Chong, Quora  
    • This is bigger than the internet. Bigger than mobile. Bigger than social media.   While everyone was distracted by stock market fluctuations and political theater…   Most people have NO IDEA what just happened last week with ChatGPT.   Their new memory feature allows ChatGPT to remember EVERYTHING about you across all your conversations.   Think about that for a minute...   While most tech companies have been collecting mere breadcrumbs about you - your likes, your clicks, your browsing history - OpenAI is now collecting the most valuable dataset in human history: your complete psychological profile.   This is Zuckerberg x 5,000.   The more you use ChatGPT, the more it understands you, becoming a supercharged reflection of yourself that improves at an exponential rate.   Are you a regular ChatGPT user?   Consider whether it’s time to turn off the “you can train on my information” feature. To prevent your data from being used for training while still using the memory feature:   Disable Model Training: Navigate to Settings > Data Controls. Toggle off "Improve the model for everyone". Manage Memory Settings: Go to Settings > Personalization > Memory. Here, you can: Turn off memory entirely. Delete specific memories. Use Temporary Chat for sessions that won't be saved or used for training. Now the investment implications…   Why This is Bigger Than You Think Consider this: the relationship between humans and ChatGPT is evolving beyond a mere tool.   People are now treating these AI assistants as friends, confidants, and even romantic partners.   I'm not making this up - there are already documented cases of people ending real human relationships to pursue “connections” with their AI companions.   A viral Instagram meme shows a person going through life with a glowing, featureless humanoid figure - representing ChatGPT - as their companion.   The post has over 1.1 million likes and comments like "Bro ChatGPT is like my best friend. Ain't even ashamed to say it" with 25,000 likes.   But here's where things get really interesting for investors and entrepreneurs...   Three Things to Watch For starters, hardware is the next big thing for the big players.   The iPhone form factor is dead.   It hasn't meaningfully changed in nearly a decade. The next evolution in hardware will be designed specifically to interface with these AI companions.   OpenAI is already working on hardware with Johnny Ive, the legendary designer behind the iPhone and iPod. But you can’t ignore Elon Musk’s edge here.   So what does all of this mean for you?   The companies that control the personal AI relationships will be worth trillions. OpenAI and Elon Musk will have the coziest moats. We're witnessing the birth of a new internet - one built on agents that can communicate with each other across platforms. Google's new agent-to-agent protocol allows AI agents to work together without sharing internal memories or tools. The hardware companies that create the perfect interface for these AI companions will dominate the next decade of technology. And almost nobody is talking about what this means.   My prediction? Within five years, most people will have a personal AI that knows them better than anyone else. And they will interact with it in ways that seem foreign today.   (And, yes, it will almost certainly have dystopian elements.)   In the meantime, the biggest gains won’t come from household names. And, right now, James is seeing a prime opportunity to invest in the most under-the-radar plays in AI…   For dirt cheap. By Chris C. Source: https://altucherconfidential.com/posts/use-chatgpt-protect-yourself-now
    • KBH KB Home stock, nice day and rally off the 50.82 support area, from Stocks to Watch at https://stockconsultant.com/?KBH      
×
×
  • Create New...

Important Information

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