Margin Enabled Accounts

[fedgolfer]

Has anyone had success with trading securities on margin? I know the pitfalls and risks, I'd just like to hear actual people tell their postive trade stories, what ticker, amt borrowed, %ages gained, etc.... I'll listen to the bad stories as well. I definitely don't want to get in over my head but if a pull back comes, I feel very comfortable buying the dips right now in certain sectors/funds/stocks.

 

[Bullitt]

I'd like to get involved in trading on margin. I have a good understanding of how it works but don't have the time to monitor the market in the way I feel necessary to be successful in options. Maybe someday....

If I were to take the plunge tomorrow there is no way I'd be shorting stocks in this current market and I'd be looking for underpriced calls expiring at least 6 months from now. Too risky to short a bull market, or at least a market with rising MA's. I wouldn't spend much time trying to play the next buyout target. By time the public finds out a company is a buyout target, the price of it's calls are already ridiculously priced. There are enough Gordon Gekko's out there playing that game, and they are all in the know.

The WSJ had an article about 'Hedging' to cut out the risk. (Hedging is buying Puts in the same stocks you are long). There are two sides to the argument. One says it's like an insurance policy in case things go bad. Kind of like buying car insurance, just write it off as your own personal seatbelt. The other side (which I can't agree with more), is that you are cutting into potential profits by buying puts when the stock flies higher. Why get involved in a stock you feel you have to 'hedge'. Wait for a nice breakout and ride it up.

Good luck with it if you took the plunge, there's lots to be made in the options market with minimal risk.

 

[tsptalk]

One thing that came as a surprise to me when I first traded on margin, was when they asked me to deposit more money when I had a margin call even though I was able to sell enough stock to raise the cash in my account.

In other words, suppose they say you need to deposit $1000 to cover a margin call and you owed $10,000 of stock ABC at the time. Even if you sell $1000 worth of ABC it doesn't satisfy the call. They want the money.

 

[Bullitt]

I can imagine. It just seems to me that all the talk of trying to get the retail investor like me to hedge my bets is a sales pitch. I don't want to be a mini hedge fund! (How about that Bear Sterns mess.)