Frank,
Each to his own, of course. There's nothing wrong with working 0% margin. My point is that if you do margin, you have to be aware of the downside risks. If you bought MU on margin at 90 and had bought puts to protect them, you'd not have lost as much as quickly when MU tanked.
To say that buying 100 MSFT with $10000 cash is a wise investment, but to buy 200 MSFT with $10000 is a complete gamble; that's just not true. There are more risks in the latter case, but margin has advantages; you just have to realize what your exposure is. Suffice it to say, I have some INTC and MSFT right now, on margin, and a nice collection of April Puts. If nothing corrects, my insurance premium comes out of the run up (not to mention a tax deductible loss!). If the market tanks, I lose only 20-30% of what I would have lost without the options. I'm paying someone else to take the gamble (that interest rates won't go up).
Anyway, I do my thing, you do yours, we're both making money, right?
Richard |
