If the market was strong the trade probably wouldn't be available.
Many people that hear the word margin, think those with some must be crazy. I don't think margin is a four letter word if used prudently. The old adage, if you can't afford to lose, you can't afford to win applies. As you know, being debt free has its privileges. :)
Since I generally stay fully invested, if I see a trade I want to take, I need to do it on margin unless I have the cash built up. In this case, round figures, I had 5K and borrowed 10K. If I hold this position for a year it will cost me 1k+ in interest. I don't really want the dividend, taxable account, and it is not qualified.
Whether the market is going up or down, anything can happen to any particular stock. If we find out the CEO syphoned off all the assets I guess I could be out 15K. To me, odds are that I can sell at $5.70+ in the next month at most, netting $1200 on a 10k loan. We'll see.
There are no guarantees in life or the market, but I think having to use margin to take a trade makes me look long and hard before trading. |
