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Strategies & Market Trends : John Pitera's Market Laboratory
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To: The Ox who wrote (18744)2/15/2017 2:20:02 AM
From: Elroy2 Recommendations

Recommended By
Hawkmoon
John Pitera

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Margin works great for day traders and is often a killer for those who don't know what they are doing or for those that haven't considered the true risks involved.

Ya think? Interactive Brokers offers very attractive margin rates, often below 2% per year. I figured if you have an account with XX dollars, you might as well borrow 1/10th of XX and buy a high income payer on margin.

Take that CIM-A preferred, for example. You could borrow 1/10th of your capital and buy CIM-A using margin.

It costs you 2% per year to buy it on margin, it pays you about 8% per year. Free 6% per year.

All you need to worry about then is a margin call. Your initial balance would need to fall tremendously to get called since you've only borrowed 10% of your capital. It could happen, but to me the free money seems worth the risk of the margin call.
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