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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures -- Ignore unavailable to you. Want to Upgrade?

To: SE who wrote (25462)	6/17/1999 8:56:00 PM
From: Da Cat in Da Hat	Respond to of 44573

<Of course, this assumes an up market, but over any 10 or 20 year period the market is up an average of 10 to 12% so it is a slam dunk.> No, that is not really so. It is so over the past several years, but any leveraged position is subject to more risk than a Flat Buy. Take Real Estate. If you owned property in Houston and used it before the collapse in prices then you would have a paper loss. If you borrowed money to own that property and rented it out....similar to borrowing money to own a mini....but your income dropped because rentals dropped because value dropped then you are at risk to make up the shortfall. In other words, when the SnP dropped from mid-Summer of '98 through October would you have been more at risk with a 10,000 dollar investment in the Cash Market or a 10,000 dollar leveraged position the Futures market? The Dow Jones alone dropped over 1500 points from High to Low. Roughly 15% of the Index. Your 10K would have had to have been re-infused several times. A Cash position would have had only a paper loss. So here is the question: if you have purchased that Mini in April or June of 1998, then (after suffering the consequences by October) would you have still espoused the principle of averaging down simply because the S&P always goes up? Recall that you will be averaging down, because otherwise your Ten Grand would have been vapor by the following October had you not re-infused money to keep the position afloat.

To: SE who wrote (25462)	6/17/1999 9:52:00 PM
From: Patrick Slevin	Read Replies (1) \| Respond to of 44573

<the thought of the market tanking 100 or 200 spoo points while holding anything long is a bit more than can be imagined..> Funny you should mention that. I heard only this morning about someone who finally covered a Spoo Short for a Loss of roughly a hundred points.....on each of several spoo contracts. Roughly a $25,000 loss on each contract. Makes me wonder....why did he bother to cover now? Must be those devious pit traders....a hundred points ago they had to know where his Stop was.....