Questions tagged [leverage]
Leverage is (1) the strategy of borrowing money to increase the potential return of an investment or (2) the amount of debt a firm uses to finance assets.
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Why does the *leverage* of an open-ended option change over time (and so quickly)?
I wonder how the leverage (not the price) of an option changes over time and why so quickly?
Naively speaking, I think of an option as the possibility to buy a stock at a certain price. If an option ...
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What's funny about "He leveraged his @#% deep into soy beans and cocoa futures" in The Jerk (1979)?
Near the end of the comedy The Jerk (1979), a character explains how their family got rich:
Father: All I did was take the money you sent home and embarked on a periodic investment, in a no-load ...
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Are leveraged risk-parity portfolios too good be true?
I was reading the bogleheads forum and it seems that lifecycle investing or leveraging a mixed portfolio of stocks and bonds have popular topics for a while now. Whether you achieve it through box-...
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What's the case against being 1.3x levered in PA if you're in your 20s?
If you're in your late 20s and own a bunch of SPY and diversified stocks, why shouldn't you be 1.3x levered?
2.0x levered seems too aggressive given there are 50% drawdowns to the S&P occasionaly.
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Is betting on "isolated margin" just crazy fun or financial folly
First off, no, I am not trolling, I have actually pondered this question.
Some entities offer in advertising a 10,000x pseudo-leverage on so-called "isolated margin" gaming. Now, I've ...
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Risks of leveraged government bonds
Given that Treasury bills are theoretically assumed to be risk-free investments (not going into whether they really are or not), is there any reason anyone who is planning on keeping the bonds until ...
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If interest rates remain the same, what effect would this have on long term treasuries?
I'm interested in gambling a few thousand on TMF, a triple-leveraged 20+ year bond fund. It tracks the daily returns of the ICE US Treasury 20+ Year Bond Index.
If the Fed neither raises nor lowers ...
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Credit Investing - Best Metric To Compare Spread / Yield Per Unit of Risk
Do people investing in credit (leveraged loans / high yield) that want to compare different industries / different valued businesses ever look at spread per turn of LTV (or the inverse, 1/LTV = asset ...
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Market Line of Credit vs Debt - where to prioritize?
Scenario
I have an etrade Line Of Credit that is leveraged against a brokerage account with rather aggressive nyse etfs (heavy in nasdaq).
Brokerage acct total 330k
LOC total 150k
Rather than pay ...
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Which expiration date and strike price gives the highest delta theta ratio & leverage?
I want to gain exposure to the underlying portfolio (long some stocks, while short some stocks) using options. While I have limited cash for margin, so I have a hard time figuring out the exp date and ...
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Why less leverage is allowed for cryptocurrency Spot trading?
I realized brokers and exchanges allow high leverage for Futures, Options and Forex listings but not so much for spot listings.
For example in Kraken Futures you can get 50x leverage for BTC-Perpetual,...
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How to estimate or determine leverage from strike price on ITM call option?
In this text 4x leverage is mentioned:
"ITM call options have a strike (X) below spot price (S). ITM call
option position is determined by aiming for ~4x leverage. The position
size is set at 33%...
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Will SQQQ go back to 2018 level if QQQ will?
It's a theoretical question, but i am not able to figure it out. Is the relation between SQQQ and QQQ close enough to expect SQQQ go back to where it was at certain point in time, if QQQ goes back to ...
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How to calculate leverage ratio while buying stocks?
I was recently studying 2008 research study by Yale researchers Ian Ayres and Barry J. Nalebuff in which they tell to use 2 to 1 leverage ratio while buying stocks in your young age and gradually ...
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Can I see how a company is using its debt?
How can I understand the way that way a company is using its borrowed funds?
From the balance sheet I can see how much debt the company issued, and how much is paid back. But how can I see if the debt ...
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Is this article correct about leveraged tokens?
In this article, it says the following:
Let's say you're interested in buying Bitcoin, so you purchase $100 of it. After a day, the price has increased by 10%, and your investment is worth $110. But ...
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Is there a better expected return on investment than with ETFs accepting higher variance? If yes, what is the maximum?
My understanding (a bit oversimplified, ignoring inflation etc.) is:
I do nothing with my money: Variance is 0, expected return is 0.
I put my money in ETFs: Variance is positive, expected return ...
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Mid risk inflation hedge for parents retirement with 10/15% of total?
My parents are very conservative and uneducated about money, and they’re keeping most of what will be their retirement (in 3/4 years) in CD. I convinced them this is detrimental due to inflation, but ...
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Why would rising interest rates favor the company with more long-term debt?
I was reading about the debt to equity ratio on Investopedia and in third paragraph under the "Modifications to the Debt-to-Equity (D/E) Ratio" title, it says that:
"If interest rates ...
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Can you get insurance on a leveraged trade
The number one rule in trading is to set a stop loss.
However, unless you are in the top minority of traders, there's a good chance you'll set a stop loss that gets hit even on a winning trade.
I'm ...
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Is using debt into a regular mutual fund different from investing in a leveraged mutual fund?
I was thinking if I should invest in some mutual funds using low-interest rate debt. But then I read this Q&A: Why are daily rebalanced inverse/leveraged ETFs bad for long term investing?
If I ...
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Need help understanding the use of leverage in the stock market
I am a newbie and need help understanding the leverage.
Suppose I have $10k to invest and I decide to invest in 1 stock $XYZ with leverage 1:5 and that I buy 100 shares of this $XYZ at $30 per share. ...
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Why wouldn’t I invest in NYSE:UPRO over something like NYSE:IVV? [duplicate]
I recently came across this 3x leveraged etf of the S&P 500 (NYSE:UPRO). I understand that it’s a risky investment, but I still see way more reason to buy it over any other thing that tracks the S&...
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Where can a normal person get the same leverage Bill Hwang got to buy stocks?
Please don't argue about how risky or irresponsible such a trading strategy is. Many financial publications described that Mr Hwang got a leverage of about 1:5 meaning for each $100 of his own money ...
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Does a one stock leveraged ETF behave like margin?
I am reading about leveraged etfs and I am very confused. It seems they don't always follow the stock prices they should be following and not always doing what they are supposed to do.
For example a ...
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How is the "loan" repaid in a leveraged trade?
I am looking at an example of a leveraged trade here:
The best way to understand leverage is through an example of how it
affects your profit or loss potential. If you trade with no leverage
at all ...
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Does TQQQ get wiped out if it QQQ drops 34%? But what if after I purchase, it first went up 50% and then down 34%? (100 to 150 and then back to 100) [duplicate]
Since TQQQ is 3x the leverage of QQQ, so the conventional wisdom is:
When TQQQ drops 34%, then it is all "wiped out" (meaning a $100 investment will go to $0 now). And TQQQ itself is also ...
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Full investment in Forex with no leverage vs partial investment with high leverage
Assume two investors with $100,000 each, willing to invest them in Forex as scalp.
Investor (a)
Funds a brokerage account with the full $100,000
each trade is executed with the full $100,000.
trades ...
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How to leverage an SP500 strategy?
I have a back tested strategy for daily trades of large cap ETFs. The expected return is 0.30% (60% confidence). The strategy is reliably and is not correlated to market movements (backtested across 2 ...
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Why does the benefit of using margin diminish over time?
When using margin to invest, your exposure is increased but there are fees associated with doing so. The future value of an investment given an annual return rate and margin loan interest rate can be ...
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How can I lever up my index fund returns?
Suppose I am very confident that the 1 year and 5 year returns of an index-tracking ETF will be positive. How can I lever up the returns?
For example, when the ETF increases by 5%, how can I achieve ...
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Why don't index ETFs use leverage to offset their fees and eliminate tracking errors?
If a hypothetical stock index returns 100%, an ETF tracking the index might only return 99% because of ETF fees. This introduces tracking errors. Why don't index ETFs use leverage to offset the fees ...
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Brokers and Negative Balance Protection
I'm a bit confused about the Negative Balance Protection offered by many brokers, specially when they allow leverage, and a lot of leverage (common in brokers with CFDs).
How are they protecting ...
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How can "regular people" get 700k in debt on RobinHood
There was recently a story of a suicide of a trader(20 y old student) that accumulated 700k of losses.
I am not asking here about a morality of this setup, I am just curious of the mechanisms...
Why ...
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How does one lose money when reasonably buying with leverage?
I'm one of the newbie retail investors that this guy (and presumably a lot of his colleagues) seem to hate.
Ironically, my biggest loss was from agreeing with specialists that the recent rally is ...
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What are the pros and cons of trading in low leverage high volatile markets over high leverage low volatile markets
I am comparing traditional stock markets with the Forex market here.
I have noticed stock market have relatively limited leverage but have more change % as well as as volatility. On the other hand, 1%...
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What was Graham thinking of leverage? Is it in accordance with the defensive investor profile?
As I am saving money from my first time I want to follow the defensive investor profile Graham defined in the Intelligent investor with the objective of doubling the amount invested before withdrawing ...
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Why do banks agree to finance Private Equity buyouts?
Private Equity buyouts are sometimes described as follows:
PE buys a company using huge loans, secured with the assets of that same company. They then pay themselves (who are now the new owners) ...
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How to calculate proceeds when buying stock with borrowed money?
Suppose I borrow money and use it to buy stock, expecting the stock price to raise short-term.
HMRC provides clear instructions on futures and contracts-for-difference (CFDs), but none on custom ...
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Who is your counterparty when longing / shorting on leverage?
I understand the basic cases of how longing/shorting works and how two parties with opposing price predictions can make a derivative contract to settle in cash when the price of an asset goes up or ...
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Can you do leverage trading with both a short and long position on the same stock?
I'm wondering if you can you do leverage trading with both a short and long position on the same stock or if it's stupid.
If I understand correctly once you get to your stoploss you lose everything ...
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Why does the futures market use stupendously high leverage?
From Investopedia:
The futures markets typically use high leverage. Futures contracts may only require a deposit of a fraction of the contract amount with a broker.
I know how margin trading works,...
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Have leveraged short ETFs lost equity?
I would like to take some hands-off, leveraged short positions of the global market, or portions thereof.
There a many leveraged short ETFs. On looking at them, unsurprisingly the value of them has ...
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How to safely start entering leveraged positions in stocks?
I am new to trading and I want to learn how leverage works.
I have been buying and selling underlying stocks with DeGiro for a year now [playing it safe and been lucky till now] and I would like to ...
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Leveraged NASDAQ ETF outperforms 3x non leveraged NASDAQ ETF?
I was reading article an about leveraged ETFs on seekingalpha and found this:
High-beta strategies have the potential to help you achieve your goals. Of particular interest is the fact that having 33 ...
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Where can I invest into S&P500 without leverage
I was willing to invest into S&P500 index but cannot find any platform without a huge leverage (for example iqOption, plus500 have leverage of 1:20 which makes usually safe investment become ...
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Leveraging macroeconomic trends
Let's say I have strong reasons to believe that an economic sector of a particular country will increase/decrease in the next few years.
How can I leverage this information financially?
Should I ...
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Does daily leverage certificate value decrease over time?
I see that there is a type of investment called Daily Leverage Certificate which allows investor to buy a certificate tracking an index with multiple leverage factor. Meaning to say that if the index ...
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What prevents leveraged ETFs from exceeding their underlying value in times of high demand?
For example, today SPY decreased -3.17% and therefore the 3x Bear SPY ETF, SPXS, increased 9.85% - roughly equivalent to 300% inverse (310%).
What if you somehow foresaw the decrease early in the ...
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Does this derivative contract between friends make sense?
Suppose there is someone with an investment horizon of 10 years (Retired Bob), and another person with an investment horizon of 30 years (Hungry Joe). Retired Bob doesn't want to take risk, but Hungry ...
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