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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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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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115 views

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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3answers
239 views

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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1answer
161 views

Details related to Upstox margin calculation

On the right is the screenshot of Upstox's span calculator for IDEA: Upstox's margin calculator I just want to confirm if I am understanding this right or not? So, according to my understanding, it ...
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135 views

Considering leverage [closed]

I started investing two years ago. Currently my situation is as follows: I earn 1700 € per month and manage to save 1200. To be Conservative and as rents are going up in my country, we can assume ...
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9answers
19k views

How is early-and-often home buying as “get rich” advice feasible?

I am being told by this guy that the following is a guaranteed-to-work way to become rich and retire early. He says to start early. 20 years, or near that age. Buy 1 house a year. Rent it out. Start ...
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1answer
108 views

What is LEVERAGE SHARES PUBLIC LIMITED COMPANY LEVERAGE SHARES 2X FACEBOOK ETP (FB2)

I was looking into buying FB shares and discovered something called 'LEVERAGE SHARES PUBLIC LIMITED COMPANY LEVERAGE SHARES 2X FACEBOOK ETP (FB2)' . What is this and how does it relate to the usual FB ...
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286 views

Is possible to use this strategy to manipulate the market and take advantage from leverage? [closed]

I will explain the scenario: Open Long position with leverage on broker1 with CFD ($1M x10 for example, and because is CFD it does not affect the real price) Buy the real stock at market price on ...
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6k views

Why cannot LLCs be used to negate increased risks when doing leveraged investments?

Let's say that I am confident that some investment will grow by 15% per year, and that I have 10K to invest, and I'd like to use leverage to invest 100K. What stops me from creating an LLC with 10K ...
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2answers
318 views

“Leverage” vs “buy a modest house”

I am in what I suspect is not a particularly unique situation, but still doesn't fit into the standard model (I think). I work and live in an area that has not seen negative rel-estate price changes ...
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3answers
175 views

By pass the 100% limit in shorting: Capitalising on a Market Crash

I want to short a cryptocurrency that is highly overvalued. Let say its current value as of now is $10,000 , my intuition say that sometime next year like Feb its going to fall significantly to about $...
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1answer
123 views

Zero cash buying power, what would margin maintenance be?

I have $0 cash buying power but have loads of margin buying power because of my current marginable securities. If I make a margin trade for any amount does that mean I have 0% equity in that position ...
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2answers
1k views

Financial leverage - why am I only responsible for my securities?

I'm a newbie in trading and I've been reading about the financial leverage mechanism when trading CFDs. From what I got it works by letting me trade on margin by moving greater amount of money lent by ...
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1answer
435 views

Leveraged positions with interest rate swaps [closed]

Why is a position in an interest swap a leveraged position (for instance when considering a plain vanilla swap, i.e. fixed for floating swap)?
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1answer
63 views

Interest payments for leveraged positions

As a novice investor, I am still struggling to understand some of the mechanics involved in leveraged positions. When I take a long position with a leverage of 1.5 over several month, is the interest ...
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1answer
159 views

What makes one smart and/or successful in investing? [closed]

Pretty broad question, but I hear these things thrown around a lot and was wondering if such a canonical or straightforward definition exists. To make this simple: What makes an investor "smart" as ...
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0answers
58 views

Are Credit Default Swaps an adequate hedge for leveraged bond portfolio?

A hedge is supposed to be a cheaper bet that pays off if a primary bet isn't profitable. With a leveraged bond portfolio, my understanding is that a credit default swap (CDS) can help hedge, but I'm ...
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2answers
224 views

Are there good investment options to pay off student loans?

I just recently graduated uni and I'm hoping to try and apply what I learned in my finance classes to paying off my student debt. The biggest surprise to me during my studies was the realization that ...
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10answers
8k views

Is CFD trading a good idea?

I am planning on speculating in forex and possibly indices, however due to my lack of experience I don't want to invest too much. With £100, you can't really get very far with indices, and profit ...
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7answers
3k views

Is there any instance where less leverage will get you a better return on a rental property?

The larger a mortgage I have on a property the less money I have to put up front so my initial cash flow is worse but my cap rate and overall return is better. However the larger my down payment the ...
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1answer
48 views

Leveraged Trade program

I was contacted by an acquaintance and introduced to a leveraged/trade platform program where I would put 10% (of what I needed) into a personal account with Citi Bank in my name only. In 90 days, I ...
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1answer
197 views

Is there a way to see how much leverage a mutual fund or ETF is using to generate a return

I am taking over some of my IRA and 401K money and I want to move towards a more value based approach with an emphasis on dividends. One thing I have learned on this quest is that most options have ...
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3answers
395 views

Putting borrowed money into an SIPP

I am employed and have about three years' salary in a stocks-and-shares ISA (an investment from which dividend income and capital gains are tax-free). I generally save £600 a month. The bank ...
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1answer
184 views

How to find leverage for futures [closed]

In my understanding, leverage is the risk we take for our investment. That is highly leveraged instruments have high risk and high potential reward. But how can we calculate leverage of futures? ...
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2answers
101 views

Figuring flood insurance into financing cost

I've been keeping the mortgage on my house, even though I have the savings to pay it off, because it's at 3.8% and my investments are expected to return at least twice that. However: I'm in a flood-...
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2answers
310 views

Investing using leverage

As a trader, I understand the premise of Leverage and Margined accounts. I understand that it is almost necessary to use leverage in order to make money from trading. But the question is about ...
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3answers
242 views

Can I trade options purely as a leveraged product?

Following the Three Ways to Buy Options article from NASDAQ, there are supposedly three different ways to trade options after buying them: Exercise the option at maturity Exercise the option before ...
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4answers
190 views

Is there an academic framework for deciding when to sell in-the-money call options?

I've been buying 1-year at-the-money call options on various stocks as a way to increase my leverage. I almost never regret selling them once they are up 40%. There are many times when they've been ...
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5answers
2k views

Pros/cons of borrowing money using a mortgage loan and investing it in a low-fee index fund?

I'm wondering if this investment strategy would work: I get a mortgage loan for $300K at a 3% rate (realistic for current 5-year fixed mortgage rates here in Canada). I invest the proceeds in a low-...
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1answer
276 views

How can I get leveraged money

lets say I have 25k USD and I have found a good opportunity. how can I convert that 25k to 250k. This could be any investment not just Forex or ETF.
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6answers
12k views

Is CFD a viable option for long-term trading?

Something really does seem seedy that if I invest $2500, that I'll make above 50k if the stock doubles. Is it really that easy? Looking at the opposite side, yes my investment can vanish from just a ...
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1answer
6k views

Calculating the profit earned from a leveraged futures contract

How do we calculate the profit/loss of Futures contract? For example, If I had a Futures contract that had $10 000 as the underlying, it had $1000 margin and the Futures contract itself was worth $3. ...
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5answers
1k views

Can you beat the market by investing in double long ETFs? [duplicate]

Certain ETFs double the daily rate of return of certain indices. Can you use such ETFs to beat the market (not on a risk-adjusted basis, just in terms of pure returns)? I have read that When ...
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5answers
6k views

Are Forex traders forced to use leverage?

I heard today that all Forex traders are forced by the Forex companies to use large leverages. Is this true? I understand this might be good for some companies, but possibly bad for the traders. How ...
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2answers
399 views

How does leverage work?

Can someone give (or point me to) a concrete example of how leverage trading works? Let's say in Forex. I have $1000, and I want to short/long the Euro at a 1:100 leverage. How much do I stand to ...
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3answers
7k views

Definitions of leverage and of leverage factor

From investopedia Here's an example of a "yen carry trade": a trader borrows 1,000 Japanese yen from a Japanese bank, converts the funds into U.S. dollars and buys a bond for the equivalent ...
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2answers
1k views

What is volatility drag?

Given a leverage portfolio, what does the term volatility drag mean? And how does it affect the value of the portfolio?
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7answers
3k views

Investing in a leveraged index ETF for retirement. Risky?

I'm 23, and in addition to my 401k at work, I have a few thousand saved in an IRA. Right now I have it sitting in Treasurys earning around 3%. Over the past 50 years the S&P has averaged around ...
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4answers
859 views

Is the gold and silver in the GLD and SLV ETFs leveraged?

There are various blogs and videos that indicate that the gold that GLD holds (via HSBC) and the silver that SLV holds (via JP Morgan) is leveraged 50 to 1 or 100 to 1. For me there are some ...
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1answer
109 views

Protecting Gains: Buying a Put vs. Leveraged Bear Market vs. Liquidating Long Positions?

I am a long investor looking to protect some of my gains in the recent market rally. What are my options? I know of 3 possibilities: Buying a Put (in say SPY) Leveraged Bear Market (say QID) ...
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3answers
699 views

High Leverage Inflation Hedges for Personal Investors

I'm looking for an investment that will appreciate against inflation in the US Dollar. I want to be leveraged 10:1 or more. For the sake of argument, let's say I have only $10,000 to invest, which ...
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1answer
414 views

What are the risks associated with leveraged trading accounts?

What is a leveraged account and why is it mandatory on some trading platforms to operate through leverage? Also, what are the associated risks? Could I end up losing more money than I invested?