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Asset Management - Trade against a Portfolio


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Asset Management - Trade against a Portfolio

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  #1 (permalink)
 E3rc 
Thurmont, MD
 
Experience: Beginner
Platform: NinjaTrader, TOS
Trading: Emini ES
 
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Posts: 41 since Jan 2019
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Still learning and hope the title was not too mis-leading, I have more of a question and thought this thread would be a good place to ask.

Does anyone trade against their portfolio or is that the correct term? Basically I have an existing portfolio of a few stocks and it has some valuation now. I believe the value of what I have will continue to grow and don't want to tap into it. But I would like to use that value and leverage that. I had the idea, but since Googling it seems possible to do. Take out a loan against the value of my portfolio, to increase my position. Using my stocks, to buy more stocks.

Some things I know to keep in mind are the fees and payment of the borrowed funds. Though I read that I can place my portfolio in a Margin account and trade the value that way.

Any insight would be greatly apricated.

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 SMCJB 
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Houston, TX
 
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Dangerous conversation ~ I'd actually advise against leveraging ~ but one of the cheapest ways to get leverage is to buy and hold futures rather stocks themselves. One ES contract currently has a notional value of about $185k but only requires $11k in INITIAL margin. That's 16:1 leverage! (MES is the same but divide by 10). If you go this route though make sure you know what you are doing.

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  #3 (permalink)
 E3rc 
Thurmont, MD
 
Experience: Beginner
Platform: NinjaTrader, TOS
Trading: Emini ES
 
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Posts: 41 since Jan 2019
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Thanks for the advice! Didn't mean to instigate to go into something dangerous. Was looking at what I had and wondered if I should leave it be or use to, if there was a way to use it.

I might have to try and look at getting back into trading ES contracts again. I tried day trading them and was just slowly bleeding myself. Simulated bleeding though, so it was not even the real market. Guessing where a good entry was and trying to hold out for a 4-6 tick return didn't work for me and I could not see what I was missing.

Does the e-mini itself work mulit-day holding or is there something to holding them for multiple days?

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,157 since Dec 2013
Thanks: 3,475 given, 8,234 received


E3rc View Post
Thanks for the advice! Didn't mean to instigate to go into something dangerous. Was looking at what I had and wondered if I should leave it be or use to, if there was a way to use it.

It's a double edged sword. When the market goes up, everybody thinks "WOW I wish I had more in the market, maybe I should borrow against by gains to buy more". The problem is when the market goes down you get wiped out. Between the end of Feb and the end of Mar the S&P500/SPX dropped about 34%. If you had borrowed against just 50% of your position, your losses would be 51% and as such you have been margin called. If you had used max leverage and bought $2 of stock for every $1 you had you would have lost 68% of your $1. And don't think you would have made it all back on the rally. because you would have been margin called and liquidated. So on the rally back you would only have 32c for every $1 you started with.

E3rc View Post
I might have to try and look at getting back into trading ES contracts again. I tried day trading them and was just slowly bleeding myself. Simulated bleeding though, so it was not even the real market. Guessing where a good entry was and trying to hold out for a 4-6 tick return didn't work for me and I could not see what I was missing.

Does the e-mini itself work mulit-day holding or is there something to holding them for multiple days?

I'm not the person to answer that question. But as you have already found out trading isn't easy - if it was everybody would do it.

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unison31
San Diego, California/United States of America
 
 
Posts: 5 since Feb 2021
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If you believe the stocks will go up, but not by a lot, you could sell call options on your stocks (“covered call”). You can sell the far away upside, in exchange for the option premium today.

Because you own the underlying stock, there is less concern about margins.

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