Hi there analysts, IB fellas, prospective ones or I would rather call fat fellas. A little help is needed here from a blue collar dude aka borderline OWS junkie. I would have joined them were it not for my libertarian principles.
Anyways back to the topic 101. I was hoping to actually play the market both long and short positions using 25k I have stashed away somewhere?
I have done my own research as a layman and feel I am on the ballpark on this one.
Ideally how should I position this. Was hoping to bank on options instead or direct long,short positions…
Say if I were to drop the whole 25k on call options, how can I maximise my exposure. In other words assuming my bet is right, I believe I can increase my returns ten folks…
Example say I were to buy JPM calls or BAC how should I go about buying them. What is the optimum and ideal call strikes I should be aiming for.
Anyway I can either increase my bet or die faster… Is 500:1 leverage possible for a poor blue collar kiddo like me. Any reliable brokerage firm offering a such with a minimal 25k account.
Much appreciated fellas and have a molly jolly tuesday. A cold guinness for all. Cheers
Sure, just buy out-of-the-money call options. March 40 JPM calls are about $0.30 so with 25k you can buy about 800. If JPM is trading in the mid 40s around St. Paddy’s day you’ll be a very happy man; although, in all likelihood you’ll lose your entire investment.
Given the volatility in the market you’ll probably die soon with such leverage, but that’s my opinion and I’m not a trader. If you tell me you want to play long short strategies, I am assuming you are probably not looking at momentum plays, and if you’re not you need some staying power, otherwise you’ll get thrown out of your positions before you have a chance of winning.
TokenFatDude, Couldn’t have said it better than FrankArabia: Youre nuts! I dont think any legitimate place would give you exposure of $12.5m for equity of 25k. Even if in some parallel universe brokers did participate in such stupidity I would strongly advise you against it. First, If your idea is so good you don’t need 500:1 leverage. Second, LTCM’s leverage was 250:1 and they employed purely arbitrage trading strategies. A directional bet with that kind of leverage wipe out 5 times your equity for every 1% the market went against you. I hope that’s enough logic to dissuade you from such a risky bet.
So, you want to take $25k you’ve saved up, leverage it to the hilt, and spend it all on options? The odds of you going completely bankrupt in the first few days are about 95%. Hell, you may cause another financial crisis. On the other hand, I amazed you can sit down with balls that big. I say go for it.
You have to realize that even if you a highly levered strategy involving derivatives, any moves (variation) at all (and I mean ANY) going the other way of your position will cause large margin calls that will immediately wipe out your position if you’re unable to meet them. If you’re making a bet with any sort of time horizon, you need to account for and expect a period of negative price moves between a buy in and the point at which you are hopefully right and sell out. Having a liquidity cushion such as I’m recommending is in some ways the opposite of leverage, and something you should consider.
If I was a “blue collar” dude (or any dude for that matter with $25 grand in spare cash sitting around I’d either invest it WISELY or take 6-8 months off to go travel staying at affordable local hotels. Really anything beats throwing it rashly into a game you’re still new to.
I don’t know. I think I disagree with most of you folks. If I can find someone that will give me 500:1 leverage on a strategy like option buying, I am selling my car and my cat to do it. Invest $200,000. have them put up $100M. Buy ATM MA puts. Either I’m rich or the idiot who lent me $100M is poor.
Fair enough JDV, but that’s assuming equal likelihood of payoff outcomes. Because of the high leverage and expected variance, the probability of him succeeding is very very small. At this point it then becomes a question of why not just go to Vegas and play roulette if you want the potential of low probability high payout gambles. Also, it needs to be taken into consideration whether $25k is a lot or not a lot to this guy. That is definitely a factor.
Yep, at which point you get stopped out and the casino (broker) walks home with their initial investment. Gambling too highly levered (too large of hands vs total buy in) is often one of the biggest mistakes made in Vegas.
Everyone knows this guy is trolling right? He set up a throwaway account to post this. Sometimes I wonder about this board. Activity has fallen off a cliff. Maybe another thread on gold just spur some debate is in order. Or, maybe one of those “rate the avatar above you” threads. That seems to be where we’re headed.
Leverage denotes borrowed money; NO retail brokerage will lend you money at 500:1 to buy options. That said, you can make 500 times your initial investment using options here is an example below: For example, the $31 DEC DOW(chemical company) call options are trading for $0.03; Therefore, if you buy 2,500 option positions it will cost you $7,500 including commission but if DOW goes to $35(it’s trading at $25 right now; so that’s a 40% increase), you will make over $900,000. IMO, this kind of bet is perfect is you have inside information that has not been disseminated, but will be announced, regarding a stock(which is illegal).
This can’t be serious, right? It is true that FX margin allows substantially higher leverage than is possible with other securities. So a broker might be advertising that when they talk about 500:1 leverage, which to me sounds like an ad for “free cyanide, with every offer.” Every trade needs to be entered with the idea that “I think I’m right, but I could be wrong; and I need to have an escape plan for ‘what if I’m wrong.’” This plan would include a pre-defined set of events that would say “ok, I’m wrong” and a set of strategies for handling it, which is usually “exit my position,” but can sometimes be “reduce the position” or “change to another asset,” or “hedge with another instrument.” If you are trading because you have to make enough to pay your rent, you will almost certainly fail. That situation screws with your emotions in such a way that you will make bad decisions. You need to be able to treat your capital as something that you nurture like a garden, but won’t starve if it goes kaput. Only then do you have even a chance of treating things with the level head that is required. There are so many things wrong with the original post that I can only hope they’re trolling. Otherwise, welcome to the jungle, young padawan!