Tagged: leverage
- This topic has 11 replies, 1 voice, and was last updated 3 months, 2 weeks ago by George Henry.
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Heather CullenKeymaster
Discussion about leverage, borrowing and leveraged ETFs
George HalongtonGuestDear Heather,
Thank you so much for setting up the ITM Chat for us. This ITM chat forum reminds me of twenty years ago in the early 2000s when I was using ICQ to communicate with families and friends over the Internet.
Sincerely,
George Halongton in Los AngelesJim MorrisGuesttest log reply. Got here okay
George HalongtonGuestPlease come up with some topics.
Thank you for your participation.Judd HallGuestThank you for working so hard on a chat venue, Heather! I got here ok with no logon.
Jeff LauniereGuestWorking well
George HalongtonGuestSpeaking of leveraging and borrowing money to invest and trade, it can be risky and it can blow up our accounts. Please read the link below of how Bill Hwang and Archegos Capital lost $20 billion in two days due to margin loan.
George HalongtonGuestAnother story of how Carl Icahn lost $20b using leverage and borrowed margin loan.
George HalongtonGuestSpeaking of leverage and using margin loan,…
Bill Hwang was convicted in July on 10 criminal charges including securities and wire fraud and racketeering conspiracy.
Prosecutors accused him of lying to banks about Archegos’ portfolio so he could borrow money aggressively and make concentrated bets on media and technology stocks such as ViacomCBS (NASDAQ:PARA), through so-called total return swaps.
Hwang amassed $160 billion of exposure to stocks but could not meet margin calls as prices began falling.
This led to Archegos’ demise in March 2021 and caused big losses for banks such as Credit Suisse, now part of UBS, and Nomura Holdings (NYSE:NMR) as various banks unloaded stocks backing Hwang’s swaps.
Hwang did not testify at his two-month trial. He is expected to appeal his conviction.
In requesting that he serve no prison time, Hwang’s lawyers said prosecutors did not and could not prove that Hwang’s alleged lies caused losses for banks. They said Hwang’s age, cardiovascular disease, philanthropy and low risk of recidivism also weighed against putting him behind bars.
Hwang’s co-defendant, former Archegos Chief Financial Officer Patrick Halligan, was convicted at the same trial on three criminal charges. His sentencing is scheduled for Jan. 27.James RoseGuestHey Heather. I just finished reading your book ITM: Bull Market. It’s a fascinating read but not practical. Let me explain. You talk about buying SPY call options at a 50% strike price to the current price of the ETF. I just checked my Schwab account which is one you trade on according to your book and can’t find a strike price lower than $400 for SPY for Sept 30, 2025 when SPY is currently trading at $596 and yes, I did click the all options tab.
Okay, you can scratch that whole paragraph as I decided to check if it were Friday options I need to look at and to my surprise you can go beyond 50% even as low as $150 strike price. So now I’d like to say you may want to let traders know it is Friday options you need to trade.
You did mention in your book about the triple witching on Fridays, but I guess I didn’t realize you meant to only trade Friday options on SPY. I hope others can use this information that may have been thinking the same thing I was that you can’t trade the SPY calls at the prices you quote in the book, but now I know that you can if you trade Friday options.
Okay, that was a bit long-winded but I love your book. I will say that if I hadn’t read a more complicated book on options (I will spare you the agony of naming it here as you need to make money off of your book) years ago I may not have understood the concepts you laid out in your book even though you have greatly simplified it. I guess never having gone to college (which I certainly don’t regret) may be why.
I would recommend your book as a starter options book but it did help me to understand better why 60% of options traders only trade SPY. That is a figure I read somewhere. I hope it is correct.
George HenryGuestThank you, James Rose, for the review.
Warren Buffett says the most dangerous
Weapons of Financial destruction are leverage, liquor, and ladies. President Biden and President Trump don’t drink.George HenryGuestQuotes about Leverage
When you combine ignorance and leverage, you get some pretty interesting results.
Warren Buffett
Activists need to educate themselves about the power of crypto currencies like Bitcoin, invented in 2009, and use crypto to leverage the success of their independent media gains to tip the balance of power away from the troika in ways that could never happen by backing a political candidate.
Max Keiser
A risk-insensitive leverage ratio can be a useful backstop to risk-based capital requirements. But such a ratio can have perverse incentives if it is the binding capital requirement because it treats relatively safe activities, such as central clearing, as equivalent to the most risky activities.
Jerome Powell
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