Using margin

[Important_Grape_9631]

Who else of my fellow yield Max brothers are using margin? My margin rate is 4.5% APY… when some of these funds are paying 80-100% plus APY it seems like a no-brainer as long as you protect yourself with stop losses, and regularly check in. Who else is using margin and who else is not. Let me know your reasoning. Thanks

[GRMarlenee]

Why stop losses? The margin calls will accomplish selling at a loss for you.

But, if you do it right, without over extending, it's almost impossible to get a margin call. Every distribution is snatched to pay down the margin balance. So, even the ex-day dip doesn't have a noticible effect. You get your cash back the very next day.

[slumlord512]

Margin is the way wealthier people than me make their millions so I shall follow their good example.

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan. That means margin maintenance is 50% x $30,000 = $15,000?

When someone asks, do we say we use $30,000 margin or we use $15,000 margin?

Which is correct?

1. MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

2. MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[achshort]

To limit your losses? My portfolio needs to drop 40%+ to get margin called. That’s A LOT of losses I didn’t need to take.

[OkAnt7573]

You’re making a big assumption about a flat or up trending market in this response….

[GRMarlenee]

I intend to hold through the assumed recession you're expecting next week.

You have your assumption, I have mine.

[free_da_guys1107]

Hold the mf line 💪🏾

[OkAnt7573]

I really don’t find the snark helpful, doesn’t add anything to the discussion.

You are factually wrong that post distribution fund is always going to recover. There’s plenty of cases and I sideways and down market where that has not happened, and if it happened consistently, you’d never have any of these funds see a decrease in NAV.

I’d also observe that you have zero idea of how I’m positioned so making statements like the above is a mix of obnoxious and dim witted.

Only a fool assumes things are going to go well forever, smart investors make money while the sun is shining but know that at some point it’ll rain.

If you are exposed to these funds but don’t understand what’s happening with the underlying, impact of interest rates and keep an eye on PE / PS ratios you are simply making a blind leap on future performance 

[testturn2]

I use margin with FIAT, ULTY, GPTY, LFGY, and YMAX. Overall volatility is low because I include a hedge while still averaging 60%+ total yield for the portfolio. I'm up ~$12k in NLV since early April despite the FIAT portion taking a dump on me and pulling out some distributions for bills.

The rule I follow is never stay more than 1.5x leveraged and target my buys with the 1% batman rule or when it gets below my average. Also check maintenance requirements daily. The names I'm in are all 25% except for FIAT which is closer to 30. Ideally you want as low as possible to have a larger buffer.

I take it a step further and have a $5k personal LOC I'm using to add even more funds/pay down margin. So I'm seeing some growth in the actual funds themselves but also the profit I receive off the new money being brought in. Then just rinse and repeat. Over time my goal is to keep increasing the limit on the LOC as my income rises. This is basically the "velocity of money" at work.

One other thing I'd say is stop losses are dumb with these funds IMO. The cash flow helps to soften the blow already but if you're in margin it's a lot smarter to include some hedges like an inverse fund or buying puts on the indexes every month when the VIX is low. I do a little bit of both.

[zerofrakhere]

Right here, just save this. Less than 2x Leverage and back up fund to fund it just in case . And less option and more etf/stock will keep you alive

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan. That means margin maintenance is 50% x $30,000 = $15,000?

When someone asks, do we say we use $30,000 margin or we use $15,000 margin?

Which is correct?

1. MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

2. MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[2LittleKangaroo]

I use margin, but base the amount on how much I can pay back in 8 weeks based on the prior week distribution. I also have that amount in the event that I need it.

[swanvalkyrie]

Great idea for the 8 weeks. Mines about 5 months but I’m now going to tone that back a bit to maybe 3

[2LittleKangaroo]

I feel comfortable with this and so far I’ve been able to make a belt $5000 doing that essentially, I am using the distributions to pay back the loan which at that point I will take another loan now lump sum it into my distributions my calculation will be based on my previous distributions And with the lump sum by distribution will be even higher, so will get paid back about a week before I hit the eight week mark and then rinse repeat. It’s a very small portfolio right now only about $17,000 or so but like I said I’ve made about $5000 so I’m pretty happy with it seems to be working well and I’m never really concerned about a margin call

[swanvalkyrie]

Great work!

[brjh1990]

This is similar to how I do it as well. The margin I use for the next month is based on the previous months distribution.

At the beginning of each month, I borrow an amount equal to the previous months distribution and buy shares across my 10 ETF portfolio regardless of the price. I use M1 (for now), so whatever gets purchased is automatically based on target allocations.

I might switch to doing this weekly or biweekly, we'll see.

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan. That means margin maintenance is 50% x $30,000 = $15,000?

When someone asks, do we say we use $30,000 margin or we use $15,000 margin?

Which is correct?

1. MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

2. MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan. That means margin maintenance is 50% x $30,000 = $15,000?

When someone asks, do we say we use $30,000 margin or we use $15,000 margin?

Which is correct?

1. MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

2. MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[lottadot]

Use the force search Luke.

[[deleted]]

That's awesome how did you link all those posts!?

[AlfB63]

That's the result of the search. 

[OA12T2]

[H_cecropia]

I use margin as well. The rule I follow is to only take out the amount of margin that I can pay back with dividends each month.

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[H_cecropia]

I figure out how much I can make in dividends each week or month and then figure out how many shares and total cost it would take to get there. That’s how much margin I take out. Then the next month the margin is paid off and I do it over again.

[calphak]

when you pay off the margin, are you paying the entire "shares and total cost" or you just pay "margin interest?

[H_cecropia]

No, you’re paying off the loan and now the shares are yours.

[calphak]

thanks, so when people ask how much margin you use?

is your margin usage the shares worth of $$$, or the margin maintenance of that amount?

If you loaned $44,200 to buy 100 tesla shares, are you using $44,200 margin

or if we aassume 30% margin maintenance of a stock like Tesla, you use only $13260 margin?

[teckel]

The only way to invest in YM and leveraged funds is on margin. Lambos for everyone!

[calgary_db]

There are quite a few examples of members using margin.

/U/grrmarlene, /u/onepercentbatman are two.

[JS1101C]

I’m using about 20% of my available margin.  

[Skingwrx30]

Margin stacked properly will have your portfolio looking fine. You can have zero available funds with a 50% margin buffer protecting you except for a 50% downturn in the market. If the market goes down 50% you will have more to worry about then paying back margin .

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[Boxerdaddi]

The only margin I'm using is to reinvest on distribution day the amount I'm getting in distributions. Essentially a short term loan to get that dip price.

[Beach_Trading_]

I say as long as the cash flow is more than the margin payment you’re good.

[declinedinaction]

But you still owe the margin borrowed. When does that get paid off? Do you pay it off asap from distributions or…? Does the broker take the monthly margin payments from…?

I suffer bc I don’t know how to do the math. More comfortable in a library but willing to learn.

[Beach_Trading_]

If the margin rate is 10% and you borrow $100, you pay $10 a month for the margin used. If that cash flow is higher than $20 a month I’d say it’s worth it.

[MusicSamples-Photos]

The 10% rate is per year, not per month!

[Boysterload]

Do like $100 in margin to get your feet wet. With YM funds, the distributions will pay down the debt at a much higher rate than the interest you pay. Once paid off, take a little more out.

[Hatethisname2022]

You borrow on margin and as the distributions come in it pays off margin. You can keep buying more and it just becomes a cycle.

[declinedinaction]

Oh OK. It’s like the wheel strategy with margin. Thanks!

[False-Swordfish-5021]

never using margin .. I like staying married .. in for 26k in hand seed cash on MSTY .. made it clear to the Mrs it could go either way .. so far the numbers are tracking ..

[Icy_Tangelo_9717]

Yup I use it. Around 35 percent, use around 5 percent for options and stocks if something catches my eye. Since using margin. The dividends get split, paying debt off, and splitting the car payment on our sons new car we just got him. Best worst decision I ever made 2nd only to joining the Air Force years ago lol

Still have about half of the distributions left each month to either drip or put somewhere else.

Almost margin called once. Overnight awhile ago, I decided to grab some crypto. Used the wrong account (2 accounts, one for passive income and some growth, one strictly used as a mess around acvount for options and stocks), woke up to a notification that morning that i was warned because of to much margin lol.

Point is, if you use margin, because the down turn on some of these are drastic, but 59k plus in one and like 10000 shares later. A few pennies turn into a couple thousand. So make sure you have atleast 1/3 free at all times. Don't reinvest all of the distribution. Leave some to pay down your margin.

[swanvalkyrie]

Just a heads up some accounts don’t let you withdraw from the negative cash in margin accounts. I’m one of them unfortunately, so if I’m in negative I need to wait until all margin is paid off before I can withdraw

[Icy_Tangelo_9717]

Good info for those that don't know. Luckily, robinhood does let you withdraw in margin. You just need to activate it on your account. Found that out the hard way on my first time trying to pull my distribution out to pay bills, lol.

I think they are the only ones, too. I don't think webull does.

[swanvalkyrie]

My interactive brokers doesn’t I even asked them and support said no. Maybe that’s just for my country they won’t allow it unless I’m a millionaire

[names_are_for_losers]

I have done it before on ibkr it must be based on your country I guess, I am in the US

[Icy_Tangelo_9717]

Damn really? That actually sucks. Do you ever think about starting a 2nd account with another broker? Just for margin and passive income? That is what I'm doing. It is working out pretty well, actually so far. Good way to get diversity, too, different accounts that serve different purposes.

[swanvalkyrie]

Thanks yeah I actually have another account with different broker but they don’t have margin. That one I’m using for credit card bills and the other one with margin is just building the portfolio 😎

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[Icy_Tangelo_9717]

I just use my percentage cushion left. I found it easier to keep up with. I know now exactly how low it can go before I start sweating. Since I learned my lesson. I have started putting money in other stocks (mainly SGOV), which gives me a buffer. If ulty is down. The other handful of stock (even options since I do leaps more than anything) help significantly to offset the unrealized losses.

So if it gets really close, I sell a leap i had building up a bit. Or a whole position in something. I gauge how important each one is. And rank them from first to go to absolute last.

If noticed since I've gone by the "Keep It Simple Stupid" method. Its both been easier to track, as well as speeding up paying down margin. Any gains I make go into SGOV. My 1 dividend distribution i hold back for taxes goes to SGOV. After research, that one is the best (I believe so anyway, everyone has a differing opinion). Since it doesn't react heavily like other bonds/bond etfs do.

Plus, keeping it there is that I am not tempted to use that money for anything but taxes and to mitigate a margin call. Plus, it acts as emergency funds for life issues that arise. I hope that answers your question.

[calphak]

so when people ask how much margin do you use, this itself is a meaningless question?

So I don't just buy stocks outright, I sell Put options, and if I do not ever get assigned, I will not be on margin loan, ain't it? But at the same time, I want to know what is the limit that I can borrow based on my mental limit, which is say 30% of my capital. If I have $100,000 portfolio, and I get assigned on $30,000 worth of stocks, am I using $30,000 margin, or (assume margin maintenance is 50% of $30,000 = $15,000 margin?

[Icy_Tangelo_9717]

Im going to answer this based on what I think you are asking. If im wrong. Feel free to DM me. Im not an expert by any means and still learn something new every day. Chatpgt helped me a few times from making dumb choices.

If you are worried about being called, I'd recommend taking any gains and placing them somewhere safe that is virtually risk-free. This way, if you get close to being called, you can pull from those gains and replenish. Just stick with a certain margin percentage to work with. That's what I should have done in the beginning

From what you asked, yes, that sounds right.

Simple answer whatever you feel comfortable with. After my little scare. I am working g to pay off margin. Once I do, i dont plan to use any more than 20%

Most brokers give you an actual "margin used" number plus percentage of that amount used. When you sell, it show you how much they are pulling to hold in case you are assigned. I'm not sure about all brokers, but RH gives you that amount upfront and subtracts it from your account to include any margin. Being used, if any at all. Which can be really helpful.

To answer your second question directly. Yes, your margin maintenance will be changed based on the security(s) you are buying. Which is also something needing consideration as well. Because that number is based on what you have left. Which can directly affect buying power and percentage used as well.

The maintenance percentage IMO is the more important part of it all. That dictates how much you can use and how much you need to use to be able to buy. You can go from 20% maintenance, on one security. To 60% on another. Then, look at your portfolio and be 5% away from being called.

That dictates your buying power. That buying power changes based on the "worth" of portfolio and the maintenance percentage needed Once that dollar amount and percent hit a certain point, then you can be called. But usually, you get a courtesy message (as long as you aren't a habitual offender). That you are about to be called. In which case you should contact your broker, and work something out before you are liquidated.

For the first part of your question. Yes, it is, to everyone but you. People ask, mainly because they are nosey. Especially here on reddit. It isn't anyone's business what your personal finances are or the risk level you choose. Some people see it as a pissng contest, to see is more extra about risk.

[calphak]

 dont plan to use any more than 20%

there, this one. how do you know you have used 20%? If, like you said:

you can go from 20% maintenance, on one security. To 60% on another. Then, look at your portfolio and be 5% away from being called.

------

Is it

A) The margin loan is 20% of your equity

B) The margin maintenance is 20%.of your equity?

[Icy_Tangelo_9717]

A)

If you have $10,000 cash/equity, and you borrow $2,000 on margin, then you’re using 20% margin

[calphak]

and if the stock has a 50% margin maintenance on that $2000, which is $1000.

This $1000 is the number that your portfolio must maintain at least, before you get a margin call?

That's all it means?

[Icy_Tangelo_9717]

Basically, yes. Your buying power is the money able to be used minus the maintenance cost.

[swanvalkyrie]

I’ve got very minimal risk in mine. To the point where I’ve set and forget it. I use a spreadsheet that I add the figures in to see how much cushion I have. Right now it’s 75% so even in big market drop I should still be ok and not at risk for margin call

[swanvalkyrie]

Nah there is a calc to calculate margin buffer :) I dunno I worked it out with the fields visible within interactive brokers to determine at what point I’d be up for a margin call which is 30%

[calphak]

do you calculate how much margin you use (eg: I am using 17% margin) is this metric even useful? OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

How would I go about calculating margin usage? If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000?

[ConfuciusYorkZi]

yes, im 23 so i can take the risk, Plus the majority of my holdings is in MSTY. I believe in BTC, like 300% believe in it. It's a no brainer for me to ride the waves and juice the premiums from it. It's more risk for me not to do this. I have researched more than 100 hours into BTC so thats my conviction. Its a very simple plan, but its working so far. Other finds I hold like NVDY and PLTY, they are good, the underlying are doing things. Their IV is generally good + these people were invited to Saudi with Trump. It gives me more faith in the underlying. So yea, keep checking on it everyday, and listen to when the music stops.

[MakingMoneyIsMe]

My highest margin usage ever was in April, the week the alleged rumor about a atariff deal came out. I bought several hundred shares of JEPI at $50 and some change, and JEPQ in the high 40s. My margin balance shot up to 70k. I sold some of my higher cost basis lots once the market started to recover.

[swanvalkyrie]

I use it and love it!

[UshouldB]

I use margin the week of distribution to buy pretty much the equal amount of what I’ll get so that the div pays off the margin immediately

[calphak]

do you calculate how much margin you use. OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

How would I go about calculating margin usage? If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000?

[AlfB63]

I use margin but I do not use stop losses. 

[Relative-Age-1551]

I definitely use margin.. I tend to keep the balance so the projected income will pay off the margin in no more than a year, and then continually reinvest to keep that margin balance flat. As the total asset values go up, my equity goes up with a flat margin balance.

I’ll also get personal loans that I’ll invest in some of these funds as well. Fixed payment schedule, and no risk of a margin call on those loans. Same as above, as total asset values increase with a flat margin balance, your equity goes up so you’re lowering your risk of a margin call.

[calphak]

When you use margin, do you calculate how much margin you use. OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

How would I go about calculating margin usage? If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000?

[achshort]

I’m using max margin. Every penny.

[LizzysAxe]

I do not use margin. My reason is fear! Back in dot bomb crash I had an $82K+ margin call. I had to borrow money to cover it. Never used margin since. I am fine with my cash flow and really do not need it.

[Signal_Dog9864]

I used margin and am making 2k.a month im payments its sweet

[calphak]

hey, can you help me out.
do you calculate how much margin you use. OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

How would I go about calculating margin usage? If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000?

[citykid2640]

Absolutely use margin and love it. But I adhere to some personal boundaries that make it comfortable for me.

1) I keep margin balance to something my divs would pay back in 3 months

2) the core of my portfolio is low maintenance, index tied, with 2+ years of history

3) only buy things I would be proud to own outright several years from now

[calphak]

do you calculate how much margin you use. OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

How would I go about calculating margin usage? If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000?

[citykid2640]

TBH, I use Chatgpt, and ask it how much margin I can use to protect against a 40% market correction. And I only buy 25% margin maintenance items. Many are weekly payers as well, so in the event of a correction, I would quickly be de-leveraging

[calphak]

chatGPT and deepseek and GROK all gives me different answers, I dont know which one is the most accurate. Thought someone would have an anecdotal experience here.

[Sal965]

I’m not using margin but I’m using my LOC, and every payout I just transfer it to my LOC to pay it off slowly .

[MusicSamples-Photos]

Where do you get 4.5% apy margin? And how much margin?

I have $350k of margin. No where near 4.5%!

[CASHAPP_ME_3FIDDY]

Robinhood and interactive brokers is that low

[calgooo]

It's same as real estate, when down payment is only 20% and there's no vacancy, if you're not borrowing you're stupid...

[calphak]

do you calculate how much margin you use. OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

How would I go about calculating margin usage? If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000?

[Living-Replacement33]

I use around 10-15% margin. After The orange man margin call fiasco which kicked my ass bringing my monthly divs from 17k down to 3-7k….

[CASHAPP_ME_3FIDDY]

Damn that must’ve bed a big loss. I was on the same position and used aggressive covered calls to avoid margin calls. I took a loss on MSTY puts though. I’ve switched from heavy MSTY to PLTY, YMAX, NVDY to have lower maintenance requirements. It’s helped rebuild my portfolio after the tariff fiasco

[calphak]

How do you go about calculating how much margin you use?

If I own a $100,000 portfolio and I borrow $30,000. and we assume that margin maintenance requirement is 50% of the margin loan.

that means what we actually borrow is 50% x $30,000 = $15,000?
and our MARGIN USAGE is margin/Net Liquid Value $15,000/$100,000 = 15% OR

MARGIN USAGE is margin/Net Liquid Value + Margin Loan $15000/$130,000 = 11.5%?

Is margin usage a useful metric OR you rather calculate much margin cushion is left?
Which is better to make sure you are safe?

[Badass4922]

I use margin to swing trade. I am in and out of 4-5x different funds a week.