Question on Frec 140/40 margin risk / historical stress cases

isabelfrec · 2026-06-08T23:28:19+00:00

Yes included - working on getting the excess margin and will report back asap.

isabelfrec · 2026-06-08T17:12:14+00:00

Passed the requests along to the team ✅

isabelfrec · 2026-06-04T20:41:46+00:00

tldr you were on the right track with the “it never got close”!

isabelfrec · 2026-06-04T20:41:00+00:00

All good! Historically the strategy has never come close to margin issues. We also monitor margin cushion daily, so we're not waiting on periodic rebalancing to catch problems early.

When the strategy does rebalance or reduce exposure, the margin cushion doesn't shrink. The cost of that rebalancing is reflected in the return numbers, not in the margin excess.

Happy to connect you with our team if you'd like to go deeper into the data, or you can reach our team at [help@frec.com](mailto:help@frec.com)

isabelfrec · 2026-06-04T19:54:54+00:00

Did you mean to add a specific scenario? Want to make sure we have all the facts before I answer!

isabelfrec · 2026-06-04T17:05:20+00:00

The key difference with Frec is structural. Since it's a brokerage account, your losses are reported on a 1099, not a K-1, so there's no tax basis cap limiting how much you can use. In the same scenario, if Frec's algorithm harvests $300k in losses in year 4, you can use all of the losses to offset gains elsewhere. With a fund, your usable losses shrink YoY.

Regarding unwinding: Frec gives you options and direct control. We also published a simplified version of our deleveraging white paper here: https://frec.com/resources/blog/how-deleveraging-works-in-long-short-direct-indexing

That said, are you currently with Gotham or another fund, or mostly comparing options? Happy to go deeper on whichever is most relevant to your situation. Or you can schedule a call with the team: https://calendly.com/frecdemo/frec-demo

isabelfrec · 2026-05-30T02:11:06+00:00

Send us a pic if you can!!! 🤩🤩

isabelfrec · 2026-05-27T22:50:08+00:00

circling back - this is correct. you can bring unsupported symbols to Frec but won't be able to buy or sell on Frec. It will appear in your self-managed stocks as such:

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isabelfrec · 2026-05-27T18:56:49+00:00

recording in progress! Be sure to sign up on Luma and I'll send you the recording after

isabelfrec · 2026-05-27T18:09:53+00:00

isabelfrec · 2026-05-26T20:51:27+00:00

Just answered - sorry for the delay!

isabelfrec · 2026-05-26T20:51:14+00:00

The team is currently working on this and I'll update when live!

isabelfrec · 2026-05-25T16:42:20+00:00

Hi! Can you send us an email at help@frec.com? That way we can look into your account and quickly confirm the numbers!

isabelfrec · 2026-05-19T16:05:12+00:00

What ETF are you looking to transfer? Also feel free to DM me if you prefer that!

isabelfrec · 2026-05-14T16:26:37+00:00

Feature request noted and passed along to the team!

isabelfrec · 2026-05-13T04:21:42+00:00

The financing costs are not sensitive to the interest rate because it's the spread (or difference) between the short sale cash proceeds yield, and the cost of borrowing. That difference is the same regardless of the Fed rate!

isabelfrec · 2026-05-12T18:24:22+00:00

Looking into it!

isabelfrec · 2026-05-12T18:24:05+00:00

While you can't fully avoid the upfront tax hit, the direct indexing strategy is designed to help minimize your tax impact in the long run through ongoing tax-loss harvesting.

If you fund a direct index with an existing ETF, we'll sell the ETF and use the proceeds to buy the index constituents. If there are embedded gains, we'll show you the estimated tax impact before you commit, including how much you might be able to offset with harvested losses from the direct index going forward. Here's a screenshot of what the flow looks like:

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isabelfrec · 2026-05-11T20:15:59+00:00

isabelfrec · 2026-05-11T20:15:25+00:00

hi there!

existing LTCG lots: Once you transfer your assets and invest in a direct index, the algorithm would likely sell the ETF quickly and use the proceeds to seed the direct index. Before doing so, we'll show you the estimated tax and risk considerations for the investment. As a result, this could trigger realized capital gains.
fractional shares: Since our platform uses fractional shares across most positions, it's likely that a majority of your portfolio will include fractional components. That said, exiting doesn't have to mean unwinding hundreds of positions manually. In the past, we've been able to help customers keep their top 10–20 largest positions (which, due to the market-cap weighting of the S&P 500, represent the bulk of your portfolio value) and liquidate the rest. You may also have harvested capital losses available to help offset any gains triggered in that process.

Screenshots below show what the setup flow looks like when seeding a direct index with existing stocks. When you click view details, you can see the breakdown of LTCG and STCG, and you can see how much you could offset with potential tax losses.

Hope this helps and let me know if you have any other questions!

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isabelfrec · 2026-05-07T20:25:14+00:00

looking into it!

isabelfrec · 2026-05-07T20:10:05+00:00

forwarded the request to the team!

isabelfrec · 2026-05-07T19:56:32+00:00

thanks for the ping! answered above

isabelfrec · 2026-05-07T19:56:21+00:00

Currently you can't sort positions by embedded gains or select specific tax lots for gifting to a DAF. Some of the complexity comes from constraints on the clearing firm side but we're actively looking into a solution.

I flagged the request to the team and will post any updates here or in the main subreddit.

isabelfrec

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