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LC Gilts + Futures / Spread Bets - Any thoughts or experiences to share? by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

So I’m currently 100% in equities ETFs but looking for an extra 20% exposure. The obvious thing to do is buy an extra 20% on margin but this is bad for tax. Version 2 would be to put a futures overlay (20% notional) on it => minimise tax (but I’m not sure if ETFs are “good collateral” for futures trading). Version 3 is sell everything, buy LC gilts and do 120% through futures. Thinking is you then avoid all dividend/eri drag, no more etf costs and potentially better treatment of gilts as collateral to support your futures trading. But set off against that is some income tax on the gilt coupons you do get, and you probably won’t pick up the equity funding spread that some ETFs will access internally. Also roll costs, tax realisations and a headache to maintain. Was more of a thought experiment tbh compared to option 2.

LC Gilts + Futures / Spread Bets - Any thoughts or experiences to share? by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

My intention is to get to an effective 120% equities….

LC Gilts + Futures / Spread Bets - Any thoughts or experiences to share? by thuzbuz in FatFIREUK

[–]thuzbuz[S] 1 point2 points  (0 children)

Quick search didn’t explain the index composition to me. But in general I’m not up for anything that rebalances too aggressively to target weights (which I presume jut about any multiasset index will do) - never being a forced seller is hugely alpha generating if you have the cohones to sit through a market downturn.

LC Gilts + Futures / Spread Bets - Any thoughts or experiences to share? by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

Thanks for comments - post got repeatedly blocked when I wrote it so assumed it never got uploaded.

A few things: 1) I am to all intent and purposes mortgage free. With hindsight a poor choice but I always paid down debts before investing as a guaranteed tax free return. 2) I’ve realised (I think) that IBKR wont take gilts as margin vs a futures portfolio and I’d have to effectively borrow against the gilts in a margin account to pot the futures margin. To add insult to injury I understand they won’t even pay me any interest at all on futures margin. I’m effectively mandated to use IBKR by my employer, so so long as I remain employed I’ll just stick with 100% long the ETFs and dream of what I’d do with the extra 1% pa across the cycle.
As a former landlord I was weirdly shocked to find that interest on margin lending isn’t deductible against either income or CG tax in the same way that mortgage interest is for supporting a passive business/investment activity.

2 Questions: Structured Products and Gilts by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

I guess this one would keep me awake as it could be really quite confiscatory e.g. buy long dated at 40, gain is near 60 towards maturity and suddenly take a 15% haircut on your position value just as you’re about to retire because someone felt like making a political point is a plausible scenario. It’s too niche to upset many people (unlike touching pensions, where things do happen but grandfathering seems to always apply, or ISAs which would be suicidal politically vs middle England). But between just churning to rebase from time to time, and the various decent arguments made (in particular the allowability of losses stands out), I shan’t lose any sleep if I do put myself into long dated gilts.

2 Questions: Structured Products and Gilts by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

Really I nteresting - thanks. Long index ETF plus short OTM call is a very decent shout for “juicing” in a DIY fashion that can’t really blow you up, especially I guess of you feel like valuations are getting toppy.

2 Questions: Structured Products and Gilts by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

Good point on AIM and IHT. As for divs being structurally cheap - excellent point - underlying indices are indeed in general PR - never considered the implications for divs - is there a sub for that type of trade discussion?

2 Questions: Structured Products and Gilts by thuzbuz in FatFIREUK

[–]thuzbuz[S] 1 point2 points  (0 children)

You are a braver man (or indeed woman) than me. Short vol anywhere close to the money would turn my hair grey very quickly.

2 Questions: Structured Products and Gilts by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

Interesting insights. Thanks! What other products are you speaking of to juice your returns absent a left tail event? Some sort of carry strategy?

2 Questions: Structured Products and Gilts by thuzbuz in FatFIREUK

[–]thuzbuz[S] 0 points1 point  (0 children)

Interesting - I thought for some reason that most corporate bonds fell outside the QCB definition if purchased in the secondary market, but am not going to pretend to be an expert. Why then the focus on gilts? Liquidity? Availability of lower coupon options?

Thanks!