Dear Investors,
Leverage can create great wealth for the Intelligent Investor. However, it works both ways and I have seen many inexperienced investors get wiped out using too much leverage at the wrong time. The volatility we are seeing in the markets over the last 2 years is creating higher returns for investors, the downside of higher returns is higher drawdowns and over leveraged accounts get cleaned out. Brokers don't even lay off high leverage accounts.
My client accounts rarely have more than 50% of the account funds at risk in the market at any time. Leverage is achieved using options with unlimited upside profit potential and the sum at risk is the sum invested. Hedging is used to insure against black swans.
For example back in May this year we were short the market in all but one position. I had an Apple Long Call option with an October 2012 expiry as a hedge. The market sold in May for the third year in a row and clients were rewarded with a 30%+ portfolio return for the month of May. Short positions were closed a few weeks into May to lock in the profits and the Apple call was allowed to run. Apple turned out to be the greatest stock of 2012 so far and gave a 100% return.
We got back into Gold at the start of seasonal strength towards the end of the summer and the crossing of the 200 Day Moving Average a very bullish sign.
The announcement by the Fed of QE3 guarantees Golds run to $3500. Hold onto your Gold buy more if you can but use the right leverage at the right time. October is like May we generally get a stock market correction. However, it would be highly unusual for a big correction so close to an election.
Happy Investing.
Leverage can create great wealth for the Intelligent Investor. However, it works both ways and I have seen many inexperienced investors get wiped out using too much leverage at the wrong time. The volatility we are seeing in the markets over the last 2 years is creating higher returns for investors, the downside of higher returns is higher drawdowns and over leveraged accounts get cleaned out. Brokers don't even lay off high leverage accounts.
My client accounts rarely have more than 50% of the account funds at risk in the market at any time. Leverage is achieved using options with unlimited upside profit potential and the sum at risk is the sum invested. Hedging is used to insure against black swans.
For example back in May this year we were short the market in all but one position. I had an Apple Long Call option with an October 2012 expiry as a hedge. The market sold in May for the third year in a row and clients were rewarded with a 30%+ portfolio return for the month of May. Short positions were closed a few weeks into May to lock in the profits and the Apple call was allowed to run. Apple turned out to be the greatest stock of 2012 so far and gave a 100% return.
We got back into Gold at the start of seasonal strength towards the end of the summer and the crossing of the 200 Day Moving Average a very bullish sign.
The announcement by the Fed of QE3 guarantees Golds run to $3500. Hold onto your Gold buy more if you can but use the right leverage at the right time. October is like May we generally get a stock market correction. However, it would be highly unusual for a big correction so close to an election.
Happy Investing.
