Currently 21 yrs old and managing a PA of about $40k I've accumulated over the last few years through consistent part/full time jobs and diligent saving. It's mostly in my Roth IRA, followed by my Merrill brokerage account, as well as a few grand in a one off crypto trade I made.
I know lots of HFs lever up by shorting stocks or other assets with minimal potential upside (Melvin @GME), so I've been thinking about shorting something to lever up my PA. I know shorting comes up with risks of course (potentially unlimited), but given I'm 21 and going into IB, I'm not too worried about if I lose all/most of my cash while chasing superior returns.
Would shorting a crypto stable coin like Tether be a safe (or even possible?) way to lever up and get more cash to dump into my long plays? Or shorting a money market fund or something where I'll just drain a few % a year, while putting it into something higher yielding on the long side?
I suspect I am probably just naïve in my understandings of portfolio management and effectively using leverage, but would love any thoughts!
Please be careful with shorting. Making money that way is difficult and you risk blowing up your PA if you don't know what you're doing. Or as John Maynard Keynes said: "The stock market can remain irrational longer than you can remain solvent". I agree with your take on GME's valuation but there is a possibility that its $15b mcap first doubles, triples, or even more before diving down to realistic value. Your broker meanwhile doesn't care about realistic value and you're likely to be squeezed out. Shorting is a difficult game to play. Tesla is my only direct short because it's more difficult for a $870b mcap to double or triple. Even then, I aim to keep the position under 5% of my portfolio for risk management purposes (that means I have to buy Tesla if it climbs, and at a higher price..).
I'm not sure how it works with shorting Tether but I would stay far away from shorting anything unregulated such as crypto (is it even possible to secure a borrow and short in the first place?). Maybe it's possible for you to short a US Treasury ETF? I would be interested in that but my broker doesn't allow.
A safer alternative is using options instead to lever up. Buying deep ITM options on stocks you like will provide you leverage without having much exposure to long vol. Alternatively, if you want more leverage and don't mind being long vol, check out ATM/OTM options. Just be sure you know how options work in advance. With leverage comes risk.. But with options you don't have to worry about margin calls.
You can check out my portfolio to see how I lever up my portfolio by integrating options in my portfolio. Search for Wisser95 on Twitter.
I get the interest of doing l/s, but why wouldn't you simply buy stocks on margin? Obviously manage your leverage level to not get margin called, but I think that looks much simpler.
I don't think you know shit about crypto because
1) Shorting spot Tether requires you to put a collateral that is greater than the value of the Tether you're trying to short.
2) Tether isn't always equal to $1. Crypto exchanges and whales put pressure on Tether's price so it slips up and down - that's enough to liquidate retards who thought that shorting USDT was a good idea. In the picture below, we see several massive green and red candles - people getting their shorts/longs liquidated.
3) Similarly, crypto loans require a collateral equal to at least 2.5x the value of the loan itself. In addition to that, the market interest rate for borrowing Tether is about 30%.
Good to know. You're correct, I don't know shit about Tether. This post was just me asking for insights from others that I'm sure know much more about the mechanics and validity of using shorts to gain leverage, so I was just brainstorming some potential ideas. Thanks for the thoughts!
I think it's dangerous to lever up to buy US stocks during relatively valued market environment.
Hey Dick, good to see you here. I was thinking of potentially putting more money into alternative assets, such as CLOs. I know some funds like OXLC pay out ~10% dividends and might be less exposed to the sky-high valuation issues facing the equity market. Any thoughts on that?
Valuation aside, his risk profile is okay for leverage I think. He's young, has high risk appetite and seems to understand the risks, and good future job income prospects. Imo, investing a bit more than $40k for him is fine. Job income should catch-up/replace the leverage in time.
ETH yield farming makes 30% annually (for now)
How does ETH yield farming work? I'm sure it's basic and not worth your time to explain, but any good resources you could point me towards to learn how to effectively do it?
Currently the one crypto I own is Ohm coin: pays a 1.2% daily stake in tokens... Turned about $1k into $7k in 3 months between the stake and price increase.
I get 150% APY farming yield on another coin pair. Yield farming is pretty neat
Could you possibly share the coin pair so I could check it out?
Please be extremely careful with this and be ready to lose your entire stake. Again, I'm not familiar with crypto and yield farming, but common sense tells you that if something (like a 150% yield) is too good to be true it probably is.
And sure, this might be a inefficiency in the crypto market that you uncovered with extensive research, that's definitely possible. Just be cafeful in the unregulated jungle and RESEARCH! :)
Short or go long Bitcoin w 20x leverage on Binance or FTX. That’ll give you the risk you want.
If I didn't know any better I'd say you were literally trying to blow up your account
First you need to build the skills that scale can magnify. You do not want to take on margin or leverage if you do not have quality ideas.
Et ipsum sapiente sit ullam et alias facere et. Voluptatum enim qui similique laboriosam. Ut aliquam suscipit quia eos quis voluptas.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...