How much margin will retail brokerages extend?
Does anyone know the typical amount of margin a retail brokerage would extend to a retail client that has lets say using an arbitrary amount of $1m in cash. This is related to equities, also, let's say one were to deploy a risk adverse approach ie. market-neutral trading large caps. Would that factor into the amount of leverage one could obtain from a retail brokerage?
It depends on the brokerage, and the volatility of what you are investing in. That is, whether you are investing in individual stocks, vs. diversified ETFs vs. bond funds, and the recent volatility of your current portfolio. I used to be able to access ~6x leverage (5 dollars of margin for every 1 dollar of equity) on a portfolio of stock ETFs through Interactive Brokers. Not that I ever used 6x leverage! Now, they have cut that down to 3x leverage due to the higher levels of volatility across various markets.
I think most retail brokerages are a bit less willing to extend margin vs. Interactive Brokers, and the interest rates are generally far higher.
Thanks, very helpful. I was curious if I could replicate a typical diversified multi-strat by creating a PA with a market-neutral portfolio of liquid equities levered at 5x-10x but I don't think I can get the leverage necessary to amplify the tiny market-neutral return streams of 2-3% annualized to make it make sense.
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