The SEC's approval of Portfolio Margin has had a profound impact on the trading strategies available to retail investors. This site is dedicated to educating investors on Portfolio Margin and the opportunities it creates.
John Bentry, a retired civil engineer from California, has been trading equities in his margin account since 1999.
When Portfolio Margin first became available from his broker, John wondered how it could be used to improve the profitability of his trading strategies. "I've been trading stocks on margin for over 11 years. My strategy focuses on holding high dividend yielding stocks and ETFs. I then hedge out risk by shorting low and no dividend yielding stocks and ETFs. With margin borrowing rates at all times lows, I earn a pretty decent income from the dividends minus the borrowing cost."
After converting his account to Portfolio Margin last year, John was able to significantly increase the amount of leverage in his account. "Under my old Reg T margin account I was borrowing around 50% of the position value. The average dividend yield on my portfolio after paying borrowing costs was 5%, so I was able to leverage up to a yield of 10%.
In my new Portfolio Margin account I've constructed the portfolio to be able to borrow around 80% of the position value. I can now leverage the dividend yield up to 25% and stlil keep risk low by hedging out market volatility."