1. Leverage for spread traders
Do you trade the spread between two ETF's? Do you trade complex option strategies like calendar spreads, straddles or collars? Want to create a long/short portfolio?
Advanced trading strategies rely on leverage. With Portfolio Margin it's possible to achieve leverage up to 10 to 1.
Portfolio Margin is designed for spread traders. Traditional Reg T? Not so much.
How about an interest free loan from the government?
Yep, a Portfolio Margin account can be used to postpone capital gains tax on your big stock winners for...well...forever.
Billionaires aren't the only ones who can take advantage of this tax loophole...
3. All you can eat dividends!
There are so many high quality stocks with dividend yields well over 5%. Here's a simple strategy: Create a portfolio of dividend yielding stocks. Leverage this up using portfolio margin, and sit back and collect the dividends. With margin borrowing rates less than 1.5%, a 4 to 1 leveraged portfolio can have a net yield of over 20%.
Concerned about the risk of this type of portfolio? No problem, simply hedge out market fluctuations by shorting the S&P 500 ETF (SPY). What's left over? A pure stream of cashflow.
Traditional Reg T margin forces you to post higher capital at the time you enter a position (compared to the margin needed for existing positions).
Portfolio margin simplifies this and gives you just one number which defines the margin requirement. Focus on your trading not on your margin.
5. Smart Hedging
Systemic risk is such a huge concern these days. Any moment Europe's financial crises could take down the world economy. It's prudent to be concerned about your portfolio's exposure to this. So I ask you: What are you going to do about it?
Clearly, it's not practical to unwind your portfolio as this would incur huge commissions and could trigger taxable capital gains.
With portfolio margin it's remarkably simple to execute a hedge. Here's how: short an ETF.
The bottom line is that Portfolio Margin gives traders and investors the flexibility you need when you need it.