Here's How I Trade With Margin

Here's How I Trade With Margin | Coffee With Markus | Episode 128

Intro: 0:00
$500K Trading Account Update: 3:04
Trading With Margin: 9:02
Deep Dive Q&A: 30:34

Trading on margin can be powerful when used correctly, but when used incorrectly can be a disaster.

Update For My $500K Trading Account:
Goal: $15K/month/30 days = $500/day.

Trades I'm Currently In 3:04
- Closed trade with AAPL earlier today.
- According to the overview in tastyworks, I've been able to realize $1,392 in profit in just 5 days.
- Unrealized P&L is $1,082
- Total in realized & unrealized profit is $2,482.

Trading With Margin:

When trading with margin, trading can be your best friend, but when used incorrectly it can be a disaster. Leverage can be a double-edged sword.

What is margin?
When opening a trading account, you can open a cash account or margin account.
With a cash account, if you put in $10K in cash, you have $10K in buying power.
With a margin account, if you put in $10K in cash, the broker will lend you another $10K giving you $20K in buying power.

What is buying power?
There is a buying power for options. Buying power for options in a margin account is always non-leveraged. So if you put $10K in a margin account, you only have $10K in buying power for options.

Buying power for stocks is where the 2:1 leverage will kick in.

Example: AAPL
If you want to sell 125 Put for AAPL: If selling the put you might be forced to buy 100 shares at $125, meaning you need $12,500.

Options: Discount: Only charging you $2,202.

Assuming a $10K account: You could sell 4 of these options = $8,795

At first, it seems you have enough margin for this but you don't.

What you SHOULD do with a $10K trading account: $20K for buying stocks.

Sell only 1 option: Your broker will only charge you $2,205. If assigned you would have to bring $12,500 to the table. You have that because the broker gave you $20K in BP. This is the right way to do this.

What would have happened if you sold 4 puts and got assigned?
4 X's $12,500 = $50,000 but you only have $20K making you $30K short.

This $30K becomes a Margin Call.

This means that you have to wire the broker $30K, usually within 24 hours, and if you don't the broker will sell 300 shares to overcome the shortage.

Portfolio Margin:
For bigger accounts. $100K - $175K in the account depending on the broker.

You will get either 5:1 or 6:1 leverage with a portfolio margin account.

This turns a $200K account into an account with $1MM - $1.25MM in BP.

I use the excess BP when things go wrong, saving a trade that's in trouble.

To use margin responsibly, you must understand what margin is, what buying power is, and that your broker is only charging you a small amount when you are selling options. Don't over-leverage yourself or you can get a margin call.

Recommended links and videos:
Markus’ Plan: https://rockwelltrading.com/myplan
Wheel Playlist: https://www.youtube.com/playlist?list=PLBa3sAx-Io2mybLLdWtbjTFqK9-BR5SJb
tastyworks: http://rockwelltrading.com/tastyworks
How To Manage A Trade In Trouble: https://www.youtube.com/watch?v=mac51XG-5E4
Cash Covered vs Naked Puts: https://www.youtube.com/watch?v=aUVw9HYrFFE 
Best Brokerage Account 2020: https://youtu.be/4MoU-UiDAi4 

#HowToTradeOnMargin #MarginTrading #TradingOptionsOnMargin
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Видео Here's How I Trade With Margin канала Markus Heitkoetter