General investing advice and information.

| Cryptocurrency | BITX, IBIT, MSTR | /MBT | [Ledger](https://www.ledger.com/) |

The reasoning is to keep some investments non-correlated with stocks/bonds. [This correlation matrix site](https://www.etfscreen.com/correlation.php) is useful for investigating this.

The main question to ask yourself is are you using your capital the best way possible? In many cases your brokerage is giving you access to tools and methods to make better use of that capital. They will not tell you all of these methods, which one is best, or hold your hand through the process, unless you pay them.

In the 2nd case, you can lose up to your initial $19k at expiration, but you will likely end up with 100 shares. There is a 10% chance you will lose the full $19k and not end up with any shares at all.

In the 4th case, it doesn't cost anything, but you can lose up to $30k if SPY goes to 0 (very unlikely). More likely is SPY ends up lower at expiration than your trade price, and you pay that difference.

These are worst case scenarios, and I am simplifying a bit. Calculating the return is more complicated for anything other than the 1st case. If the market moves in your favor, the leveraged instruments will make you much more money than the 1st case. Even though they have expirations, you can continually roll them to future dates to simulate a buy and hold. This requires some active management that the 1st case does not require.

Adding leverage increases your risk, but increased risk is one way to possibly gain better returns. There are many ways to gain leverage, from using loans, to options, to futures. I'll explain how to use all of these methods.

People use leverage all of the time for home loans, and it is not unheard of to use a 80% loan to value ratio for a mortgage. For a $500k home, you might put up $100k cash and take a $400k loan. You would likely do this at a reasonable interest rate, and your hope is the value of the home goes up faster than your interest charges. Your home value could fall, leaving you with a mortgage that is underwater, i.e. you owe more than the home is actually worth. All of this can apply to investing as well. Using a 30% LTV for investing seems perfectly reasonable to me.

When you have stocks, brokers will let you take a margin loan of at least 50% or more of your equity value. This gives you at least 1.5 leverage, at the cost of margin loan interest, which is usually terrible at most brokerages. For example, Schwab will charge you 13% interest as of today (June 2025). If you cannot make more than 13% on the investments you do with leverage, you won't even break even. Interactive Brokers will give you a much better rate, for example 5%. This is an easier number to beat on investment return.

One way to reduce interest charges is using a forex margin loan (sometimes called a carry trade). Your broker may have a much lower interest rate for borrowing in another currency like CHF. Say that is 1.5%. You can take a CHF loan, convert that to USD, and use the funds to invest in US stocks. However, you must now beat both the 1.5% margin interest as well as any forex rate changes. You also have to keep in mind the cost of conversion, which is more favorable to larger sums. For stable currencies like CHF, I've had good results for multi-year timeframes. However, if there is a big drop in USD value to the foreign currency, your loan repayment can be much bigger than you expected. Many people have done this with JPY due to its low interest rate.

You can use forex futures to lock in an interest rate for the loan. For example, buying a /6S future will offset any currency fluctuation with CHF. However, this adds some complexity.

A box spread is another way to take a loan, except it is not from your broker, but from the options market. This essentially gives you the best borrowing rate that your broker will never beat, but you will need to trade options which can be quite complicated if you are new to them. [This blog post](https://thefinancebuff.com/short-box-spread-vs-margin-loan-fidelity.html) describes the process. I created [this video](https://www.youtube.com/watch?v=mSmY9HNzeAo) and [slides](https://docs.google.com/presentation/d/1-CDrMKt7snfninR7kycAI7HIv2nGCyVBD-ozjVqwVUc/edit?slide=id.p#slide=id.p) going into the mechanics.

There are many strategies to trade options. This focuses mainly on its use as leverage. One option contract represents 100 shares, and its cost is much less than actual shares. That should give you an idea of its leverage. In most cases you would only be trading the option, and not the actual shares. However, the profit/loss would be similar to as if you were actually trading 100 shares.

There are at least 2 ways to do this:

This type of options trade allows you to do leveraged investing mostly using the buying power of your equities. Some cash is required to enter the trade, mainly due to the call being more expensive than the put. It is similar to using futures for leverage.

Overview video:

You will need to apply for undefined risk options trading ability at your brokerage to do this because it involves selling a put (i.e. naked put).

- [How To Trade Options in 2 Hours 12 Minutes and 4 Seconds | Live Bash Series](https://youtu.be/441HWKDot0Y?si=kYyqLX-V39qhbr3d)