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Margin Accounts For The Conservative Investor

Mar. 24, 2014 8:20 PM ETBBY, TPR, WOLF, EBAY, HLF, KSS, LULU, SBUX, TWTR56 Comments
George Acs profile picture
George Acs


  • Margin accounts can lead to reckless behavior.
  • Margin accounts can prevent "free riding violations."
  • Margin accounts can lead to increased income from put sales without incurring loan liability.

Last week one of my favorite people on Twitter, Eddy Elfenbein, said the following:

Based upon his past record of performance, Eddy Elfenbein is not a guy that you want to disagree with - and I don't. He is a consistently great source of insight.

With news that margin balances are once again at all time highs, you do have to wonder whether that's at least one sign of a market top, as it has its own history of reflecting the worst in individual investor excesses.

Having learned that the hard way in October 1987, I am, at the very least capable of learning from my mistakes and my long-term memory is still intact enough to offset my otherwise inconsistent judgment.

Elfenbein, who offered sage counsel in his Tweet, is an acknowledged and recognized master of "buy and hold" investing and offers as transparent of a past record as you could ever hope to find. He is also funny, knows his statistics and offers a free newsletter.

I, on the other hand, go from week to week, look to Jimmy Carter as my humor go-to guy, have forgotten the meaning of "kappa coefficient" and hide behind a paywall.

Actually, I am an occasional buy and hold investor, but prefer to do it in a syncopated fashion when possible, such as owning shares of eBay (EBAY) 17 times in 15 months. That's almost like buy and hold.

After today's trading session, make that 18 times.

However, I do agree with Elfenbein that margin is dangerous, especially for the buy and hold investor, but I can't go so far as to say "don't."

For the covered option investor, the availability of a margin account brings very tangible benefits that can be consistent with the otherwise cautious nature of most such investors, and actually

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George Acs profile picture
I am a simple individual investor who believes that the playing field is level, but may require active management of one's holdings. I've devised a series of steps that constitute a highly defined covered option strategy that most anyone can follow and that I've described in Option to Profit (2011). Having retired from a career in Pediatric Dentistry, approximately 10 years ahead of schedule, after spending the previous 10 years working just 2 1/2 days each week, I now spend my time trading.For almost 5 years I alerted others of trading opportunities in large cap positions through the Option to Profit subscription service, a premium subscription service that provided actionable Trading Alerts via text messaging or e-mail at my old site www.optiontoprofit.com. As of January 2, 2017, the site  and the name "Option to Profit" are no longer mine. as I've again joined the dark side and taken the easy money. But I've returned to my blogging roots on January 2, 2017 by resurrecting the old TheAcsMan.com ad supported web site, open to all.That, too, ended and the new, subscriber based LEAPtoProfit.com which launched July 2018 and is geared to the less active trader who is either shifting into a "buy and hold" strategy, as am I in this next to final stage of my investing career or seeks to milk an existing "buy and hold" portfolio.Current;y. the LEAPtoProfit p[ortfolio is fully invested and the paywall has been removed until December 2019 when I expect an infusion of cash from position assignments.Ultimately, I hope to make my stock portfolio improve the quality of my life. Whatever stage of life you are in, you can make your stocks improve that quality by putting them to work for you and perhaps LEAPtoProfit can be part of that process.

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