This approach to low rate loans backed by stock as collateral is interesting - have been reading and trying sims before jumping in.
One question for the group - how does one execute the optimal box spread roll? Is it:
1. Sell new box BEFORE current box expires
--If yes, new box should equal expiring box? Or does the new box need to be larger? Assumption is that the upfront capital & rate from new box is greater than to equal to balance due on expiring box
--If yes, when should the new box be sold? Day of expiry? Day before? Does it need to be settled before the old box expires?
--Example: $100K box expiring in 24 hours; would I simply sell a new box for $100K (~$90K capital paid upfront, for example) and have this capital + $10K extra available to be auto pulled to settle expiring box? Or would I need to sell a bigger box to cover the $100K expiring box?
2. Sell new box AFTER current box expires
--If yes, let existing box expire. Assuming un-invested cash isnt available to cover the expiring box, what happens? Will the brokerage (IB or Fid in this case) sell stock from portfolio to cover the expired box? If so, when would they do this?
--After box has expired (and assuming stock collateral hasn't been sold by brokerage to cover expired box), sell a new box for an amount with enough upfront capital to cover expired box?
--If this option (sell new box AFTER existing box expires) is optimal, what is the timing like? Sell new box the next day? The period in between the existing box expiring and selling new box isn't clear to me. What happens? If the brokerage doesn't quickly sell your stock to cover the existing box, do you go into margin & margin interest territory?
3. Something else?
THANK YOU for any light you can shed. Learning a lot!
One question for the group - how does one execute the optimal box spread roll? Is it:
1. Sell new box BEFORE current box expires
--If yes, new box should equal expiring box? Or does the new box need to be larger? Assumption is that the upfront capital & rate from new box is greater than to equal to balance due on expiring box
--If yes, when should the new box be sold? Day of expiry? Day before? Does it need to be settled before the old box expires?
--Example: $100K box expiring in 24 hours; would I simply sell a new box for $100K (~$90K capital paid upfront, for example) and have this capital + $10K extra available to be auto pulled to settle expiring box? Or would I need to sell a bigger box to cover the $100K expiring box?
2. Sell new box AFTER current box expires
--If yes, let existing box expire. Assuming un-invested cash isnt available to cover the expiring box, what happens? Will the brokerage (IB or Fid in this case) sell stock from portfolio to cover the expired box? If so, when would they do this?
--After box has expired (and assuming stock collateral hasn't been sold by brokerage to cover expired box), sell a new box for an amount with enough upfront capital to cover expired box?
--If this option (sell new box AFTER existing box expires) is optimal, what is the timing like? Sell new box the next day? The period in between the existing box expiring and selling new box isn't clear to me. What happens? If the brokerage doesn't quickly sell your stock to cover the existing box, do you go into margin & margin interest territory?
3. Something else?
THANK YOU for any light you can shed. Learning a lot!
Statistics: Posted by shmohan — Mon Oct 14, 2024 8:22 pm — Replies 1 — Views 85