Was a $400k equity portfolio margin position that I bought $3.2m total of UPRO and TMF on, two 3x leveraged ETFs. 55% UPRO 45% TMF. I just rebalanced gains from TMF into UPRO and it now blew up.
I walked risk management through the positions. The SPX position is a short box spread financing the margin for the position. The other two positions are risk parity positions that I explained to him was much safer than the 100% stocks and less correlation than a 50/50 stock bond portfolio.
His response: Your “safer” portfolio just caused a $276k margin call.
Risk management is going to reevaluate their bond/stock correlation offsets both in general and for 3x levered ETFs.
Anyways, I’m a bit off the hook. Since the margin loan is due to the market by 16 dec 22 and I’m getting 15k/mo tax free disability, risk management was nice enough to give me a 5 day portfolio margin call to bring the account back up to 100k positive equity. If not, the UPRO/TMF positions are liquidated, SPX remains, and I have until the date the short box spread is due. At that time I’ll have a full margin call when the brokers account is on the hook. I’m down to “risk reduction only” trades.
I had to provide proof by sending in pay stubs that I really am getting $15k/mo in tax free disability insurance pay.
So I’m going to pray portfolio goes up, otherwise whoever the fuck on the other side of my SPX box spread lending me 2.8 million at 0.85% APR to gamble on stocks is going to wish they bought US treasuries instead.
TL;DR what strike/ underlying
Go for puts on my broker TD Ameritrade or their new owner Charles Schwab. $AMTD or $SCHW. Say $20 puts.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.