Re:We are publishing the tax secrets of the .001%
by ac29 on Tuesday June 08, 2021 @12:08PM
(#27437042)
> leaving the bank holding the bag
You probably underestimate the ability of banks to evaluate risk. Yes, they absolutely could end up underwater on an asset backed loan, but you also shouldn't assume that you can take out $1 in loans on every $1 of stock.
On Schwab's page, they say: "Schwab Bank, in its sole discretion, will determine what collateral is eligible collateral and the loan value of collateral". So, if you have some recently highly-appreciated shares of AMC for example, they might decide they are not eligible collateral, or only offer to lend you $1 for every $5 of stock.
Re:We are publishing the tax secrets of the .001%
by influx on Tuesday June 08, 2021 @03:47PM
(#27439881)
LOL, yeah the banks have been so great at leverage in the past couple of decades in the USA that they have to get bailed out repeatedly.
Re:We are publishing the tax secrets of the .001%
by AdamN on Tuesday June 08, 2021 @02:04PM
(#27438688)
Depends on what you spend the money on. If you take the margin and spend it on an asset, then you have the underlying stock as well as the asset to cover calls. Still requires correct thinking but the risk is mostly based on what you do with the loan.
It's not a win-win, there's significant risk.
> fully collateralized
This is not true! The underlying asset fluctuates in value and is open to lowering significantly in value, leaving the bank holding the bag.