2x And 3x Margin Increases Now At A BD Near You
Did anyone out there try to load up on some 3x or 2x ETS’s this week and get their trade rejected? Wonder why? My Buddy Mark “The Brick” Brickman at BroadstreetTrading.com gave me the reason this am. You see New Margin Rule Plays A Role In The Popular Direxion Financial ETFs (FAZ, FAS). and others. “And late last week the Financial Industry Regulatory Authority finally implemented a rule that it had originally planned to introduce in late 2009, increasing the minimum margin requirement for leveraged ETFs “by a factor commensurate with the leverage of the ETF.”“ (emphasis mine) Here is the article covering the first announcement of this rule. This is crud on several fronts.
What they are saying is you are not capable of managing your risk, so they will do it for you. Second, they are saying if you don’t have the money you can’t play (sorry middle class). Third, they allowed the longs and shorts to have all the leverage they wanted while the market was going up, and now that the turn or at least some sort of corrective is finally here (ya think their market timing is a coincidence?) all of a suden they decide to hike the margin requirements? Give me a friggin break. This is just another thorn in the shorts side. Just another government imposed parking break on the markets potential to fall. I am assuming that at some point this year or next they will discuss making it illegal to short the market period (no, not kidding).
Sadly, now they are taking away your ability to catch up if you do not have the cabbage to play. Sure you can still bet your whole paycheck on the state lottery or head to the casino nearest your home on any whim, but playing the market just got a lot more expensive. This makes a lot of sense.
Hey, what’s good for the goose right? Those that bought SSO (14 – 42, roughly 200%) at the bottom have outperformed significantly those that bought SPY (65 to 118 roughly 82%). So why not let the bears have their shot or at least a fair chance at getting their money back? I don’t see any justification for the increased margin rules (well, other than for the BD’s to make more money and for them to limit downside pressures on the market).
Investors need to do their homework and understand RISK! Have a plan for every trade and ALWAYS USE STOPS! Playing the game can be that simple. Control your risk and you can take as many pot shots as you like. You may still end up losing it all, but at least you maintain some sort of control and somewhat improve your odds. If you want to play on margin in 2x and 3x etfs you should be able to without increased margin requirements (imposed at a really odd time).
There are winners and losers. That is life. When the heck will government just back off and let nature take it’s course? Don’t even get me started on “In GOD We Trust” on the coinage or prayer in schools. This crud about protecting everyone and everything is getting way out of hand (whether it be here or in the EU). Welcome to your socialist state my brothers. Slowly but surely you are losing more rights every day and this is one sad example of their control measures to protect YOU
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