The use of margin can be a difficult aspect of investing for many people. During a correction in particular, investors find as stocks fall they can quickly reach a point where a margin call can occur as there is not enough capital in a portfolio to cover the continuing declines in positions being held.
Let’s review this email from an investor and then look at some answers.
I have reduced the size of the emails received and focused on the primary issue this investor is focused on. Lisa’s portfolio also contains a large stock portfolio as well which I will discuss in some of the ideas section below.
Here are the questions:
Thank you for your email. I have gotten way over my head in my portfolio margin account. My biggest short put positions are AMZN, BABA, FB, GOOGL, NVDA, and WYNN.
I have closed out many positions and taken about a $30,000 loss since the end of October. Today I bought 8 put contracts of AMZN expiring this Friday which alleviated around $17,000 in margin, otherwise I would have been out of buying power for today.
To close almost all my contracts would cost me around 3 times what I received in premium at over $1500 per contract, some many times that just to close out (like AMZN, ALGN, ANET, FB, GOOGL, MA, NVDA, PAYC, SHW, STMP). In essence, I would deplete what cash I still have, and still have many remaining positions – naked put contracts – still open. I am just at a loss as to what to do to save this account. I feel like a deer looking at headlights. Any suggestions would be greatly appreicated. Thank you Teddi!
Some Ideas For Repairing This Portfolio:
This article is 1800 words in length and requires 4 pages if printed.
The rest of this strategy article is for FullyInformed members.
Avoid Margin Calls and Repair Steep Losses In A Downturn – Investor Questions
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