larry,

assume a $100K account - you want to follow strat. #2 - you want to trade SPY - you want to have 50% allocation for your COT portion of your portfolio...

if strat #2 says to be short NON-leveraged, would you short $50K? or would you put on a $25K position and wait till you have a leveraged signal to put on $50K?

i know you can do whatever you want, but if you were trading SPY, how would YOU do it?

thanks.

-ja

Joe,

I would short $50K while the system says to be non-leveraged. And then when it says to go leveraged, I would short another $50K on margin or I would move the $50K to a 2 to 1 leveraged bear fund (ProFunds or Rydex).

In fact, that’s exactly what we will do with the Model Portfolio. If the SPX closes below its weekly 40-week moving average, we will move the short COT positions to the ProFunds Ultra Bear fund (I think that’s what it’s called).

Doing it that way keeps $50,000 free for other positions and still keeps risk at a manageable level.

Larry

Larry,

Do some brokerages allow you to specify when to use margin?
My brokerage will only let you use margin once all your equity is invested.
So if I had $100K capital, I couldn't specifically opt to use half of it and match it with the same amount of margin capital.

Jacques

Jacques,

Different brokers handle it in different ways. For example, my broker allows nothing but margin accounts. It’s the only kind of account you can have (other than an IRA or something like that). But no interest is charged unless you have a large enough position that you have to actually use the margin.

In your example, there wouldn’t be any reason to specify to use half of it for margin until you used the entire $100K.

Larry