On trading with leverage

“I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.”
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— Warren Buffet

I am not a professional trader. I am a professional investor, though. And I only invest in what I know and understand.

For me, life must be lived under the principles of Nassim Taleb’s book, Skin in the Game. Once public, you will understand that every single aspect of Atman Capital exonerates alignment. We are building something very special that combines leverage and skin in the game.

In the meantime, I’d like to talk about trading stocks with margin.

A quick explanation on what margin is, from the WSJ:

"It is the money that investors borrow from stockbrokers to buy securities when they can’t or don’t want to fund the entire purchase with cash. Say an investor wants to purchase 100 shares at $50 each for a total of $5,000 but has only $2,500 to invest. That individual could buy the rest of the shares on margin. The same process can be used to buy exchange-traded funds."

Interesting to see that margin soared this year.

I have made 30+ trades in the past 18 months using over US$100K in margin. I agree that it isn’t for everyone, but it can be quite useful. Especially with low interest rates.

As of now, I still have 25% leverage on the portfolio, different than the 3-4x I was using in 2020. I plan on reducing that to 0% in the next 12 months since I am concentrating my future capital to build Atman.

As many knows, I think using leverage is extremely important in life. Margin is one of these mechanisms, if, and only if, you know what you are doing and can take the consequences for your actions.