Nice information Hubertus, would you still recommend a box spread in today’s market, and would one be possible with a 4 year CD, I am located in the USA and the 3 year CDs are all at 1.25% however a 4 year CD from NASA FCU is at 1.7% as of Feb 1, 2022.
In today’s market I would not set up the virtual deposito I mentioned above, it would not work.
At this moment (Feb 8 2022) the short box spread AEX 200⁄800 DEC 2023 yields EUR 59944,-, with settlement in 2023 at EUR 60000,- this would result in a loan at 0,09% interest. This is nowhere near the negative % I got in 2019. However, with investing in a CD at 1,7% you may think that gives a nice leverage.
By investing the yield in a CD you won’t have the broker’s cash interest risk. But as long as a broker decides about risk management, stock portfolio valuation and margin rates I would not consider this a safe loan for long term investments. There is a serious risk that should (can?) be covered. Interesting stuff.
Again, I don’t recommend borrowing money to invest it, actually, I don’t recommend investing at all ;-)
Thank you so much for your explanation. I invest very conservatively so have never leveraged or invested with borrowed money, but have been looking to invest a little more aggressively as I am young and would only do so with a small portion of my portfolio. I have never traded options so this is very new to me and interesting to learn and read about. Thanks again!
Nice information Hubertus, would you still recommend a box spread in today’s market, and would one be possible with a 4 year CD, I am located in the USA and the 3 year CDs are all at 1.25% however a 4 year CD from NASA FCU is at 1.7% as of Feb 1, 2022.
I don’t recommend borrowing money to invest it.
In today’s market I would not set up the virtual deposito I mentioned above, it would not work.
At this moment (Feb 8 2022) the short box spread AEX 200⁄800 DEC 2023 yields EUR 59944,-, with settlement in 2023 at EUR 60000,- this would result in a loan at 0,09% interest. This is nowhere near the negative % I got in 2019. However, with investing in a CD at 1,7% you may think that gives a nice leverage.
By investing the yield in a CD you won’t have the broker’s cash interest risk. But as long as a broker decides about risk management, stock portfolio valuation and margin rates I would not consider this a safe loan for long term investments. There is a serious risk that should (can?) be covered. Interesting stuff.
Again, I don’t recommend borrowing money to invest it, actually, I don’t recommend investing at all ;-)
Thank you so much for your explanation. I invest very conservatively so have never leveraged or invested with borrowed money, but have been looking to invest a little more aggressively as I am young and would only do so with a small portion of my portfolio. I have never traded options so this is very new to me and interesting to learn and read about. Thanks again!