Comments on: Gary Scott Highlights the Risks & Rewards of Leveraging http://selfinvestors.com/tradingstocks/guest-author-gary-scott/gary-scott-highlights-the-risks-rewards-of-leveraging/ ETF, IPO & Breakout Stocks Analysis, Tracking & Research Sat, 06 Aug 2011 03:46:02 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Zach http://selfinvestors.com/tradingstocks/guest-author-gary-scott/gary-scott-highlights-the-risks-rewards-of-leveraging/comment-page-1/#comment-235 Zach Fri, 13 Jul 2007 18:08:43 +0000 http://selfinvestors.com/tradingstocks/uncategorized/gary-scott-highlights-the-risks-rewards-of-leveraging/#comment-235 I'm always intrigued with stories of investors using leverage both successfully and unsuccessfully. It's amazing how little respect some give to the potentially drastic consequences that can occur if positions move against them. Many use models assuming that they can withstand a 25% drop in the underlying asset (50% loss for a 2/1 leveraged account) and forget that even if they are confident the assets will rebound in value, a margin call will force them to liquidate some of the position so they are not able to retain the full position for the ride back up. Thanks for the insightful post! Zach I’m always intrigued with stories of investors using leverage both successfully and unsuccessfully. It’s amazing how little respect some give to the potentially drastic consequences that can occur if positions move against them. Many use models assuming that they can withstand a 25% drop in the underlying asset (50% loss for a 2/1 leveraged account) and forget that even if they are confident the assets will rebound in value, a margin call will force them to liquidate some of the position so they are not able to retain the full position for the ride back up.

Thanks for the insightful post!
Zach

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