Hello everyone. I'm not a trader but a passive investor, meaning that I "buy and hold" world stock ETFs. I'm tempted to use margin to leverage my portfolio a little bit and keep that strategy going in the long run - 20-30 years. I'm talking about a leverage of up to 1.25x, nothing too crazy. Do you think doing something like that would be too risky? Perhaps the most important variable in order for that strategy to work are IB's margin requirements. I have a Portfolio Margin account, and my maintenance margin on world stock ETFs is currently 25%. How much higher could it realistically become during a big crisis? Does anyone remember what happened to the margin requirements for broad ETFs such as the ones based on the S&P 500 and world stock indices during the 2008 crisis? I just want to know what to expect in the worst-case scenario so I can plan things accordingly. Thank you.
It's hard to envision a worst case scenario, but multiple consecutive days of limit down would be a good place to start. I'd be prepared to sell in that scenario - both to limit the damage and protect against rapidly rising margins.
I was in an IBKR PM account at the time and wan't running any naked exposure but I recall my req in futures and cash increased by 20% at one point. It would simply increase day to day. It was hard to put a figure on it.
During a crisis like 2008, CME might increase ES overnight margin to something like 10% or more, and IB might go even more conservative than CME and want 20%. 25% for ETFs is already higher than that, unless it is some really risky ETF for a highly volatile stock index that could crash more than 25% overnight. They unlikely to demand much more.