Using Bonds in a Stock and Options Account

Discussion in 'Trading' started by diputs, Jul 14, 2006.

  1. diputs


    I am still getting all the details, but this is where I am at.

    My brokerage will give me 92% of the value of the treasurary bonds in my account to use to trade stocks. My brokerage does not have a very high interest on cash, so this would be a way to raise the interest I get for money in my account. The Treasury market is very liquid, so I could sell the bonds if I needed to cover my account. The only problem is that it takes three days for the sale to clear.

    It seems like this would be a great way to still have money to trade, but also get a fixed income on my trading money.

    Maybe I should post an example to make it clearer.

    If I have an account with $25,050. I buy 25 30yr T-bills with a comission of $50. I would have $25000 in bonds, and be able to trade with 92% or $23,000. 30yr T-bills are currently around 5%. So I would be making 5% on $25,000 plus being able to trade $23,000.

    Is anyone doing this? Why isn't everyone doing this? Anything obvious that I am missing about this?