Leverage

[hendi_alex]

Leverage can be you best friend, but when not properly managed can be your worst enemy. I use margin in my cash account, but only as opportunity cash, to snatch up bargains when they appear and available cash is low. I never use more margin than could easily be repaid in one year, only about $20k max, of which $10k is currently in use. I also sparingly use closed end funds when they appear to represent deep value. Many are levered about 30%. I currently hold KMF an infrastructure fund holding mostly MLPs and selling at a deep discount. My only other use of leverage is via buying calls. I buy calls if a company gets heavily punished in what appears to be a temporary over reaction. Some times will buy calls in anticipation of a favorable release of info that doesn't appear to be priced in by the market.