Market leverage

[epidural man]

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This GameStop thing has really made me really think about how crazy it is that Hedge Funds and Banks are allowed to be leveraged 30X or more.

That is really nuts. That explains why when a crash starts, it goes crazy fast.

It also explains why the market is so high, despite an incredibly damaged and poor economy. Being leveraged at those levels (with billions of dollars) makes it seem like there is 30X the amount of money in the market. Yet when it starts to decline, it basically declines at a rate of 30X normal. This is going to be painful for many.

This graph is shocking.

And this one is pretty interesting regarding leverage and market responses.

 

[anbuitachi]

yes, when it goes up, the hedge funds will be the first to go up . when it goes down, they will be the first to get out, leaving the retail traders with the losses. another reason why income inequality is skyrocketing. and unfortunately only rich have access to hedge

 

[YCAGA]

Retail traders have access to 30x+ leverage through option contracts and futures contracts. You can get approximately 345x leverage from a sketchy, yet legal and regulated futures broker within 24 hours of setting up an account. These brokers are all domestic too, not someone operating out of Seychelles or the Virgin Islands. Option contract leverage varies based on strike, intrinsic vs extrinsic value, etc, definitely can get above 30x though.

 

[Direct Laryngoscopy]

When people understand and find out it's not just retail, hedge funds, etc are leveraged to the tilt, there will be a moment of oh s**t, but more importantly, start to look at options to protect their hard work and energy ($$$). The current debt to GDP ratio is at a level where only one currency has not failed. I won't stop posting on my ahead of the curve thread, because I want to see more people have a lightbulb moment. Watch the video I posted. Leverage is discussed in it.

 

[jeterfan]

Leverage is nothing new markets declines with the broader economy..what is different now is 3 Trillion in fed stimulus buying stocks in the open market...pushing the can down the road and allowing billionaires who are smart enough to exit even richer. What will be left when the stimulus buying is done are tax payers left holding losses on these stocks...

the dollar decline has already begun..

 

[anbuitachi]

When people understand and find out it's not just retail, hedge funds, etc are leveraged to the tilt, there will be a moment of oh s**t, but more importantly, start to look at options to protect their hard work and energy ($$$). The current debt to GDP ratio is at a level where only one currency has not failed. I won't stop posting on my ahead of the curve thread, because I want to see more people have a lightbulb moment. Watch the video I posted. Leverage is discussed in it.

you are talking about Yuan right?

 

[Direct Laryngoscopy]

you are talking about Yuan right?

Right region wrong country. Japan currently has the highest and the yen has not collapsed. Every other country that has had it above 150 has failed (The US is currently above 150).