Part 7/9:
The conversation also delved into the subject of using margin while trading. David expressed a cautious approach, highlighting the potential perils associated with over-leveraging—particularly during turbulent market conditions. He shared his own experiences balancing margin use with the need to maintain liquidity and minimize risk, likening it to a cautious dance where timing and prudence come into play.
Through utilizing a small amount of margin—typically under 10% of his total portfolio—David felt he could take advantage of stock opportunities without exceeding his risk tolerance. He compared this to investments in deep-in-the-money options, which can provide similar leverage without the necessity of margin calls.