dbond

No one said anything about leverage. Or at least I didn't, and I was the one you quoted in your response. You're right that the lack of control over the execution on buying and selling makes Loyal3 less than ideal. That, plus the fact that their terms specifically disallow this type of CC buying and they are already shutting people down, is why I asked whether anyone knows of any other low-fee brokers that allow CC funding.

As someone else mentioned much further up-thread, just about any professional investor would kill for a 2% edge, and I have to say it's a bit puzzling to me that the idea of using options to reduce one's risk would generate such a strong reaction decrying this as reckless behavior. Racking up a large credit card balance to buy stocks with a 2% edge but no hedge? I'll agree that's reckless, unless as others have pointed out, you planned on buying and holding the stock anyway.

From the numbers I ran over the weekend, though, it looked to me like one could guarantee a return between .7% and 2.6%, after fees, assuming a 2% CC and an options spread, and it would be completely scalable provided the broker doesn't pull the plug (obviously an issue with Loyal3).

Again, if someone knows of any other brokers, let's swap some info.

maksimfa

Go buy that index fund or eft that will NEVER beat the index.

while true, most funds under perform, plenty of great funds that consistently provide extra returning with far less volatility year after year.

newbieflyer1

bought few apple shares with citi aa executive,lets see how it posts.

hamhead

I've come up with similar numbers looking at options spreads.

Like I said way earlier in this thread, I can't do this because I work at a bank. I wish I could.

hamhead

Past performance not indicative of future results, etc.

Its very rare that mutual funds consistently outperform an index over long periods such as five or ten years. Funds that do outperform struggle once they become known for that. Outperformance = cash inflows, which means they can no longer nimbly buy and sell like they did in the past. A fund with a couple hundred million can not operate like a fund with tens of billions.

When funds have billions of dollars, reducing/increasing their stake in companies by even 5, 10% is cumbersome and can move the market in the opposite way they want it, even funds that trade large caps exclusively.

bu08usc11

It's a straight up purchase. Done several with mine.

maksimfa

I am quite familiar with that concept... thanks. I am an RIA. =)

The bigger issue is also the beta of the portfolio.

Between funds, UIT's, select SMA's and hedge funds, and a few good non traded options, there is no need to be a closet indexer. How well did those index funds work in 07? 98-01?

While I agree that in the large cap space there is little to no alpha being generated by most mutual funds.... when it comes to international, developing and emerging markets, frontier markets, real estate, private equity, and a lot of fixed income markets (muni, corporates, high yield, bank and senior loan, preferred)... index funds just can't hack it. And let's not get started on ETN's. Having a professional absolutely makes sense.

Working in finance you should be familiar with the saying.... fees are only an issue in the absence of value.

Neither myself or my clients have any qualms about paying fees to either make more or lose less than market, peers, index's do.

... but I digress.

I have done the math and this was discussed adnauseum on our private forum, and this method just does not make sense outside of one or two specific reasons.

Too much volatility, and most of all, too SLOW of a turnaround time to make it worth while.

Once the market goes through the much needed correction, I do have 5 or 6 names I would pick up that I would buy anyway, with the added perk of generating MS.... but NOT at the 2.2% max most would throw around here.

My own numbers, on the names I am looking at... Making 5% on the buy/load side (net of fees), and another 5% or so to either hedge or juice the return. Only problem is... the 10 days or so round trip, +/- nearest options expiration, plus ACAT/transfer time to sustain account.

The numbers are good, IF... big IF you are ok with market risk, and are fine locking up your money for that long of a time frame. Personally, I am not. My preferred methods are 2 to 3 days... TOPS, from charged to paid off avail.

drdrew450

if your a pro like maksimfa, this may not seem that great, but for a casual investor who likes to buy indiv stocks, I think this is pretty great, not without risks, but the prices Ive gotten from loyal3 have been fair, I have made money on all 5 of my trades so far, plus the credit card points.

I normally only trade in my retirement accounts but I float thousands of dollars in man spend every month so I think people who do man spend can handle that situation.

I don't like most of the stocks they offer, this is what I have bought/sold so far, I would be more than happy to hold these for years, their future is bright.

brk-b
aapl
sbux
dnkn
tgt

TheGreatMongo

I dont think this is suitable for MS. one can lose more than what he/she gain from the potential CC bonus. Until we get realtime trade confirmation, I don't think its advisable for anyone to send payment to Loyal3.

schoopsthecat

I understand that the risk is inherently greater than with other forms of MS, however seen as an investment, if you can guarantee a 2% bonus from a credit card for depositing money, logic says that over time this is a no lose situation. If the market goes down, you buy more shares cheaper and keep collecting 2% more than any normal investor. This of course assumes you have enough cash to be able to float whatever you're investing.

My question is about how to do this without getting shut down by loyal3. So far, I've bought and sold 3 stocks for a grand each as a test. I happened to make 1.8% on the investment as well as the CC points, and I recognize this won't be typical. What I'm wondering is how often you can change credit cards without getting shut down and how often you can buy and sell on the same day (which is what I did in the first instance) without getting shut down. I actually want to hang on to a few companies...mostly McDonalds and Brk...possibly Coke.

I'd also like to point out that while you don't have control over when the shares are purchased, you have control (within a couple hours) of when they are sold, which greatly mitigates the risk. You can absolutely accomplish buying and selling on the same day.

Anyone have an account that hasn't been closed that has cycled through 3 or more credit cards?

Shuai Zeng

Only way I'll use this, is for meeting minimal spending. I'll only buy when the earning posted, or if it's stable. Other than that, it's a risk factor like what other have said.

wholeinone04

I was pretty against Loyal3 at first and I wrote the article haha. But the more I've thought about it/researched and played around with it, I think it might work. Invest in 10-20 of the lowest beta(of the 53 loyal3 offers) stocks and hold on to them for a week so you don't raise any red flags with Loyal3 and then sell.

Source: http://news.morningstar.com/classroo...385&page=4&CN=

Everyone's different but at what % loss are you no longer satisfied? Everyone should be ok with a 1% loss since that's what VR's were costing and you'll get at least 1% back in cash or points. 2-3% is where people like me won't be happy but if it's the difference between not being able to get a card and getting one, then it might make sense. I apply for cards for me and my fiancee so the limiting factor in my applications is usually my spend ability and not my credit.

I'm not sure how to run the numbers but I'll try and figure out what the chances are of the market going down 1% in 1 week, 2% in 1 week, 3% in 1 week, etc.. and report back.

newbieflyer1

for me the since the time i placed the order apple shares went by 15 dollars.but i am doing this to meet spend requirement so i am ok as long as it just 1% loss .

cfbrown

I am in with 5k testing out the waters. The hard part is not knowing the "real time" as someone said before. I bought GOOG and TWTR thus far.

EGFLYER

I bought $2500 of brk-b on 11 apr, sold them on the 17th(made 80 bucks), but i'm still waiting for funds to be availible for withdraw. With that said this may be a long process, as they want another 3-4 buisness days to deposit funds, when they become availible for withdrawl. As a side note, Im still holding $7500 of google appl and amzn. I plan to cycle 10k a month on four cards, at 2500k a piece. Got them all loaded now just need to unload them, in a timely manner, and hopefully a resonable return.