I understand what you guys are saying and I agree in theory. The problem will occur the time people use "that buffer" and the mkt continues to go down. Then more buffer is used to avg down and the mkt continues its decline. Next comes margin calls and the sale of stocks people don't want to sell which creates further mkt decline as all those sells come in to cover. That's a big part of what compounded the tech bubbles bursting. I'm just saying it's risky and that "most people" can/will do better just using options for leverage. BTW, I have access to some of the lowest margin rates in the industry in my E-Trade acct because it has rates that are grandfathered to my former BrownCo acct. I haven't looked recently but it's typically been 1-1.5% below Ameritrade & E-Trades normal rates.
I like to use my margin account as a buffer, so I always have funds available if I need to pull the trigger. Sometimes you need to move fast and cannot afford to wait for the funds to clear.
Actually, would it be a good test to see where the stock closed the day the S&P announcement came out and look at the after hours trading? Didn't it pop up $2-3 in after hours just on the announcment? Would that be an idea of how much it might pop when fund buying commences?
"I think you may get those profits back"
--> Yep. I'm waiting for the addition to the S&P to sell calls. I expect to get a $3-4 pop when that happens so I should be able to get a nice premium. The thing I'm hoping against is that it trades at $58-9 before that pop in which case it won't be in the $65 range which is where I want to sell those calls at.
Smacked down to $61.70? That's not much of a drop.
I mean I would think it will sell off a little then steady itself for a decent gain, but I don't know. It always seems this stock starts off hot in the mornings sells off midday and then comes back up off the selling to close well over the last few days.