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Investment plan - please help me identify the extra risk?

#1
I am planning to use this investment plan in my non IRA margin account. Normally I would have done 50% bond and 50% stocks since I feel like stock market/economy may be getting closer to top.
 
But I am thinking of using only margin for stock positions and invest all the cash in bonds.
 
I want to invest 100% of my money in bonds, I am thinking about 15% in six months treasury, 25% in short term treasuries, less than 1.5 years expiry.
 
And the rest in investment grade corp bond. For corp bond, I am using LQD which is a diversified corp bond, with diverse expiry, yields around 3.5%. I am able to sell covered call against this to generate another 1.5% extra yield.
 
Then use the margin to take synthetic long positions. Say for example, synthetic covered call for apple will be something like, buy call, sell put, say strike 205, Jun 2020, and sell a covered call of strike 230.
 
this strategy can increase our yield by 2.5-3% (because bond investment is kind of free and that can yield 2.5-3%)
 
I am not planning to use 100% of the margin buying power, to take positions, I will keep around 20% balance, just in case market becomes very volatile or some of my stocks go down more than 10% (upto 10% down will be taken care by the covered call)
 
I am not able to figure out where exactly is my risk being increased due to this leveraged investment plan?
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#2
As you already realize, your main collateral (Bond portfolio) will have the interest-rate risk (for the 60% in LQD), as well as inflation risk. Due to stability, your marginable amount will be relatively stable, but you maybe subject to margin call if your margin requirements for your leveraged holdings go up, or the margin % limits change due to one reason or the other. The latter should not normally happen, but for leveraged play, one needs to be prepared for "abnormal" conditions and doomsday scenario. As a general rule, leaving a lot of headroom in the margin is a good idea (i.e., do not use the entire margin available). I think margin calls will be the biggest risk in such an arrangement. It'd be wise to prepare for 50%-70% downturn, not 10-20%. Such a big downturn is very rare, but not impossible. One should not get completely wiped out on such an event.
 
You can use your margin as a collateral (e.g., for option sells), or as a loan to buy securities. In the former case, there is no monetary cost to you. In the latter case, you will need to pay margin interest. That means you will need to invest the borrowed fund in such a way that not only the return exceeds the margin interest rate (to avoid loss), but it needs to exceed by a fair bit to compensate for the opportunity cost of divesting 50% of your portfolio from Bond to stock, as well as generate a good profit.
 
I did not quite follow your synthetic trade examples. I personally use a much simpler variant of what you mention. I have a large % invested in Bonds. To compensate, I use a small % of my available margin as collateral for option sales. The cap I use is 25%, although presently it's at 4% but normally I tend to stay at 10%. Depending on how much margin I use on average, the strategy can boost the return by a few % points. I could use higher margin, but I do care about the quality of my sleep  and I have had a few first-hand experience of how margin requirement on options can go up suddenly with major market events.
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#3
You are right, I did some analysis and turns out in 2008 like scenario, my account may face complete wipe out since LQD will also lose a lot of value due to the credit risk on corporations (I am beginning to wonder if LQD is worth the risk or I can simply go and buy bonds of solid cash rich companies like Apple, Microsoft etc,,, I would hate to be a buyer of bonds of financial companies since those are leveraged very high due to the very nature of their business, and have tendency of losing 50% or more in bad times).
 
So in 2008 like scenario, not only LQD will be danger but option margins can quadruple when my stocks fall by 30% or more.
 
I am thinking of not being too greedy and invest only around 40% in LQD and the rest in UST of expiry less than 2 years. This way, at least my bond investment will stay safe in a bad event.
 
My plan for the extreme margin requirement during a bad event, was to slowly sell my bonds(since they would not go down but maybe slightly up when stocks go down) and make the cash available for margin or to just buy the underlying stocks and wait it out.
 
I think I will make sure that my position is such that my synthetic stock ownership never exceeds 80% of my account, that will make sure I can stay in the game even in extreme conditions.
 
 
Synthetic stock position: buy call and sell put of same strike, this gives you position in 100 stocks, your position is completely funded by margin requirement, plus a small amount for the dividend difference in put price to call price.

 
The danger of synthetic positions is, you can easily take 3 times the position in stocks compared to if you were just using cash to buy the stocks.
 
There is no interest on margin since you are just using your bond investment as collateral and most of your trades cost very little cash since the credit from the put pays for most of the call price. In my case, I always sell a covered call, which means I always end up with credit for every account.
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#4
I know what Synthetic long is (though I do not use it myself) - I understood that part. I did not understand the "combine with covered call" or "synthetic covered call" part. I was unfamiliar with "synthetic covered call" and I did some reading. Some describe this as simply writing a call spread and a stand-alone put. Some describe this as simply writing naked put. Some describe this as a call spread write. In all these cases, there will be margin interest involved on the trade value. If conversely you are selling a covered call, you are buying the stock and selling a call. If you are using margin for buying the underlying of the covered call, then you will owe margin interest on that borrowed fund.
 
Another thing you may want to consider is whether the complexity of the positions will increase your maintenance effort. Depending on your specific trades and the extent of margin you decide to take, the portfolio may not be a fire-and-forget one. It may make sense to give up some additional yield if that makes the portfolio low-maintenance.
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#5
I like the strategy and System101 has already pointed out the possible shortcoming of LQD. 

It is difficult to give a definite thumbs up or down on the risk without knowing the goal or objective for this portfolio. Turn it into Income when I Retire, kids education, get that vacation home/boat/RV, or mostly protection into the future for my heirs/charitable giving.

 
Keep going, looks good!
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#6
Perfect, building a lifecycle fund based on your needs. As opposed to the generic products from the large MF companies.
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#7
Thanks Miss_Prim Its my savings for retirement. My goal is to grow it 9-10% every year and would make it more conservative when I get closer to retirement.
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#8
"Then use the margin to take synthetic long positions. Say for example, synthetic covered call for apple will be something like, buy call, sell put, say strike 205, Jun 2020, and sell a covered call of strike 230."

I did not try hard enough to analyze to get anywhere.
 
Do note that if you sell a put on AAPL, that can be exercised early. That could be motivated by various things including the buyer of the put wanting to capture regular dividends.
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