Other Peoples Money

[force]

Hi,

I have been thinking strategy and would like your opinion, heres what I came up with:

If I use a credit card with say $30,000 limit and 55 days interest free, I can basically get $30,000 for free as long as I pay it back within 55 days.

So I was thinking If i put the $30,000 on bluechip stock a few days before the record date, wait a month or so holding the stock, get paid the dividend and sell the stock presumably a little higher than I bought it or even break even. I could pay the card off by giving back the $30,000 and keep the dividends earned & any appreciation in the price of the stock.

Is this or another form of using other peoples money a good way to make money, granted there is alot of risk but no guts no glory right?

What do you guys think of this?

 

[tech/a]

Outside of the square thinking!

Don's been doing this for years using Margin account.
As long as you understand the risks fine---

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=forum;f=79

 

[prawn_86]

what happens if you have to sell the stock at a loss though? thats where the risk lies, lots of stocks drop ex-dividend, and sometimes by a greater % than what the div was paying

 

[mrWoodo]

But if you take the $30k out as cash, you don't get 55 days interest fee. ie, Cash advances attract interest immediately.
Hmmmm, could you buy stocks using a credit card? Too tempting

 

[stock_man]

2 thumbs up for thinking outside the square. Using other people's money is the fastest way to financial success and freedom.

Unfortunately (correct me anyone if I am wrong), most credit cards only have the 55 days interest free on purchases, and its "up to 55 days", depending on what part of the billing cycle you made the purchase. Pulling cash of the card results in instant interest (~18% p/a) on the balance.
(2.71% over 55 days)

In the past I have done this, but found that if you get burnt, you get burnt at that interest rate. And it stings....

Even a cheapy credit card is about 10%.

Why not get a margin loan for a blue chipper - most allow you to borrow 70% (or even more). If you were really sure that your system worked, even CFDs and borrow 90% or so.

Just be careful using the instant cash on credit cards - your stock has to return a decent percent just to break even!

 

[rowes]

I heard some one say once and a few of you might have heard this to,

If you where to take a loan and borrow 20K and purchase a car, you pay petrol every week, wear and tear, services on the car, Rego, depreciation, interest etc etc this is quite acceptable to most people.

Take a loan and borrow 20k and invest it in the markets and work towards your future most think you have a screw loose!!

you'd wanna know what your where doin first.

 

[tech/a]

Man I've got a whole workshop full of Screws in that case.

 

[Sean K]

Would work ok in this bull, but will cause pain in a sideways, downward market. Time might be running out to give it a spin. Maybe try it if you have the cash set aside to cover the trade and repay the card. You'd only really come up with this idea towards the end of a bullmarket probably. Are you a cab driver?

 

[nizar]

I have thought about this as well ie.using a credit card.
But no go because interest is paid instantly on cash advances

Its a pity coz it would work well, it would be kinda like t+55 instead of t+3, lol

 

[happytrader]

Hi Force

If you did your homework you could be very selective with your purchase of bluechip shares and sell options on them at the same time as you bought them. This is called a buy write strategy. You would receive a premium (equivalent of a holding deposit) immediately, which would cover the interest on borrowings, brokerage and partial profits.

As I said you would need to be selective in your choice of share as well as your choice of option series and do your homework very well. Best to do lots and lots of papertrading first and make the first trade count.

Of course nothing is without risk so get advice, education and know yourself.

Cheers
Happytrader

 

[force]

Would work ok in this bull, but will cause pain in a sideways, downward market. Time might be running out to give it a spin. Maybe try it if you have the cash set aside to cover the trade and repay the card. You'd only really come up with this idea towards the end of a bullmarket probably. Are you a cab driver?

A cab driver? LOL no

Why would they come up with an idea like that ?

 

[bvbfan]

Would work if you have a CFD account with someone that accepts BPAY

Mine charges $1.50 for deposit and withdrawal. So you could get the interest free days. Some banks offer a low rate for large purchases over $1000 around 1% for 3 months which might also be useful.