From L.B.: "I would like to get rich
quick. I have a little spare money to gamble. I
heard that margin trading can make a mountain of
dough out of my little molehill of cash. Any
experience in this?"
Yes. My experience is that you will lose your money.
The leverage you get with borrowed money does increase
potential returns. (Buying out-of-the-money puts and
calls increases it still further.) The more leverage
you reach for, the greater the pot of gold you have
an outside chance of winning — but the more outside
that chance becomes. Sooner or later, you will in all
likelihood lose it all, because even gamblers who do
win rarely quit while they’re ahead.
