Not just Forex Traders get margin calls!
Written by A Forex View From Afar on Friday, March 07, 2008Back to www.thelfb.com
What is the difference between a Retail Forex trader and Carlyle Capital? Apparently they both can get a margin call; recently Carlyle found out.
Carlyle Capital, a mortgage hedge fund got a margin call from its lenders, which "could quickly deplete its liquidity and impair its capital"
The first shock came on Wednesday, when it announced that it can't meet the margin calls for its $21.7b portfolio. Carlyle used a high leverage ratio, of 1:32, in order to control its assets from $670m of client's investments.
In addition to the Wednesday margin call, on Friday the fund announced it will receive some further margin calls from its lenders.
How I like these transition periods, all year long we watch hedge funds and admire there ability to generate profits, and then in the first market turmoil they fail. The Kitchen Sink retail Traders are so much more adept than that, it's how you handle the bad times that defines your trading skills, and 2% of the account at risk, with 100:1 leverage is how the Kitchen sink Trader will win out. The draw-downs are far more tolerable.
Source:
WSJ: Carlyle Capital Receives Additional Default Notices
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