Sunday, 12 October 2025

Leverage can double your gains but wipe you out too, what "dangerous" positions am I holding currently?

The huge crash on Friday has been making waves in the weekend as cryptocurrency market functions 24/7, there is no break and we are hearing stories of liquidations and huge capital loss due to perpetuals. Let's have some definitions first as I am also not familiar with terms. 

Leverage in investing refers to the use of borrowed money (debt) to increase the potential return of an investment. It is a strategy that allows an investor to control a larger position in a security or asset than their own capital would normally permit. Essentially, leverage acts like a financial multiplier, amplifying both potential gains and potential losses.

How Leverage Works

The core mechanism involves:

  1. Borrowing Funds: The investor borrows capital, usually from a broker (through a margin account), a bank (like a mortgage for real estate), or by using financial instruments like options and futures.

  2. Increased Exposure: The borrowed funds are combined with the investor's own capital (equity) to make a significantly larger investment. This larger investment is the total exposure.

  3. Amplified Outcome: Because the profit or loss is calculated on the total, larger investment amount, the return (or loss) on the investor's relatively smaller amount of original capital is magnified.

The degree of leverage is often expressed as a leverage ratio, such as 2:1 or 5:1. A 5:1 ratio means that for every $1 of the investor's own money (margin), they can control $5 worth of the asset (borrowing the remaining $4).

The Double-Edged Sword

Leverage is considered a high-risk, high-reward strategy:

  • Amplified Profits: If the investment performs well, the returns on the total position, after deducting the cost of borrowing (interest/fees), can lead to a much higher percentage return on the investor's initial capital.
  • Amplified Losses: If the investment moves against the investor, the loss is also based on the total position's value. This can result in losses that exceed the investor's initial investment, requiring them to put up additional capital or face a forced sale (margin call) of the asset to repay the debt.

My Position

I don't hold any leverage in my portfolio as I don't spend huge amount of time in the markets nor am I a trader but I do hold some cash secured puts on IBIT which I did to generate some capital to add onto my positions and since I know that Bitcoin is on an upside trajectory long term then if it ever drops that low, I will be willing to buy. 

I hold about 3 cash secured puts that I bought in June this year expiring on 20 March, 18 June and 18 June 2026 with strike prices, $49, $40 and $45. Based on this, $49x1754=$85,946.00, $40x1754=$70,160.00 and $45x1754=$78,930.00 so if Bitcoin drops to these prices, I would need to buy the shares. 

$49x100=$4,900.00, $40x100=$4,000.00 and $45x100=$4,500.00, if we were to reach the prices above then I would need to spend $4,500.00+$4,000.00+$4,900.00=$13,400.00 (USD) to cover the positions. To me, those are my riskiest positions because I am also holding a Bitcoin position and would then need to spend my cash position to buy the positions. Seeing this Friday crash, is scary and there is a possibility for that, never say never in crypto.  

I am experimenting with options, I don't like covered calls as most of my positions are for the long term and for holdings like Tesla and QQQ, it is definitely not recommended for covered calls unless you plan to take profit and close the position. I did covered calls for awhile and always found myself losing the upside. 

With cash secured puts, I find it useful only if you have some cash on the side, after trying it, I do find it a little waste of cash positions if they are huge as it might be better having it invested but overall all right with it as my cash secured puts are not a huge amount. I think as we get older then this might be a good tactic as your portfolio has grown and you also can afford to have a larger cash holding but of course, this is in the case of you not having much liabilities For now, I won't be adding any options positions in. I am observing buying options like a call or a put but not dabbling into it yet, just learning more about it. 

Let's wait and see how the equities market will open on Tuesday, the crypto market has been devastated so sharing some tweets here for the memories. 
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Q3 2025 Portfolio update - Broke a new all time high but went back down again in start of Q4

I wanted to record this down as another all time high was recorded for the portfolio at the end of Q3 2025.  With Tesla gaining back traction, REITs gaining back as interest rate is predicted to fall plus bitcoin hitting all time highs, it propelled my portfolio to $300,000 at one point which was unimaginable. 

I remember starting out in my investing journey, wanting to hit $100,000 when I turn 30. I turn 30 this year and my portfolio has hit $300,000 before declining to about $260,000, I have been taking huge risks in positions but balancing it out slowly now with monthly DCA has seems to pay out so far. 

A huge part of how my portfolio has grown is due to concentration, I decided to concentrate in just a few positions, Bitcoin being one of it and Tesla as well as QQQ. All 3 has done pretty well. 

As I type this, it is 12 October 2025 and on 10.10, with China announcing rare earth export control, Trump retaliated and will be imposing tariffs.  The market reacted to it and crashed with Bitcoin seeing a dramatic drop, the crypto space has experienced huge liquidations as a lot of leverage is being use and also because the market was so bullish the past week that everyone was predicting an all time high. I have seen stories of huge liquidation on twitter and also it seems that some brokerage did close positions even when it wasn't supposed to due to the huge dips. 

My portfolio has dropped down to about $260,000 since the highs and it really shows the volatility and concentrated positions that I currently hold gives a huge high and low as Bitcoin crashes quick and dip quite substantially compared to the stock market index like S&P 500. My brother portfolio is only VOO so he experienced a lower volatility but overall, I am all right with it and am thinking of adding some positions slowly. 

Sharing some of the ATH screenshots of my portfolio so far (I hold a portion of my Bitcoin in IBIT and the rest in cold storage so my stock portfolio looks to soar much higher as it has a position of Bitcoin too:




With that, it really shows that if you start seeing ATHs and want to take a screenshot of your portfolio value then maybe it is time to take some profits or reserve cash for some buying opportunities. Anyway, with whatever available cash, I will slowly be initiating positions although I don't usually hold much cash to deploy as I use a monthly DCA strategy. I hold mainly spot positions and do not use leverage so most losses are due to decline in prices of assets which is already enough volatility for me. I am currently building up my index ETF positions and as I get older, I might shift my profits from positions to safer assets. 

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