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Hello QC community, I was just wondering if leverage is applied universally considering the total account value or if it applies to each individual stock purchased. Meaning if I purchase a hedging instrument that I plan to lose money hand over fist with, will I just continually be margin called on that asset as it regularly drops over 50% in value, even though the rest of my account has increased significantly more than was lost? Thanks for any help - I currently plan to use interactive brokers but if this is an issue I might switch!
Gahl Goziker
Hi Samuel,
Leverage is applied on a per-asset level, but it’s also possible to set a universal leverage for the universe.
To set a universal leverage for the universe, see this thread.
To set a leverage for an individual stock, use the Security class’s SetLeverage method.
If we purchase a hedging instrument which loses money, we will be margin called unless the rest of the portfolio performs well.
See the attached backtest, and note that if line 28 is uncommented, there are no margin calls.
Best,
Gahl Goziker
Samuel Schoening
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