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hypothecation
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<blockquote data-quote="UPS Lifer" data-source="post: 293727" data-attributes="member: 9789"><p>I can recall when the interest rates were really low my hypo dropped to 1.82%. Just about anywhere you took your money you could make money! It was great! I was making 6% net on the loan....Obviously those days are gone! </p><p></p><p>You have to be careful of over-leveraging your position. Now that UPS can drop $10 in one day - the bank can put you on notice and ask for additional stock as collateral to bring your position to the required margin (now it is about 60% of loan to stock held). So if you have a $600K hypo you will need to tie up $1 million plus in stock. ... Or the other scenario is to have your loan called in. </p><p></p><p>The last scenario can really hurt your position if the bank sells your stock to pay off the loan especially if you have a high capital gains situation. You would be forced to pay the gains to the IRS and your state (depending if your state requires that).</p><p></p><p>There is another program that BofA offers called STARs....but you have to have at least 1 million in stock to participate. This is very simply stated but the program is a forward sale of your stock. You lock in the current price and get approx 79% of that now with no immediate tax consequence - if in 3 years the stock jumps up to a predetermined ceiling price you share in the upside at the time of sale. Your CG becomes due for the tax year you sell in but you might have a nice upside to help pay the CG. If the stock drops to say $20 a share you lose nothing more. You have already received the discounted portion which is what BoA takes for the risk. You can even set the dividend amount that you want to receive over that time period. The stock still shows that it is yours but it is in a type of custodial account. You have no more rights to the stock until the contract is up and the current price of the stock is determined. ...but don't forget..you already have the money just no capital gains to pay until April of the following year after the end of the contract. </p><p></p><p>The way BoA makes money is they short sell and buy and make a minute % everyday on a large block of UPS stock (or some other blue chip stock). You can't do this with just any stock...but UPS is considered a blue chip stock so be glad you own it! </p><p></p><p>NOTE: This program is not for everyone. You need to be bullish on your stock and feel that it will go up. If you still curious about the program get with a BoA Investment VP and your CPA. It definitely has an upside and a downside. The program can be customized to fit your needs based on shares - future time of sale - and if you want to receive a defined dividend.</p></blockquote><p></p>
[QUOTE="UPS Lifer, post: 293727, member: 9789"] I can recall when the interest rates were really low my hypo dropped to 1.82%. Just about anywhere you took your money you could make money! It was great! I was making 6% net on the loan....Obviously those days are gone! You have to be careful of over-leveraging your position. Now that UPS can drop $10 in one day - the bank can put you on notice and ask for additional stock as collateral to bring your position to the required margin (now it is about 60% of loan to stock held). So if you have a $600K hypo you will need to tie up $1 million plus in stock. ... Or the other scenario is to have your loan called in. The last scenario can really hurt your position if the bank sells your stock to pay off the loan especially if you have a high capital gains situation. You would be forced to pay the gains to the IRS and your state (depending if your state requires that). There is another program that BofA offers called STARs....but you have to have at least 1 million in stock to participate. This is very simply stated but the program is a forward sale of your stock. You lock in the current price and get approx 79% of that now with no immediate tax consequence - if in 3 years the stock jumps up to a predetermined ceiling price you share in the upside at the time of sale. Your CG becomes due for the tax year you sell in but you might have a nice upside to help pay the CG. If the stock drops to say $20 a share you lose nothing more. You have already received the discounted portion which is what BoA takes for the risk. You can even set the dividend amount that you want to receive over that time period. The stock still shows that it is yours but it is in a type of custodial account. You have no more rights to the stock until the contract is up and the current price of the stock is determined. ...but don't forget..you already have the money just no capital gains to pay until April of the following year after the end of the contract. The way BoA makes money is they short sell and buy and make a minute % everyday on a large block of UPS stock (or some other blue chip stock). You can't do this with just any stock...but UPS is considered a blue chip stock so be glad you own it! NOTE: This program is not for everyone. You need to be bullish on your stock and feel that it will go up. If you still curious about the program get with a BoA Investment VP and your CPA. It definitely has an upside and a downside. The program can be customized to fit your needs based on shares - future time of sale - and if you want to receive a defined dividend. [/QUOTE]
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