I’m about to tell you something for free that cost me $70,000 to learn.
I’m sharing it because I don’t want you making the same expensive mistake I did.
Here’s what happened. I bought a large position in Nvidia (NVDA) using nearly $500,000 in margin, with an average cost around $62 during a strong uptrend. At the time, the leverage made sense because the stock was moving higher.
Margin works beautifully when prices are rising. The leverage amplifies gains, and the interest feels manageable as long as the position keeps delivering.
Then the stock stopped advancing and started moving sideways. That’s when the math turned ugly.
When Premium Income Becomes a Margin Payment
I was selling covered calls and collecting premium each week, but instead of that money becoming profit, it went straight to margin interest. I wasn’t getting ahead — I was treading water.
When I finally reviewed the numbers, the margin expense totaled $70,000.
That was the wake-up call.
Margin isn’t just about interest rates. The real danger shows up when momentum stalls and you’re paying to hold a position that isn’t working. In extreme cases, you also risk forced liquidation, where a computer decides what to sell and when.
I sold every share that was purchased with borrowed money. The shares I owned outright stayed, and I continued running the wheel on those. But the leveraged portion had to go.
My rule now is simple: Margin works on the way up. The moment a stock stops advancing, anything held on margin gets sold.
If your margin rate is 10% and a position is reliably earning more than that, margin can make sense. But once that edge disappears, the risk-reward breaks down fast.
How I Keep Dry Powder Without Using Margin
I still have margin accounts, but I’m currently using zero of it.
Instead, I park a portion of my capital in the U.S. Treasury 3-Month Bill ETF (TBIL). It’s liquid, it earns yield and it gives me same-day access to cash if I ever need it.
That buffer keeps me in control instead of letting the brokerage decide my fate. It allows me to stay invested without relying on borrowed money.
When you’re managing a seven-figure account and a meaningful portion of it is margin, the risk simply isn’t worth it unless the position is delivering.
I learned that lesson the expensive way.
Now my process is locked in: margin only during confirmed uptrends, and the second momentum stalls, I’m out. No exceptions.
Trade well,
Jack Carter
Jack Carter Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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Source: Initial Public Offerings: Updated Statistics; University of Florida, 2025
