Borrow chf at min cost

Hi,
I would like to borrow a six figures chf amount to invest it. I got comfortable paychecks so I am easy and I would qualify as an excellent credit rating: no child, young, no debt.
Where is the best place to get “cheap financing” in Switzerland ?

Thanks

You need to assets to pledge, rather then “no child, young, no debt”, in order to qualify for the lowest interest rates such as

  • real estate - 0.4-0.6% via mortgage is possible
  • stocks - IBKR will loan to you at 1.5% on the margin
  • own business - talk to private banking units at swiss banks. But for 6 figures they are probably not going to be interested in cutting you a deal, 1M @1% is only 10k profit for them, a tad too little. Try again when you’re rich

Unsecured loans will start at around 5%.

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Unsecured loans also come with hefty amortization requirements, making it very hard to invest that money in a profitable manner. I’d triple-check to make sure my financing model is viable before taking anything else than a margin/Lombard loan to buy securities.

When I wanted to go on a similar venture, I’ve tried a search through Comparis after checking all calculators I could find online, they sent me to Credaris. The deal wasn’t good enough to make sense (it required more than guaranteed 14% returns per year on invested assets to be viable).

It also seems that at least some credit providers will get you a better deal if you are a homeowner than if you are a renter.

Since you’ve got comfortable paychecks, I’d say the easiest way to go would be to save a large chunk of them, which should lead you to your 6 figures amount to invest in a relatively short time. You can add in margin loans through IB on the way if your risk assessment calls for it (based on your need to take risk, provided it doesn’t surpass your ability for it). Please remember that paychecks are not guaranteed and that unexpected events happen (like meeting someone we love and wanting to raise a family with them), making your risk profile subject to change in the future.

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Thanks for your answer.
I wanted to borrow against some of my assets but it is unfortunately not available in Switzerland.

When there are some arbitrages around at 40% annualized, borrowing at 5% is a no brainer…
I am just trying to get set up and be able to engage cash quickly when this arb opportunity happens. Looking for up to 1mchf. I received a 5.9% proposal this morning.

40% APR sounds to good to be true.

I got a 40k unsecured loan at 4.70% from Good Finance in 2019, as I needed some liquidity for a larger purchase and did not want to sell my investments. I also looked into Lend.ch and cashare.ch as they advertise rates as low as 3.50%, but almost nobody qualifies for those rates.

Today I would probably use margin/lombard loans from Interactive Brokers, if I was in the same situation again. Lombard loans might also be available from you bank, if you have significant wealth managed by them.

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The best place is rich friends or parents, or relatives. As others have said, it is very unlikely that a bank or lending service will give you a loan for shares.

Second best:
Open an account at IB, DeGiro, Swissquote or SmartBroker.
They all offer margin loans in CHF from 1.5 to 3.5 %.

Buy some solid ETFs like VWRD or VT.
Use the margin for investing more.

There are no shortcuts.

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Lombard credit by swissquote for 0.0%. You can probably take safely one third of your asset as loan this way.

SQ “Free” Lombard loans are only free until January 22, after that, it’s back to 3%.

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This screams scam.

The risk free rate is negative.

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Maybe do your research, look at what a carry trade is and come back?
All the smart money in Q1 was in the bitcoin cash and carry trade. I personally locked 15% over 5 months in April-21 by buying spot and selling the Sep-21 future (equivalent 39% annualized).

There is currently 8% annualized… that is a good measure of where true inflation truly is… if you can lock it Risk free

This is not risk free.

There is a risk of losing your principal with these trades.

Gambling in crypto is not free arbitrage.

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The only Risk in this trade is the counterparty Risk with the deriv exchange, which is similar with IB, saxo or whoever.

Otherwise, that is a trade around the convergence spot/futures. You short the future premium and you buy it back when you get closer to expiry (spot =future just before the expiry, so premium converges to 0). Anyway, no need to justify myself, if everybody was aware, we would not have these returns available. Thanks for the challenges

I’m not @xorfish, but I followed your advice.

Carry trading, or cash and carry arbitrage, is a market-neutral strategy that exploits inefficiencies in the spot and the futures market. It combines a long position in the spot market and a short position in futures when the market is in contango – a condition where the future prices of an underlying asset are higher than the current spot price. As expiration nears, the premium evaporates; on the day of the settlement the futures price converges with the spot market price, generating relatively riskless returns.

From my humble POV, this is one of the biggest risks here. Unless you want to trade BTC futures on CME, you’ll have Binance, Deribit or some other crypto exchange as your counterparty.

Problem with CME is that one BTC future contract is 5 BTC, which means you need ~200k USD to buy the BTC in the spot market first. Personally, I would trust CME much more than any crypto exchange (we’re talking different galaxies here).

If you are trading futures on crypto exchanges, contract sizes of 1 BTC seem to common (that’s just a rough check, maybe they have smaller contract sizes as well). The problem is that you have to use the BTC as collateral. If you use 100%, you don’t have any liquidation price. If you use leverage instead, your position might be liquidated by strong price changes in BTC.

Personally, I wouldn’t leave more than 5k or maximum 10k equivalent USD on any exchange, but that’s just me.

As of right now, only the futures from Feb. 2022 are selling for a notably higher premium than the current spot price (on CME). So you would need to block 200k for almost half a year. But that’s just a high-level view of the whole thing. The premiums I found on CME are options, not the futures themselves. Will need to read a little bit more about that.

On a side note: tax offices might treat you as a professional trader and tax you differently. But I’m sure you know all of that already.

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I assume you are familiar with interest rate parity theory. In an efficient market it shouldn’t be possible to make profits on Fx this way because you are betting against professional traders. However perhaps the point is that crypto future markets are not efficient and that is why you think there is an arbitrage opportunity

Does seem like you needs balls of steel to leverage up to do this though:
-BTC price is volatile, how can you be sure price will be higher in the future? Especially when there is risk of political intervention

-counterparty risk: unlike other future exchanges there is no regulator overseeing these crypto exchanges, which are limited risk entities. In the event if a run on the exchange you are likely to lose everything

-margin call risk if you are borrowing on margin

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That is actually a significant risk when dealing with underregulated crypto exchanges.It’s more similar to Mt Gox than IB/Saxo/whoever.

Generally if a deal looks too good and even obvious, the first instinct should to be to ask where are you possibly getting fucked and work from there, not where to borrow tons of money to go balls deep in.

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I use deribit which is a NL based exchange.
Appreciate the challenges around exchanges going away (mt gox). We are in different environments… crypto is still the far west for some, but it is honestly a total different world vs Mt gox years.

On deribit, it is 100% collateralized… so no risk of margin call.
I buy x btc spot on spot exchanges and sells x btc worth of future.
Same returns were available on CME and when i say that a ton of smart money was capturing the %, it is true.
I would not bet 100% of my net worth into it for sure but it is;
1/ a nice strat to accumulate underlying during downtrends. Flat pnl in $ but growing amount of btc
2/ get a return on a part of your portfolio if you are denominating your assets in $

Ultimately it all comes down to your Risk measure of ctp risk. If you feel deribit has 40% of going away, probably not for you. Under my Risk measure I don’t put this prob…

Unfortunately it’s not. Deribit belongs to DRB Panama Inc, which is domiciled in Panama (see here and here)

Please also note that Deribit is required to regulate derivatives according to EU law, which they haven’t complied to yet (see here)

And here’s a little more about Deribit history:

Amid the novel coronavirus market upheaval in late winter 2020, liquidations on Deribit caused an almost 50% decline in the holdings of bitcoin in the platform’s insurance fund, from 392 on March 11 to 198 on March 13.[7] The company deposited 500 of its own bitcoin in the fund on March 13.[8]. On the morning of August 27, 2020 - a day in which $22.8 million worth of bitcoin options and $6.5 Ether options were due to expire - Deribit suffered an outage. The outage was due to “hardware issues,” according to a tweet sent out by the company at about 1 AM CST, and not due to a hacking attack.

When checking the their official website, I couldn’t even find an official address. The only advantage from my point of view is the small contract size of 10 USD. So you can buy a small amount of BTC, and don’t need to buy 1 or 5 BTC at once. Still, for me, the counterparty risk is too high, even if it’s just 1k USD.

I don’t say that big fish used that anomaly earlier this year, and if you can live with the risk to loose your money - fine with me. Just again a reminder about professional trader status, unless you are not declaring those assets.

This is not a problem for cash and carry. You are buying 1 BTC while selling 1 BTC future. The premium is higher than the current BTC price. Example:

  • Buy 5 BTC: 210’340 USD (29.09.2021 16:47)
  • Sell 1 BTC future contract (43’000 PUT, due Feb 2022): premium of 49’700 USD (1 BTC future contract has 5 BTC contract size)
  • annualized return: (49’700 USD * 100) / 210’340 USD = 23.63%
  • in Feb 2022, you are buying back 1 BTC future contract some days before expiration. The price of BTC doesn’t matter, because the premium will be almost 0 and the future will cost almost 5 BTC
  • you will sell your 5 BTC
  • so the sell of your 5 BTC equals the 1 future contract (price is irrelevant, could be 20k for 1 BTC or 200k), and you keep the premium
  • if the price has appreciated to 200k per BTC, you could have gained more by just owning the 5 BTC. BUT: you have a bigger risk when the market goes down
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Thanks for the detailed answer. Do you think there is a risk the platform goes off due to regulations ? That is a plausible risk and I like the challenge.

Regarding your strategy, it is not working… if the btc price goes to 0, your btc length is = 0, and the sold put goes against you in a linear way (if you hold until the last mn).
The cash and carry is not done through options but through futures only.

Borrowing six figures for online cryptocurrency derivatives from Panama.
What could possibly go wrong?

When your career and resumé goes straight from selling wooden log cabins in Lithuania
to “architecting” and managing as CEO a cryptocurrency options trading outfit in Panama

…“the far west for some” seems quite the fitting and appropriate description.

(Though I certainly don’t mean to ridicule anyone for a sudden an drastic change of career. Also, you somehow have to respect the guy and give him credit for apparently being upfront about it on LinkedIn).

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