A five-year habit of borrowing money from his broker to buy Tesla shares has transformed Hy Luu's finances. The 29-year-old engineering consultant, who lives with his mother Kim Nguyen in a three-bedroom house in Houston, first discovered margin investing in May 2021. He was researching ways to obtain more capital to invest in Tesla when he learned that brokers allow customers to borrow against existing holdings to buy securities. The main risk is a margin call, which requires depositing more money if the account value falls.
Luu consulted his mother, a former accountant who was still awake at the time. She found the idea interesting. "That was the reassurance I needed," Luu told CNBC. Within a year he had accumulated more than $100,000 in margin debt. "I went really crazy," he said. "The stock was going up, and so I was like, 'There's no way I could lose.'"
In June, Luu exercised $165,000 on five Tesla call options and bought 500 shares at $330 each, driving his borrowing to more than $156,000. Tesla shares swung from below $370 to above $430 during that month. Between his Tesla holdings, company stock and 401(k), minus margin and other debts, Luu's net worth has risen to more than $800,000 from negative territory seven years ago. "I'm very close to becoming a millionaire," he said, while cautioning that "what I'm doing is risky. I don't recommend anyone do it."
Luu's story reflects a broader trend. Margin debt on Wall Street has hit record levels as retail investors increasingly borrow to amplify their bets. Robinhood's margin book grew to a record, the company reported, though the total was not disclosed in the available coverage. The risk of a widespread sell-off increases when margin calls force leveraged investors to liquidate positions, potentially accelerating market declines.