Using a credit card to purchase stocks at Loyal3

[GoldenStache]

I have been thinking about it for miles instead of the cash back.  Long time United card lover, and sometimes I will spend the money and buy miles if I am a little short for an expensive trip.  2k miles @ $75.25, 10k @$376.25...

Someone please chime in because I do not see how I could possibly lose with loyal3.  A factor is that I do own some VDIGX dividend stock.

Let's say I am going to buy 2k miles, instead I buy stock (get the points/sell the stock).  For me to not directly gain on the transaction the stock has to go down 3.76%(the cost I would be spending for the miles).  If the stock does go down 3.76% or more I can deduct those loses from my gains (dividends) for taxes.  Am I missing something?   

[seattlecyclone]

I see nothing wrong with hedging your losses with the reward of a bonus credit card but please don't think you can use this system to consistently make money through a 1-2% hedge (cc cash back rate) by thinking you can outperform the market, which is essentially the ideology behind this thread.

I haven't seen anyone suggest they're likely to outperform the market with their trades churning stocks on Loyal3. Sometimes you'll sell on a day where the market is up, and sometimes you'll sell on a day when the market is down. I expect that if you did this long enough (say a few hundred transactions over the course of a few years), the gain from holding these stocks for a few days at a time would average out to about zero, or perhaps slightly higher in a bull market and slightly lower in a bear market. The stock trades will come out to a wash (more or less), and the credit card points will remain. I don't think the risk is worth it for me to get 1-2% back on a normal rewards card, but I'd seriously consider doing it for sign-up bonuses.

[wealthviahealth]

I have to jump in and say that in my opinion, this is really is an ideal platform for buying and holding dividend stocks that you would have purchased anyway.  I have been buying all of my favorites and haven't sold much yet so I cant speak to the trading side of things but I can say there is a great feeling of simplicity that comes from doing very frequent buying at smaller amounts and not focusing on "the right price to buy" and instead just knowing you are getting a good average. It takes away some of the excitement but I think that is actually a really good thing.

I enjoy the little added bonus of the credit card aspect and would hate to see this taken away
if the excessive churning by some does end up creating an issue. By no means am I implying people should alter there habits but this very well may end up being the case of a few bad apples spoiling the bunch. I may be off on this though, so forgive me if so, just a thought.

[thepokercab]

3/10/2014 UPDATE:

I went ahead and created an account and purchased the following:

$1,000:  Google
$600:     Berkshire Hathaway
$400:     Coca Cola. 

I received an immediate email confirmation on my BRKB purchase, but haven't received similar confirmations on my GOOG or KO purchases.  However all three are listed in my account, and my credit card shows all three as pending transactions.   

Personally- my risk tolerance is such that i'm ok doing this to try to reach my sign up reward, but not such that i would want to try to churn thousands of dollars a month.

3/12/2014 UPDATE:

My Loyal3 account now lists my Total Account value at $2000, and shows my transactions as "posted".  It still shows my available funds at $0 as well as the total value of my stocks at $0. 

Credit card still shows transactions as pending.   

**Correction:  Shows value as $2000**

[dragoncar]

Speculation doesn't harbor "deals". It's no more than gambling. The "gambling" process is accentuated by Loyal3's delayed transactional process. It's one thing to try to time the market (foolishness), and it's another to try to time the market blindly (what would you even call this?). Timing the market blindly by quickly buying and selling is exactly what you're doing on Loyal3.

Keep in mind that volatility is low right now and anyone who has made anything thus far has done nothing more than gambled.

Myself, I do see value in Loyal3, but definitely not for day trading (or day to day trading since it takes so long to actually trade). Most of those companies are good, stable, dividend paying stocks so it won't hurt to buy them through a card if you definitely have the money to pay the card off immediately.

I see nothing wrong with hedging your losses with the reward of a bonus credit card but please don't think you can use this system to consistently make money through a 1-2% hedge (cc cash back rate) by thinking you can outperform the market, which is essentially the ideology behind this thread.

Little early for soap box, no?

People here aren't trying to play the market, time the market, or in any way use Loyal3 to day trade. It's a way to, pretty quickly, earn credit card bonuses with minimal (not zero) risk.

I totally agree with Ricky.  This is why I haven't started churning $100k/year to get a free thousand in cash back.  You are gambling, with a small positive EV.  But most of us don't have the bankroll to successfully play the casino in this game.

[KingCoin]

Speculation doesn't harbor "deals". It's no more than gambling. The "gambling" process is accentuated by Loyal3's delayed transactional process. It's one thing to try to time the market (foolishness), and it's another to try to time the market blindly (what would you even call this?). Timing the market blindly by quickly buying and selling is exactly what you're doing on Loyal3.

Keep in mind that volatility is low right now and anyone who has made anything thus far has done nothing more than gambled.

Myself, I do see value in Loyal3, but definitely not for day trading (or day to day trading since it takes so long to actually trade). Most of those companies are good, stable, dividend paying stocks so it won't hurt to buy them through a card if you definitely have the money to pay the card off immediately.

I see nothing wrong with hedging your losses with the reward of a bonus credit card but please don't think you can use this system to consistently make money through a 1-2% hedge (cc cash back rate) by thinking you can outperform the market, which is essentially the ideology behind this thread.

Little early for soap box, no?

People here aren't trying to play the market, time the market, or in any way use Loyal3 to day trade. It's a way to, pretty quickly, earn credit card bonuses with minimal (not zero) risk.

I totally agree with Ricky.  This is why I haven't started churning $100k/year to get a free thousand in cash back.  You are gambling, with a small positive EV.  But most of us don't have the bankroll to successfully play the casino in this game.

The key is looking at it as a statistical arbitrage. If you buy and sell 100 times throughout the year, with $1k each time, it's basically impossible for you to lose. Your edge is absolutely enormous. Even is the market is down 30% on the year, you'll still come out way ahead (you'll clear $1,000-$2,000 on bonuses, and lose $300 on the average $1000 invested capital).

Running this 100 times will of course be pretty tedious, so it probably makes sense to do it 5-10 times, which exacerbates your risk a bit, but still has a no-brainer payout profile.

Even under maximum risk conditions this is an easy bet. Imagine that you earn 1.5% rewards. You buy $100k of the full Loyal3 portfolio which will end up either (1) +2%, (2) flat, or (3) -2% over the next couple days. Your payout profile would look like this:

(1) +$3,500
(2) +$1,500
(3) -$500

You'd have to be almost tragically risk averse not to take that gamble. Yes, there's the possibility of some sort of tail event taking the market down 10%, but if you're worried about that, you shouldn't be investing in stocks at all. As other indicated, you could always short $100k SPY's if you really wanted to hedge yourself up.

[ZMonet]

Do you guys have credit limits that allow for $100k outstanding at a time?

Curious what this does to someone's credit score to have such a high utilization, even for a short period of time.

If Loyal3 was worried about these types of strategies, wouldn't they just boot people off who violated their terms of service (even though they are allowing people to execute)?  I have to think their is some incentive for Loyal3to have a high volume/transaction amount on their platform.  If nothing else, maybe it is good advertising to be able to say, "Transacted $X Million"

[KingCoin]

Do you guys have credit limits that allow for $100k outstanding at a time?

I wasn't suggesting that anyone was actually transacting $100k at a clip, but rather illustrating a maximum risk scenario with that notional.

[dragoncar]

Do you guys have credit limits that allow for $100k outstanding at a time?

Curious what this does to someone's credit score to have such a high utilization, even for a short period of time.

If Loyal3 was worried about these types of strategies, wouldn't they just boot people off who violated their terms of service (even though they are allowing people to execute)?  I have to think their is some incentive for Loyal3to have a high volume/transaction amount on their platform.  If nothing else, maybe it is good advertising to be able to say, "Transacted $X Million"

Nobody has tried this level yet -- what I've seen so far in this thread is just a few thousand to meet minimum purchases for bonuses.

As for the first point, lets say I have a $15k card and a total limit of $100k.  I can put 15k on that card, then pay it off a week later, then put another 15k on that card, and so on.  The overall utilization would be low, but that particular card would be maxed.  This will hurt your score a little, but not that much compared to maxing all your cards.

[Ricky]

You'd have to be almost tragically risk averse not to take that gamble. Yes, there's the possibility of some sort of tail event taking the market down 10%, but if you're worried about that, you shouldn't be investing in stocks at all. As other indicated, you could always short $100k SPY's if you really wanted to hedge yourself up.

While I agree with a lot of what you're saying, and dealing with $1k increment wouldn't be nearly as devastating as say $2.5k increments should something happen, there is still nothing that says that the stock can't drop >1% (avg. cc cash back bonus). Point being that even though there are no trading fees (helps towards risk aversion) and you have a 1% cushion, there is no guarantee that the stock won't drop >1% consistently for days.

Also I think you might not have mean to say that there would be an average loss of $300 per $1000, because that would be a yearly loss of $29k (($100k x .01=) $1000 - ($~300 x 100=) $30000 = $~29k

[KingCoin]

Also I think you might not have mean to say that there would be an average loss of $300 per $1000, because that would be a yearly loss of $29k (($100k x .01=) $1000 - ($~300 x 100=) $30000 = $~29k

No. You're doing the math wrong throughout.

For the above example to be true, you'd have to lose 30% on EVERY TRANSACTION, a statistical impossibility. Since your average amount invested is only $1,000, a 30% annual draw-down would only cost you $300 vs your $1000-2000 reward.

Also, when you say a 1% draw-down negates your reward on an individual transaction, that's true. But the law of large numbers says that sometimes you'll win, sometimes you'll lose, but it will average out to the market return as a whole. We've already established above that the market return as a whole will have a small impact relative to rewards, so that this is an extremely low risk arbitrage, no matter what size you're trading. The bigger the better since the trade will have a higher Sharpe ratio than any other investment in the market.

[seattlecyclone]

Also I think you might not have mean to say that there would be an average loss of $300 per $1000, because that would be a yearly loss of $29k (($100k x .01=) $1000 - ($~300 x 100=) $30000 = $~29k

No. You're doing the math wrong throughout.

For the above example to be true, you'd have to lose 30% on EVERY TRANSACTION, a statistical impossibility. Since your average amount invested is only $1,000, a 30% annual draw-down would only cost you $300 vs your $1000-2000 reward.

Also, when you say a 1% draw-down negates your reward on an individual transaction, that's true. But the law of large numbers says that sometimes you'll win, sometimes you'll lose, but it will average out to the market return as a whole. We've already established above that the market return as a whole will have a small impact relative to rewards, so that this is an extremely low risk arbitrage, no matter what size you're trading. The bigger the better since the trade will have a higher Sharpe ratio than any other investment in the market.

Exactly. While any one transaction has a high probability of gaining or losing more 1%, the law of large numbers tempers the risk. The key is to favor smaller transactions on different days over one large transaction every month. A higher number of transactions greatly decreases the probability of losing money overall.

[thepokercab]

Yeah- reading through these analyses its pretty clear that its almost impossible to lose at this.  Which makes it basically too good to be true.  I'd imagine this isn't going to last forever, but in the meantime i don't see the downside.   

I'm also liking this platform for just keeping a portion of my portfolio in dividend paying stocks.  Something along this strategy:

http://youngfinances.com/blog/60-40-passive-active-investing-portfolio/

..although my percentage would be far below 40.

[innerscorecard]

I feel that we really need to either delete this thread or lock it from being viewed on Google. It ranks far too high on just an organic search for "Loyal 3 credit card." It's the second link!

[dragoncar]

I feel that we really need to either delete this thread or lock it from being viewed on Google. It ranks far too high on just an organic search for "Loyal 3 credit card." It's the second link!

Mods/admins:  lets make a members-only category MKAY?  We promise to use it sparingly.

[arebelspy]

Information wants to be free.

Or, my favorite version of it: You can't stop the signal.

[tomq04]

So ... we can't stop the signal?

Shutting this down would be profitable for those of us in the know ;)

[dragoncar]

Information wants to be free.

Or, my favorite version of it: You can't stop the signal.

OK, cool I'll email Loyal3 with our findings, then.

[arebelspy]

Information wants to be free.

Or, my favorite version of it: You can't stop the signal.

OK, cool I'll email Loyal3 with our findings, then.

If you'd like.

I'd be shocked if they don't know it already and have plans in place.

[dragoncar]

Information wants to be free.

Or, my favorite version of it: You can't stop the signal.

OK, cool I'll email Loyal3 with our findings, then.

If you'd like.

I'd be shocked if they don't know it already and have plans in place.

Yeah, but Mr. Universe died in that movie.

Information wants to be free.

I'd say edit that out

Hack the planet!

[innerscorecard]

Just got the money from my Berkshire sale. Took 7 calendar days. Let's see how long it takes for the money to hit my bank account.

[cowstash]

I have been thinking about it for miles instead of the cash back.  Long time United card lover, and sometimes I will spend the money and buy miles if I am a little short for an expensive trip.  2k miles @ $75.25, 10k @$376.25...

Someone please chime in because I do not see how I could possibly lose with loyal3.  A factor is that I do own some VDIGX dividend stock.

Let's say I am going to buy 2k miles, instead I buy stock (get the points/sell the stock).  For me to not directly gain on the transaction the stock has to go down 3.76%(the cost I would be spending for the miles).  If the stock does go down 3.76% or more I can deduct those loses from my gains (dividends) for taxes.  Am I missing something?   

I don't know if that's exactly right, I believe you can use short term capital gains losses to offset short term capital gains (i.e. if you lose $500 when selling some Coke stock but you make $500 on selling some Google stock, they essentially cancel each other out). Dividends are taxed around 15% and short term capital gains are taxed much higher, at closer to income rates, so I'm unsure if one can offset the other. Any investment tax buffs out there?

But otherwise your math is fairly sound -- you'll get your 2000 miles from United and as long as the stock(s) you pick don't drop by that much, you come out ahead. Though I will add that buying miles directly from the airline is a HUGE ripoff (i.e. you're paying >25% of the cost of a flight that would earn 2000 miles just to buy those miles).

[cowstash]

Just got the money from my Berkshire sale. Took 7 calendar days. Let's see how long it takes for the money to hit my bank account.

Looks like it'll take at least three business days for me since my trial run still hasn't posted to my checking account yet. Granted, I didn't put in the sell order on the first day that I could, but there are some substantial wait times to take into consideration for each step of the process.

[wtjbatman]

I don't run these forums, but I'd be really annoyed if this thread was deleted/made private. Especially so that Loyal3, or random people googling the words "Loyal3" and "credit cards", don't find this thread. We're already seeing drama over MMM being threatened with legal action and the corresponding Streisand Effect, let's not go down that road.

Enjoy the ride while it lasts.

[GoldenStache]

Cowstash,

I agree the price they charge for the miles is a rip-off but depending on the price of the flight it can be worth it.  I only use the miles for flights over $750, most of the time they are roughly $1,200 (unavoidable peak season/ peak airports flying and on peak days).

I kept the old school United Select and signed up for the mileage plus dining - 5 miles per dollar spent at select restaurants

•3 award miles per $1 spent on tickets purchased from United
•2 miles per $1 spent on gas station, grocery, restaurant and home improvement store purchases
•2 miles per $1 spent on tickets purchased from other Star AllianceTM member airlines
•1 mile per $1 spent on all other purchases
 
Most months I get 4k-5k miles, so at least 1 free flight a year.  I will have 2 expensive (over $750) and 1 cheap flight this year.  Monday I am going to start with $5k and get enough to get my 2nd free flight (waiting until card clears for the month). 

We will see how it goes. 

On a side note, I did pick a up some call options (MS & WFC) a few months ago that are very green, for now, that I will be able write off the loses if I do not break even on loyal3.
 

[arebelspy]

I don't run these forums, but I'd be really annoyed if this thread was deleted/made private. Especially so that Loyal3, or random people googling the words "Loyal3" and "credit cards", don't find this thread. We're already seeing drama over MMM being threatened with legal action and the corresponding Streisand Effect, let's not go down that road.

Enjoy the ride while it lasts.

Voluntarily choosing to make a discussion private between members of a group that are amenable to it is very different than  forcing someone to take down comments/criticism about you and stifle their speech.  In this case, no one's speech would be stifled, and no lawsuits would be threatened.

They're not even remotely close in situation.

That being said, it is not at this time being considered making this private.  Sorry for those of you interested in it (I myself may give it a shot), I do hope it lasts awhile.

[tomq04]

Here is my "trial" ledger, i suspect i did the purchase too late in the day.

03/05/2014   Berkshire Hathaway   Charge credit card *****4410 for one time buy order   $100.00
03/10/2014   Berkshire Hathaway   sell order   -0.8191   $123.69                    $101.31
03/13/2014   Funds Transfer to Checking Account *****9075         ($101.31)

Appears to be 7 or 8 business days minimum as a turn around, that is assuming the money comes into my checking account tomorrow.  I also have reason to suspect that you can only charge 1 credit card/day, or at least that is all i'm comfortable with, I don't want to buy some stock, then edit my card and buy more, and then have everything hit the last card I had entered at the end of the day...I have no proof that would happen, but I don't want to stir up anything more than I need to.

[cowstash]

I don't run these forums, but I'd be really annoyed if this thread was deleted/made private. Especially so that Loyal3, or random people googling the words "Loyal3" and "credit cards", don't find this thread. We're already seeing drama over MMM being threatened with legal action and the corresponding Streisand Effect, let's not go down that road.

Enjoy the ride while it lasts.

Voluntarily choosing to make a discussion private between members of a group that are amenable to it is very different than  forcing someone to take down comments/criticism about you and stifle their speech.  In this case, no one's speech would be stifled, and no lawsuits would be threatened.

They're not even remotely close in situation.

That being said, it is not at this time being considered making this private.  Sorry for those of you interested in it (I myself may give it a shot), I do hope it lasts awhile.

I think there is a big difference between putting this discussion behind a wall and merely opting it out of global search engine indexing. Any one of us could easily take the gist of this info over to some of the popular churn blogs and it would blow up so fast that Loyal3 would take notice (and indeed, I suspect it's only a matter of time). But I venture that most people who might come across this on a Google search wouldn't necessarily be fellow mustashians. So just some food for thought.

[dragoncar]

I don't run these forums, but I'd be really annoyed if this thread was deleted/made private. Especially so that Loyal3, or random people googling the words "Loyal3" and "credit cards", don't find this thread. We're already seeing drama over MMM being threatened with legal action and the corresponding Streisand Effect, let's not go down that road.

Enjoy the ride while it lasts.

Voluntarily choosing to make a discussion private between members of a group that are amenable to it is very different than  forcing someone to take down comments/criticism about you and stifle their speech.  In this case, no one's speech would be stifled, and no lawsuits would be threatened.

They're not even remotely close in situation.

That being said, it is not at this time being considered making this private.  Sorry for those of you interested in it (I myself may give it a shot), I do hope it lasts awhile.

I think there is a big difference between putting this discussion behind a wall and merely opting it out of global search engine indexing. Any one of us could easily take the gist of this info over to some of the popular churn blogs and it would blow up so fast that Loyal3 would take notice (and indeed, I suspect it's only a matter of time). But I venture that most people who might come across this on a Google search wouldn't necessarily be fellow mustashians. So just some food for thought.

I don't see why it would be annoying to make the thread members-only.  Do a lot of you browse without logging in?  An alternative would be to use robots.txt to disallow search indexing on this thread.  I don't really care either way, as I am not currently using this churn... It just seemed like others were worried about it blowing up.

[wtjbatman]

I don't run these forums, but I'd be really annoyed if this thread was deleted/made private. Especially so that Loyal3, or random people googling the words "Loyal3" and "credit cards", don't find this thread. We're already seeing drama over MMM being threatened with legal action and the corresponding Streisand Effect, let's not go down that road.

Enjoy the ride while it lasts.

Voluntarily choosing to make a discussion private between members of a group that are amenable to it is very different than  forcing someone to take down comments/criticism about you and stifle their speech.  In this case, no one's speech would be stifled, and no lawsuits would be threatened.

They're not even remotely close in situation.

That being said, it is not at this time being considered making this private.  Sorry for those of you interested in it (I myself may give it a shot), I do hope it lasts awhile.

I'm not going to count exactly how many people have posted saying they would be open to the thread becoming private, but I only saw two or three posts advocating it. So it wouldn't be voluntary (in my case), and speaking for myself, I'm not amenable to it.

But like I said before, I don't run the forums, so that "power" is out of my hands.

[AccidentalMiser]

I don't run these forums, but I'd be really annoyed if this thread was deleted/made private. Especially so that Loyal3, or random people googling the words "Loyal3" and "credit cards", don't find this thread. We're already seeing drama over MMM being threatened with legal action and the corresponding Streisand Effect, let's not go down that road.

Enjoy the ride while it lasts.

I agree.  People who start brokerages that accept credit cards as payment wouldn't be surprised by anything any of us have written on this thread.  They're not going to smack themselves on the head and say "How could we have been so BLIND?!".

Anyone with two brain cells to rub together can figure this one out.  Even I thought of it.

[tomq04]

Here is my "trial" ledger, i suspect i did the purchase too late in the day.

03/05/2014   Berkshire Hathaway   Charge credit card *****4410 for one time buy order   $100.00
03/10/2014   Berkshire Hathaway   sell order   -0.8191   $123.69                    $101.31
03/13/2014   Funds Transfer to Checking Account *****9075         ($101.31)

Appears to be 7 or 8 business days minimum as a turn around, that is assuming the money comes into my checking account tomorrow.  I also have reason to suspect that you can only charge 1 credit card/day, or at least that is all i'm comfortable with, I don't want to buy some stock, then edit my card and buy more, and then have everything hit the last card I had entered at the end of the day...I have no proof that would happen, but I don't want to stir up anything more than I need to.

update: I think if you get your transactions done in the early AM you can get it down to 6 business days for a total cycle.  Which is somewhere between 3 and 4 cycles/month/card (assuming 1 card/day) if you are so inclined.  You can spread your risk out by doing my previously mentioned 1 card/day by ensure you have only 1/5 or so of your money in the market at any given time, so if there is a -2% day, your purchase the next day can catch the 1-2% bounce up.

[arebelspy]

I don't run these forums, but I'd be really annoyed if this thread was deleted/made private. Especially so that Loyal3, or random people googling the words "Loyal3" and "credit cards", don't find this thread. We're already seeing drama over MMM being threatened with legal action and the corresponding Streisand Effect, let's not go down that road.

Enjoy the ride while it lasts.

I agree.  People who start brokerages that accept credit cards as payment wouldn't be surprised by anything any of us have written on this thread.  They're not going to smack themselves on the head and say "How could we have been so BLIND?!".

Anyone with two brain cells to rub together can figure this one out.  Even I thought of it.

The issue isn't that no one will think of it, it's how long before it blows up big enough that they cut it off.  They know about it, and are allowing it for now.  People want it more secret so Loyal3 lets it last longer.  Once it blows up, lots of people will do it (people who would have never heard of Loyal3).

tl;dr: The secrecy wouldn't be to hide the idea, but to not make it widespread.

Anyways, it's a moot point at this time.

[ZMonet]

You probably wouldn't want a lot of money floating out in the market today, but even so some of their stocks have held up quite well despite the 200+ downturn.

I wonder why Loyal3 doesn't just do a charge back to the credit card you purchased the stock from and pay any overage, if there is any, by direct deposit.  Maybe it violates the credit card merchant terms of service, or maybe they want to book the sales.

[thepokercab]

3/10/2014 UPDATE:

I went ahead and created an account and purchased the following:

$1,000:  Google
$600:     Berkshire Hathaway
$400:     Coca Cola. 

I received an immediate email confirmation on my BRKB purchase, but haven't received similar confirmations on my GOOG or KO purchases.  However all three are listed in my account, and my credit card shows all three as pending transactions.   

Personally- my risk tolerance is such that i'm ok doing this to try to reach my sign up reward, but not such that i would want to try to churn thousands of dollars a month.

3/12/2014 UPDATE:

My Loyal3 account now lists my Total Account value at $2000, and shows my transactions as "posted".  It still shows my available funds at $0 as well as the total value of my stocks at $0. 

Credit card still shows transactions as pending.   

**Correction:  Shows value as $2000**

3/13/2014 UPDATE:

So, my sell order went through today.  At last look the Dow was done like 200 points today so my stocks definitely lost value.  Here was the result:

Purchased:

Berkshire:  $600 executed at $125.00 per share

CocaCola:  $400 executed at $38.45 per share

Google:   $1,000 executed at $1204.60 per share. 

It sold today at:

Berkshire:  Sold at $124.00 per share, ($595.20 debited to account)

CocaCola:  Sold at $38.07 per share, ($396.04  debited to account)

Google:     Sold at $1,187.66 per share ($985.93 debited to account)

Total Bought:  $2,000
Total Credited back to me:  $1977.17   (minus $22.83) 

Total miles earned from purchase:  4,400 
Redemption value for travel purchases:   $44.00

Net Gain:  $21.17

Bonus for hitting $3,000 spend:  40,000 miles
Redemption value for travel purchases:  $400.00

So basically- even after the market having a less than stellar week in general, I was still able to walk away with a net gain.  Plus, hitting my $3,000 spend obviously made it worthwhile.  I can definitely see the utility though of spreading these transactions out over a period of days, in lower amount- to minimize potential losses. 

[tj]

Their site is down for maintenance. Are they nerfing this? :-D

[innerscorecard]

"LOYAL3 is currently down for scheduled maintenance. We expect to be back up soon.
Sorry for the inconvenience."

I'm scared! MY Chase Sapphire Preferred is still in the mail. :\

[tj]

3/10/2014 UPDATE:

I went ahead and created an account and purchased the following:

$1,000:  Google
$600:     Berkshire Hathaway
$400:     Coca Cola. 

I received an immediate email confirmation on my BRKB purchase, but haven't received similar confirmations on my GOOG or KO purchases.  However all three are listed in my account, and my credit card shows all three as pending transactions.   

Personally- my risk tolerance is such that i'm ok doing this to try to reach my sign up reward, but not such that i would want to try to churn thousands of dollars a month.

3/12/2014 UPDATE:

My Loyal3 account now lists my Total Account value at $2000, and shows my transactions as "posted".  It still shows my available funds at $0 as well as the total value of my stocks at $0. 

Credit card still shows transactions as pending.   

**Correction:  Shows value as $2000**

3/13/2014 UPDATE:

So, my sell order went through today.  At last look the Dow was done like 200 points today so my stocks definitely lost value.  Here was the result:

Purchased:

Berkshire:  $600 executed at $125.00 per share

CocaCola:  $400 executed at $38.45 per share

Google:   $1,000 executed at $1204.60 per share. 

It sold today at:

Berkshire:  Sold at $124.00 per share, ($595.20 debited to account)

CocaCola:  Sold at $38.07 per share, ($396.04  debited to account)

Google:     Sold at $1,187.66 per share ($985.93 debited to account)

Total Bought:  $2,000
Total Credited back to me:  $1977.17   (minus $22.83) 

Total miles earned from purchase:  4,400 
Redemption value for travel purchases:   $44.00

Net Gain:  $21.17

Bonus for hitting $3,000 spend:  40,000 miles
Redemption value for travel purchases:  $400.00

So basically- even after the market having a less than stellar week in general, I was still able to walk away with a net gain.  Plus, hitting my $3,000 spend obviously made it worthwhile.  I can definitely see the utility though of spreading these transactions out over a period of days, in lower amount- to minimize potential losses.

Honestly, it really all comes down to luck.

Here's mine:

3/5 Berkshire Hathaway - Purchased $2,500.00 at $118.84 per share (Buy order submitted on 2/28)
3/6 Berkshire Hathaway - Sold $2546.00

So from this i got $46 in a a short term gain....and hit $2500 of the $3500 spend on the US Bank Flexperks Travel promo....signup bonus + spend yielded around 30,000 flexpersk points Valued at $300 or airfare up to $600.

on the other hand, I bought two other stocks earlier this week to hit a $500 bonus on Chase Ink Plus. The purchases were processed today, the buy price appears to be a bit higher than what they were valued at at today's close, but I'm still well ahead considering the value of bonuses.

[innerscorecard]

My funds just posted. I see them in my checking account, too. Bought on March 5, and the sell posted on March 13. Not bad.

And I just did another small order to see if CC still works. It does. The golden goose lives on!

[innerscorecard]

For everyone's reference:

http://www.flyertalk.com/forum/archive/t-1327520.html

Note that some things have changed since then. Mostly that more companies have been added. Better stocks.

[ZMonet]

I think Loyal3 has their limits...I received an email today telling me know that my trading was not in line with their platform.  They said they would monitor my account and, if it continued, then I would no longer be allowed to make purchases (sounds like I would still be able to liquify what was in the account).  In short, I think the platform will allow you to meet your minimum spends for CC bonuses, but I'm not sure you'll get very far trying to manufactured spend tens of thousands of dollars.

[medinaj2160]

So, can I still get on this deal?

My wife got the Chase Sapphire Preferred and I got the Barclay's card.

[arebelspy]

I think Loyal3 has their limits...I received an email today telling me know that my trading was not in line with their platform.  They said they would monitor my account and, if it continued, then I would no longer be allowed to make purchases (sounds like I would still be able to liquify what was in the account).  In short, I think the platform will allow you to meet your minimum spends for CC bonuses, but I'm not sure you'll get very far trying to manufactured spend tens of thousands of dollars.

Can you let us know what level/amount of trading you did?

[medinaj2160]

Can you let us know what level/amount of trading you did?

Yes please let us know, I was going to use my credit card to pay taxes but there is a 1.87% fee. It seems that this will to avoid the fee and get the bonus miles.

[tj]

Thanks for the heads up.  I signed up for another card that has 50k American miles after spending $3k in 3 months. I 'll be sure to do, say, six $500 purchases over a longer period of time rather than the shameless $2500 purchases I did on Chase Ink. :-D

[ZMonet]

I traded about $35k over a month. 

To be clear, I think their email is reasonable and I hope they keep the CC option at no charge for people who don't attempt to manufacture spend so much.

[arebelspy]

I traded about $35k over a month. 

To be clear, I think their email is reasonable and I hope they keep the CC option at no charge for people who don't attempt to manufacture spend so much.

And you did the buy and immediately sell model?

[Ricky]

Also I think you might not have mean to say that there would be an average loss of $300 per $1000, because that would be a yearly loss of $29k (($100k x .01=) $1000 - ($~300 x 100=) $30000 = $~29k

No. You're doing the math wrong throughout.

For the above example to be true, you'd have to lose 30% on EVERY TRANSACTION, a statistical impossibility. Since your average amount invested is only $1,000, a 30% annual draw-down would only cost you $300 vs your $1000-2000 reward.

Also, when you say a 1% draw-down negates your reward on an individual transaction, that's true. But the law of large numbers says that sometimes you'll win, sometimes you'll lose, but it will average out to the market return as a whole. We've already established above that the market return as a whole will have a small impact relative to rewards, so that this is an extremely low risk arbitrage, no matter what size you're trading. The bigger the better since the trade will have a higher Sharpe ratio than any other investment in the market.

The problem wasn't that I was doing the math wrong, it was that you were saying it wrong:

(you'll clear $1,000-$2,000 on bonuses, and lose $300 on the average $1000 invested capital).

To me that reads, for every $1000 you will lose $300. I don't know who else could construe that a different way. But I see that you didn't mean that and I see what you mean.

I don't personally agree that the law of large numbers applies to something as volatile as the stock market. Not worth the risk, especially with the limited range of stocks you get with Loyal 3.

There are only a few consumer staples, and I only seen one utility. The other stocks listed are too cyclical for me and carry a high beta. One of these stocks could easily be down >1% any given day. Plus, it is completely out of your hands as to when the trade happens. Sure, when you limit your time-frame to < a day, you increase your chances of success, but you're still playing with fire.

That said, I'd say you could make an extra $100-$150 a month no problem with some of the stocks, but I wouldn't take my chances with the majority of the ones that they trade. The real problem is that anything that sounds too good to be true usually is so even the $100-$150 won't last as evident by ZMonet's claim.

Finally, imagine if Loyal 3 stopped offering payment by card. The law of large numbers doesn't tell us "how" long it will take to break even. If Loyal 3 stopped at a point where you were way behind, you might have wasted your time.

[ZMonet]

I traded about $35k over a month. 

To be clear, I think their email is reasonable and I hope they keep the CC option at no charge for people who don't attempt to manufacture spend so much.

And you did the buy and immediately sell model?

Yeah.  I'd say for 75% of the trades I even bought and sold on the same day.  Interestingly (actually just luckily), I made $250 just on the stock trades -- not counting bonuses or miles, etc.  Of course that means you stand a chance of losing the same.

[cowstash]

I traded about $35k over a month. 

To be clear, I think their email is reasonable and I hope they keep the CC option at no charge for people who don't attempt to manufacture spend so much.

I have the same hope, and it's good to know what might happen if you cross their threshold. I, for one, am still waiting for my Barclay Arrival card to come through to me here in West Africa so I can give it a try (at least for the minimum purchase level).