“All of the strategists agreed the market would go up,” said Mr. Hajiyan.

At the end of January, he placed an ill-timed bet and used only margin to fund a large position in the ProShares Short VIX Short-Term Futures exchange-traded fund (SVXY), which rises as long as stock prices remain stable. When the S&P 500 fell into correction territory to erase one of its best starts in years, Mr. Hajiyan’s investment in the ProShares fund tracking expected market swings was nearly wiped out, forcing him to liquidate hundreds of thousands of dollars of securities to answer the margin call.

“I was in denial,” said Mr. Hajiyan after he realized he lost about 600,000 Canadian dollars (US$472,260) worth of his C$1.1 million investment portfolio.

Some brokerages have taken steps to protect investors who use margin debt from investing in highly risky strategies that contributed to steep losses. Bank of America Corp.’s Merrill Lynch, for example, had already instituted a ban on allowing its customers to invest in exchange-traded products that track swings in volatility. E*Trade Financial Corp. recently decided to raise the margin requirements for clients who invest in the iPath S&P 500 VIX Short-term Futures exchange-traded note, essentially requiring clients to use their own cash to trade.

Despite losing a sizable portion of his wealth, Mr. Hajiyan says the experience hasn’t soured him on using margin debt. “If I wasn’t using margin, I wouldn’t be at this level,” Mr. Hajiyan said of his profits before the pullback. “As my money grows, I’ll limit the amount of margin I use.”

(http://www.autoadmit.com/thread.php?thread_id=3904024&forum_id=2#35487180)