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Liquidity
Case Study
4 mins
How a Bridge Loan Won an $8 Million Relationship, Then Became a Tax Strategy.
Joseph Wang
Ben Jones, founder of Wave Wealth, has been doing securities-backed lending for 15 years. When he found SyntheticFi, his first instinct was skepticism.
"I really had to get in the weeds because I'm not an options guy. I ended up running this by someone in one of my study groups who does his own box spreads and he said, 'It all makes sense. It's real. It's not witchcraft.'"
Since that conversation, Ben has used SyntheticFi with more than a dozen clients across everything from car loans to business acquisitions to bridge financing on home purchases. When a client needs to borrow, he pulls up the rates page.
Ben calls his clients “wealthy delegators.” They value high-touch service but prefer to leave the details to him. That trust gives Ben the room to implement solutions like SyntheticFi without having to get into the nuances of box spread mechanics. The best example is the story of a prospect (now client) named Steve*.
Steve’s previous advisor told him he couldn't buy a $1.5 million house, despite having an $8 million portfolio.
Steve wanted a vacation home. His advisory firm, which claims to do better when their clients do better, ran his plan through their proprietary planning software and told him he couldn't do it.
His brokerage account was full of long-held positions with massive unrealized gains; selling to fund the purchase would have triggered a significant tax event. His advisor either didn't think of another way or didn't have the tools to offer one.
It took Ben 27 phone calls and meetings–a number he keeps on a Post-it pinned to his desk–but with SyntheticFi and a partial mortgage, Steve bought the house without liquidating a single position. Then he moved his entire portfolio to Wave Wealth.
Steve paid off the old house, but chose to keep the SyntheticFi loan in place.
The original plan was to use SyntheticFi as bridge financing until Steve sold his previous home, then pay off the balance.
When Steve sold the house, there was $900,000 still borrowed through SyntheticFi and the cash to pay it off. This is where most borrowers close the loop and move on. Steve looked at his rate, did the math, and suggested a different path:
"I think we should just leave it in place. I think the math works where if we're only borrowing at 4.45%, we can do better in the market."
Instead of paying it off, Steve and Ben opted to keep the loan in place.
The borrowing costs are now helping unwind Steve’s concentrated positions.
Because box spreads are options transactions, SyntheticFi's borrowing costs show up on Schedule D as capital losses with 60/40 long-term/short-term treatment under Section 1256. Every year the loan is in place, Steve generates losses that can offset capital gains dollar-for-dollar. Now Ben can gradually sell down the concentrated positions and use the SyntheticFi-generated losses to absorb the tax hit from each sale.
Not only did Steve get the funds to buy his vacation house (win #1), he accessed the funds at a more attractive rate than he would've found with a traditional SBLOC (win #2), and by holding onto the loan, he is using the borrowing costs to fund a tax-efficient exit from his highly embedded positions (win #3).
SyntheticFi shows up everywhere in Ben's practice now.
SyntheticFi has become Ben's default answer whenever the math favors borrowing over selling. A car dealership owner borrowed $1.6 million to buy an additional stake in his store, expecting roughly 8x returns on the investment while borrowing at around 4%* and keeping his entire portfolio in the market. Ben refinanced his own wife's car loan from 5.5% at the dealership to around 4%* through SyntheticFi.
"Every single time my client needs to borrow money for anything, my mind goes straight to SyntheticFi."
Ben sees SyntheticFi as a differentiator.
"Most RIAs have securities backed lending at this point. I feel like that's kind of tablestakes. But this is different."
After the publication of a recent Kitces article on box spreads, a friend in the industry texted Ben, the message was: "Your magic lending solution just hit mainstream." A Kitces article is nothing to shrug at, but box spreads are still far from mainstream; today, fewer than 1% of advisory firms are using SyntheticFi.
Ben is an early adopter. The Steve story shows what a head start looks like in practice.
*Name changed to protect client privacy
How SyntheticFi works
Traditional securities-backed lines of credit (SBLOCs) let clients borrow against their portfolio, but typically at rates of 8% or higher. SyntheticFi uses box spreads, a decades-old options strategy recently available to non-institutional clients, to generate liquidity at rates derived directly from exchange-listed options markets, which closely track treasury yields. The result is borrowing costs that are often significantly lower than what banks, wirehouses, or traditional SBLOC programs can offer.
Historically, box spreads were complex to manage and inaccessible to most advisors and their clients. SyntheticFi handles the structuring and execution, giving advisors a simple interface to deliver institutional-grade borrowing terms.
Rates Today: ~3.95%* floating / ~3.70%* fixed. Compare to Schwab PAL (6-8%), bank SBLOCs (5.5-8%), custodian margin loans (8-13%). Rates are lower because multiple lenders compete on the exchange-listed options market to offer capital directly, cutting out the bank middleman.
Tax deductibility: Borrowing costs are deductible as capital losses (60% long-term, 40% short-term) regardless of how the funds are used. Traditional SBLOCs are only deductible when proceeds go toward taxable investments. Estimated after-tax effective rate: ~2.95%*.
Underwriting: Collateral-based, not income-based. No income documentation, no hard credit inquiry, no appraisal. Applications can be processed in a single trading day.
Custodian integration: Works with Schwab, Pershing, Fidelity, and Interactive Brokers. No need to move assets.
Minimums and onboarding: $10,000 minimum (vs. $100,000 or more at Schwab). Onboarding in 2 weeks, with faster options available.
Market infrastructure: Box spreads have been used as a financing tool for decades, with billions in daily volume. Contracts are guaranteed by the Options Clearing Corporation (OCC), a Systemically Important Financial Market Utility (SIFMU). SyntheticFi uses European-style S&P 500 Index Options only (cash-settled, no early exercise) and has traded well over $1B box spreads.
Risks: Borrowing facilitated by SyntheticFi is collateralized by the client’s investment portfolio. If portfolio value falls, clients may need to post additional collateral. Advisors should work with clients to size borrowing appropriately.
