QUOTE(simplesmile @ Jun 25 2013, 03:01 PM)
No. The share financing or margin financing is not 2-3x of cash value. The financier will give you an approved limit. Example, 100k. You cannot borrow more than 100k. But at the same time, you don't need to use all the 100k. you can use 0, 20k, 45k.... up to you. It's like an overdraft ready for you to use.
They have certain rules like earlier example, the margin must not be more than 60% of the portfolio, or collateral. So, if you deposit 10k and buy 50k of stock, this means you borrow 40k margin. Then 40/50 = 80%... above the 60% limit. Financier will ask you to top up the collateral with cash or sell.
If you deposit 10k and buy 15k stock, this means you borrow 5k. So 5/15 = 33%. This is below the approved limit so there is no margin call. Is considered the bank loan you money to buy share. This amount will charge you interest.
Beware also that not all the stocks is valued at 100%. For example, I buy ABC share and bank only take 80% of it's value as collateral. So if market price for my ABC stock is 50k, bank will only assume it is worth 40k when calculating whether I have breached the margin limit or not.
They have certain rules like earlier example, the margin must not be more than 60% of the portfolio, or collateral. So, if you deposit 10k and buy 50k of stock, this means you borrow 40k margin. Then 40/50 = 80%... above the 60% limit. Financier will ask you to top up the collateral with cash or sell.
If you deposit 10k and buy 15k stock, this means you borrow 5k. So 5/15 = 33%. This is below the approved limit so there is no margin call. Is considered the bank loan you money to buy share. This amount will charge you interest.
Beware also that not all the stocks is valued at 100%. For example, I buy ABC share and bank only take 80% of it's value as collateral. So if market price for my ABC stock is 50k, bank will only assume it is worth 40k when calculating whether I have breached the margin limit or not.
Dunno why wanna make life so difficult?
Jun 25 2013, 03:42 PM

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