Financing refers to a way for investors to borrow funds through a company or to conduct transactions. Financing is divided into financing transactions and securities lending transactions, the former is borrowing funds***, and the latter is borrowing**selling**. Financing can amplify investors' funds and benefits, but there are also certain risks and costs. So, how does financing work?How to handle it?What to look out for?This article will give some guidance and suggestions from the following aspects.
In order to carry out ** financing, investors first need to open a credit account, that is, a margin account. A credit account is a special ** account that allows for both ordinary and credit transactions. The opening of a credit account requires certain conditions to be met, generally including:
Investors need to have a certain amount of trading experience, generally not less than 6 months;
Investors need to have a certain asset scale, generally not less than 500,000 yuan;
Investors need to have a certain risk tolerance, and generally need to pass the risk assessment to reach a medium or above level.
The opening of the credit account needs to be handled in the business department of the ** company or online, and the specific process and materials may vary from broker to broker, generally including:
Fill in and sign the relevant agreements and application forms;
Provide a valid ID and bank card;
Conduct risk assessments and training;
Waiting for review and activation.
After the credit account is opened, the investor needs to transfer the funds in the ordinary account or ** to the credit account as collateral for credit transactions. The transfer of collateral needs to be carried out during trading hours, and the transferred funds or ** will be calculated according to a certain proportion of the free margin, which determines the amount of funds or ** that investors can borrow.
After the credit account is opened and the collateral is transferred, the investor can carry out the operation of ** financing. **Financing operations are divided into financing** and securities lending and selling, and the specific steps are as follows:
Financing: Investors can choose the function of financing in the credit account, enter the number and quantity you want, the system will display the maximum amount of financing and the required margin, investors can determine the number of orders and ** according to their own capital situation and risk appetite, after submitting the entrustment, the system will automatically borrow the corresponding funds from the broker to complete the transaction. The financing will be shown in the credit account's holdings, and the corresponding financing liability will be incurred, and the principal and interest will need to be repaid within the agreed period.
Selling securities lending: Investors can choose the function of selling securities borrowing and selling in the credit account, enter the *** and quantity they want to sell, the system will display the maximum amount that can be borrowed and the required margin, investors can determine the quantity and ** of the order according to their own capital situation and risk appetite, after submitting the entrustment, the system will automatically borrow the corresponding ** from the brokerage to complete the sale transaction. The ** sold by securities borrowing and lending will be displayed in the liabilities of the credit account, and the corresponding securities borrowing and lending liabilities will be generated, and the same quantity and variety of ** need to be bought back within the agreed period, returned to the brokerage, and the securities borrowing and lending fees will be paid.
*Financing is a kind of leveraged trading, which can magnify gains and losses, so investors need to pay attention to the following points when making **financing:
Investors need to choose the right target, not all of them can be margin trading, only those that meet certain conditions, generally including circulating market value, trading volume, rise and fall and other indicators. Investors can check the list of targets for margin trading on the company's or trading software, or directly enter *** to see if there is a function of financing or securities lending and selling.
Investors need to control the leverage ratio, do not over-borrow funds or **, so as not to cause the risk of tight funds or insufficient margin2 times. Investors can judge their risk profile by looking at the maintenance margin ratio of the credit account, generally speaking, the higher the maintenance guarantee ratio, the lower the risk, and vice versa. If the maintenance margin ratio is lower than a certain level, the company has the right to require investors to add margin or force liquidation, resulting in losses for investors.
Investors need to repay the bonds in a timely manner to avoid overdue or default. Investors can repay the bond at any time, or they can wait until the maturity date to repay it, but no matter when they repay, they need to pay the corresponding interest or fees. Generally speaking, the maximum term of margin trading is not more than half a year, and of course, you can also apply for an extension after expiration.
Investors need to pay attention to the costs and benefits of financing, and reasonably evaluate their investment returns and risk-return ratios. The cost of financing mainly includes interest and fees, generally calculated according to the annualized interest rate, different companies may have different charging standards, investors can open a credit account, carefully read the relevant agreements and instructions, or consult the company's customer service, understand their costs. The income of financing mainly depends on the change of the underlying **, if *** or **, the investor can get a positive or negative return, but if the change is less than the magnitude of the cost, the investor will lose money. Therefore, investors need to choose the target reasonably according to their own investment objectives and risk appetite.
*Financing is a trading method with advantages and disadvantages, which can provide investors with more funds and increase the flexibility and profitability of investment, but there are also certain risks and costs, which require investors to operate cautiously and manage reasonably. Only in this way can you earn more income in the financing market and achieve your investment goals.