Margin trading is a kind of credit trading in the market, which allows investors to borrow funds or amplify their investment returns with a small amount of principal, but it also magnifies investment risks. Interest on margin trading is a fee that investors need to pay to the company, and there are different calculation methods and charging methods according to different transaction types and tenors. This article will detail how much interest is on margin trading, how it is calculated, as well as the advantages, disadvantages and precautions of margin trading.
Margin trading, also known as credit trading, is divided into margin trading and securities lending trading. In layman's terms, a financing transaction is when an investor borrows funds from a company to repay the principal and interest of the loan within the agreed period with funds or ** as a pledgeInvestors who buy from the company for financing is called "buying long". Securities lending transaction is that investors borrow funds from **company to sell, and within the agreed period, **the same quantity and variety ** will be returned to the brokerage and pay the corresponding securities lending fees;Investors sell securities to ** companies is called "short selling". Generally speaking, the key to margin trading lies in the word "financing", and investors with "financing" must provide certain guarantees and pay certain fees, and return the borrowed funds within the agreed period.
The purpose of margin trading is to amplify investors' capital leverage and increase investment returns. When investors are optimistic about the potential of a certain stock, they can increase their positions by financing it, so as to get more benefits at the time. When an investor is bearish on the trend of a certain **, he can sell it by borrowing and lending securities to open a short position, so as to obtain the spread income at ***. Margin trading allows investors to expand the scale of transactions, improve the utilization rate of funds, and achieve diversified investment strategies without increasing their own funds.
The interest on margin financing refers to a fee that investors need to pay when borrowing funds from the company, which can also be referred to as financing interest or securities borrowing and lending fees. Interest on margin is calculated based on the amount borrowed, the term and the interest rate, and there are different interest rates for different transaction types and tenors. In general, the financing rate is lower than the borrowing and lending rate because of the higher risk and cost of securities borrowing and lending. The interest rate of margin financing and securities lending shall be determined by the ** company, but shall not be lower than the benchmark interest rate of financial institutions for the same period stipulated by the People's Bank of China. At present, China's two ** exchanges have opened margin financing and securities lending business, the interest rate of margin financing and securities lending is generally between 8% and 12%, and the specific interest rate can be consulted by each ** company.
Interest on margin is calculated on a daily basis, divided by 360 days per annum, and so on. For example, the annual interest rate of financing is 86%, and the annual interest rate is 106%, then the interest of 10,000 yuan a day for financing or securities lending is 2$39 or 2$94. Interest on margin is charged on a monthly basis and settled on the last trading day of each month. If the loan is paid off or returned**, interest is calculated based on the number of days actually used. If there is a change in the interest rate of margin trading, the new interest rate will be applied from the date of adjustment for margin contracts that were not settled before the implementation of the adjustment, and the adjustment will not be retrospective.
The advantage of margin trading is that it can amplify investors' capital leverage, increase investment returns, achieve diversified investment strategies, and increase market liquidity and activity. The disadvantage of margin trading is that it will also magnify investors' investment risks, increase investment costs, and may face the risk of forced liquidation, which is restricted by market regulation.
Margin trading requires the opening of a special credit account, and the application requires the provision of certain asset certificates and credit evaluation, which not all investors can participate in.
Margin trading requires the provision of certain collateral, and the scope and conversion rate of collateral are stipulated by ** company and the exchange, which may be adjusted with market conditions, and investors need to pay attention to and adjust in time.
There are certain time limits for margin tradingUsually 6 monthsAfter maturity, you need to repay the loan or **, otherwise it will be forced to close the position, investors need to master the time and capital arrangements, of course, it can be extended, and the rollover period is generally 6 months.
If the value of the collateral decreases or the amount of the loan increases, resulting in the maintenance margin ratio being lower than the warning line or liquidation line, investors need to add collateral or repay the loan in time, otherwise they will be forced to liquidate, and investors need to pay close attention to market fluctuations and account conditions.
Margin trading has a certain range of subject **, not all of ** can be traded on margin trading, the scope of the subject ** is stipulated by ** company and the exchange, and may be adjusted with market conditions, investors need to pay attention to and comply with it in a timely manner.
Investors need to fully understand the rules and risks of margin trading, reasonably control the leverage ratio according to their own risk appetite and investment objectives, participate cautiously, and do not blindly follow the trend.
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