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Vincent

Minimum Initial Margin and Maximum Initial Margin

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Hello Vincent,

 

There is no min and max initial margin????

 

The margin to hold a position is given by the MarginFactor property in the DTO and displayed as Margin Factor on the Market Information sheet.

 

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Hi Vincent,

 

Before I get to the answer for your 2nd question, I just want to mention that in my previous reply the margin factor (MF) is multiplied by the stake size to compute the margin required to trade that market. 

 

As an example, for the Wall Street DFT market the MF is 80 as shown in the previous screenshot. If you were trading at £2/point then the margin for that position is 2 x 80 = 160. 

 

Onto your second question. Margin factors expressed as percentage is the usual case for equities. The margin required is just the percent MF of the equivalent share value exposure.

 

Let me clarify with an example. Microsoft stock has an MF of 4%. A trade size of £1/point is the equivalent of 100 shares. £2/point is equivalent to 200 shares and so on.

 

If you bought MSFT at 47.02 at £1/point, then your share exposure is 100 (shares) x 47.02 = 4702. Your margin to open and hold this trade is 4% of 4702 and is 0.04 * 4702 = 188.08.

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Hi Physicsman,

 

Thank you for your answers.

 

You calculation is very clear.

 

I have one more question:

"A trade size of £1/point is the equivalent of 100 shares. £2/point is equivalent to 200 shares and so on."

 

Where could you find such information? How do you know a trade size of £1/point is the equivalent of 100 shares?

 

Thanks.

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Hello Vincent,

 

I worked it out manually based on equivalent share exposure. There isn't a table or any other list that I can give you. Fortunately, the logic to work out the equivalent share exposure is not difficult. 

 

Start with:

1) I place a £1/point bet on a stock, for example the previous example of Microsoft at 47.02. If the stock priced moved up/down by $1, then how much would I win/lose?

 

2) Since the bet per for shares is 1 cent (penny for GB stocks) movement, then a dollar movement = 100 cents, which means £100 profit/loss. 

 

3) How many shares do I have to own for a $1 movement in stock price to give me a $100 profit/loss? It is immediately obvious that 100 shares (100 shares x $1) gives me the requisite $100 P/L.

 

4) Therefore, £1/point is equivalent to 100 shares exposure. 

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Hi Physicsman,

 

Sorry, I still don't understand it. I understand the calculation, but I don't know where some of key information is coming from.

 

How do I know this : "bet per for shares is 1 cent (penny for GB stocks) movement"?

I am looking at "Microsoft Corp CFD" market info page on City Index Advantage Web platform.

It has minimum size, max long size, max short size...etc.

 

And could we use "UK 100 CFD" as an example because it got a long open hour. I can try  do the calculation by hand and compare the result with the web platform.

 

Thanks.

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Hi Vincent,

 

Aha!! I think I see where the confusion is arising! I'm using a SpreadBet account and it looks like you are using a CFD account. 

 

Therefore, the following is a side note since it only applies to SpreadBet markets and not CFDs:

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In the MSFT example, the  "bet per for shares is 1 cent (penny for GB stocks) movement" information I took from the Market Information sheet. The Bet Per field, which is given as 1. Possibly this could have been made clearer by stating the value as "1 cent". 

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With CFDs, calculating margin becomes trivially easy - good news!  :)

 

Long 1 contract GB100 CFD at 6823. Your exposure is just (1 contract) x (6823 market value) = 6823. Margin requirement is 0.5%. 

 

Therefore: 0.005 x 6823 = 34.11. 

 

I just did the above test trade on a CFD account and the Margin Req is indeed 34.11.

 

For more than 1 CFD contract just multiply the unit margin requirement by the number of contracts. 

 

Example: 10 Contracts is 10 x 6823 = 68230. 

0.005 x 68230 = 341.15. Verified by doing the above trade in a CFD account.

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