Questions about Margin Ratio

1. What is the margin ratio?

The margin ratio represents the reciprocal of the leverage in margin trading.  

Take long margin ratios as an example, If you want to buy a stock with a market value of 1 million US dollars, when the initial margin ratio of the stock is 100%, you will need 1 million US dollars to open a position (corresponding to the leverage of 1x); when the initial margin ratio is 80%, it will only take 800,000 US dollars to open the same position (corresponding to the leverage of 1.25x).  

Take short margin ratios as an example, If you want to sell short a stock with a market value of 1 million US dollars when the initial margin ratio of the stock is 100%, you will need 1 million US dollars in your account; when the initial margin ratio is 80%, only 800,000 US dollars are needed to sell short the same position.


2. How will the margin ratio adjustment influence my accounts?

Generally speaking, if the margin ratio is reduced, the funds required to open a position are lower, and the stock position can pledge more buying power for trading, IPO subscription, etc. If the margin ratio is increased, then more funds are required to open a position, while less or no buying power can be pledged.  

For example, if the initial margin ratio of a stock is increased from 60% to 80%:  

1) If you hold a stock postion with a market value of 1 million, the initial margin requirement will increase from 600,000 to 800,000;   

2)If you hold a stock postion with a market value of 1 million, the amount that can be pledged will be reduced from 400,000 to 200,000.


3. How to check the margin ratio?
You can click the icons of "Long Margin" or "Short Margin"  to view its margin ratio.


4. How to calculate the margin requirement for each stock?

IInitial Margin Requirement = Market Value of Underlying Stock * Its Initial Margin Ratio

Margin Call Margin Requirement = Market Value of Underlying Stock * Its Margin Call Margin Ratio

Maintenance Margin Requirement = Market Value of Underlying Stock * Its Maintenance Margin Ratio

For example, if you hold 1 million HKD of Tencent (00700.HK), and the initial margin ratio is 50%, then the initial margin requirement = the market value of the underlying stock * the initial margin ratio = 1 million HKD * 50% = 500,000 HKD.

The total required margin of the account is equal to the summary of the margin requirement of each stock position.