Description of initial margin change pop-up

1. Entry of the Pop-up

You may click the "Initial Margin Change" button next to the "Amount" in Order Placing page to expand the following pop-up regarding the initial margin change:

2. Applicable Clients and Products

● Currently only applicable to mobile clients (iOS, Android);

● Currently only available for viewing when placing an option order.

3. Description of Fields

● Direction: You can choose to buy or sell, corresponding to the simulation results of different trading directions.

● Current: The initial margin requirement of your current account, based on the current account transaction currency. The initial margin refers to the margin required for margin trading, which is usually calculated according to a certain percentage of the market value of the stocks and derivatives held. When the initial margin requirement is greater than the equity with loan value of your account, you may have no buying power and not able to open new positions.

● Change (Estimated): The estimated change of the initial margin of your account according to the order about to be placed (based on the transcation currency of the account). Please note that this value is only an estimated value based on the current situation, and the actual result may vary depending on the price and margin strategy when the order is filled.

● Post-trade (Estimated): The estimated post-trade initial margin of your account according to the order about to be placed (based on the transcation currency of the account). Please note that this value is only an estimated value based on the current situation, and the actual result may vary depending on the price and margin strategy when the order is filled.

4. Why Does Longing an Option Increase the Margin Requirement? 

Generally speaking, as the right party, longing an option does not require an additional margin. However, in terms of account risk, longing an option is equivalent to converting part of your available funds into a non-collateralized option contract of equal value. As a result, the net assets in your account remain unchanged, but the funds available are reduced.

It can be approximated as follows: available funds = net assets (equity with loan value) - initial margin. The increased margin actually represents a decrease in available funds, similar in principle of buying non-collateralizable stock (100% margin rate).