Imagine you deposited USD 10,000 on your Margin Lending account and plan to buy 1,000 shares in the US listed Stock ABC, priced at USD 25/share.
Stock ABC has a risk rating 1, with an initial collateral value of 63% and maintenance collateral value of 70% (haircut = 30%). This means you’ll need to put up 37% of the transaction value as collateral (cash or positions) to open the position. This will give you an effective leverage of up to 2.70x your capital at the time of opening.
After the trade, your net cash balance will change from USD 10,000 to minus USD 15,000, since you have now borrowed USD 15,000 to finance the position value of USD 25,000.
After the trade you will have utilised 86% of your account’s maintenance collateral value. That means you’ll have USD 750 left as unused initial collateral to open new positions worth up to USD 2,027 (assuming a risk rating 1 stock with 63% initial collateral value).
Pre Trade | Post Trade |
 |  |
Position details - Stock ABC | Position details - Stock ABC |
# shares | - | # shares | 1,000.00 |
Share Price | - | Share Price (USD) | 25.00 |
Market Value | - | Market Value (USD) | 25,000.00 |
Risk Rating | - | Risk Rating | 1.00 |
Initial Collateral Value (%) | - | Initial Collateral Value (%) | 63% |
Maintenance Collateral Value (%) | - | Maintenance Collateral Value (%) | 70% |
Haircut (Maintenance Margin Req., %) | - | Haircut (Maintenance Margin Req., %) | 30% |
Pre Trade |
 |
Position details - Stock ABC |
# shares | - |
Share Price | - |
Market Value | - |
Risk Rating | - |
Initial Collateral Value (%) | - |
Maintenance Collateral Value (%) | - |
Haircut (Maintenance Margin Req., %) | - |
Post Trade |
 |
Position details - Stock ABC |
# shares | 1,000.00 |
Share Price (USD) | 25.00 |
Market Value (USD) | 25,000.00 |
Risk Rating | 1.00 |
Initial Collateral Value (%) | 63% |
Maintenance Collateral Value (%) | 70% |
Haircut (Maintenance Margin Req., %) | 30% |
Please note that the above example does not take transactional costs (commissions etc) and financing costs (interest) when holding the position overnight into account.