I have US$10,000 in my US$ margin lending account. If I buy US$10,000 of Apple Stock (63% initial margin, 70% variation margin), will I end up with a loan of $6,300 and a long cash balance of US$3,700”
No, you will end up with no loan and a cash balance of NIL. All of the available cash in the currency of the share being purchased will be used up first. Only when there is no cash left will you enter into a loan with Saxo
How do I know if I am buying on margin?
If you are placing a trade in a stock on which margin lending is available, you will see a choice of accounts in which to buy the stock. These accounts will be:
- All of the fully paid currency accounts that you have set up (Note that if you buy a share in a different currency to the currency of the account, Saxo will automatically do an FX conversion to fund the purchase of the shares)
- The margin lending sub-account that has the same currency as the shares to be purchased
If you purchase the stock using the margin lending sub-account, you will buy the stock on margin if there are insufficient cash funds in the account to cover the purchase price of the stock.
When do I start paying interest on my loan?
Loan interest is payable from the day that the share purchase is settled (T+2 for US and HK stocks). Loan interest will continue until the settlement day for the share sale. Thus interest is only paid on settled amounts. Interest will be accrued daily and charged monthly.
What interest do I get on my positive cash balances on my margin loan accounts?
You will receive interest on your positive cash balances at the same rates as those used on your fully paid account.
I have US$10,000 in my USD margin account and no cash or assets in my HK$ margin account. Can I still buy HK stocks on margin?
Yes. You have a HK$ margin sub-account and a US$ margin sub-account and cash and collateral is counted across both sub-accounts as part of your overall margin account.
In this case, if you purchase a HK stock, you will have a long share position in the stock, a short HKD cash position and a long US$ cash position. You will pay interest on the short HK$ position and you will receive interest on your long US$ position.
Can I move a share position out of a margin lending account to my fully paid account?
No. Transfer of shares which have not been fully funded is not allowed.
If I have US$10,000 of cash in my US$ account and HK shares and a HK$ loan account in my HK$ account, can I transfer US$ out of my margin loan account?
Yes. You will be able to transfer US$ out of the US$ account provided that your collateral usage on the margin lending account does not exceed 100%. This means that whilst you may see a cash balance of US$10,000, you may only be able to transfer a smaller amount out of the margin lending account.
I am buying a HK stock in my HK$ margin sub-account. Why are the Initial collateral impact and Loan impact shown in US$ on the trade ticket?
These amounts are shown in US$ because the overall reporting currency of your account is US$. All loans and collateral calculations are performed in your reporting currency.
How can I fund my Margin Lending account?
You can fund your account in one of the following ways:
- Transfer cash from your fully paid Saxo account into one of the US$ or HK$ margin lending accounts
- Transfer stock from your fully paid Saxo account into one of the US$ or HK$ margin lending accounts
- Transfer cash from your bank account at another institution into one of the US$ or HK$ margin lending accounts
- Transfer stock from an account at another institution into one of the US$ or HK$ margin lending accounts
What is the difference between initial collateral and maintenance collateral?
Each stock in the margin lending universe has a collateral percentage associated with it. This percentage is applied to the market value of a stock to determine the collateral value of the stock.
The initial collateral percentage is always less than the maintenance collateral level to stop a client putting a position on and being immediately stopped out. As an example, a blue chip stock may have:
- Initial collateral percentage: 63%
- Maintenance collateral percentage: 70%
The collateral value of the stock, in turn, is an input into the collateral utilization calculation.
- Collateral utilization = loan / (positive cash + maintenance collateral value)
As the maintenance collateral percentage is higher, the collateral utilization will be lower than if the initial collateral percentage was used.
Saxo uses the initial collateral percentage to calculate how much leverage you can have and hence how much stock you can buy on margin. In the example, using the initial collateral percentage will limit the amount of stock you can buy on margin to an amount that will result in a collateral utilization of 90%. This is done so that it is impossible for a client to use maximum leverage, put a trade on, have a collateral utilization of 100% and then have the position closed out immediately.
Why is initial collateral available smaller than maintenance collateral available?
Collateral available is defined as:
- Cash deposits + (Market value of positions x applicable collateral percentages) – loan amount
Initial collateral available uses the initial collateral percentage and maintenance collateral uses the maintenance collateral percentage. As the initial collateral percentage is always less than the maintenance collateral percentage, the initial collateral available will likewise always be smaller.
Once initial collateral is fully utilized, you will not be able to place any further trades in your margin lending account until your collateral utilization falls below 90%.
My collateral utilization is over 90% but it is not 100% yet. Why am I unable to place any new margin trades?
When your margin utilization is over 90%, your initial collateral available is zero. As you do not have any initial collateral available, you will not be able to put on a new margin lending trade.
I try to do a margin trade and the ticket says “Trade would exceed available collateral. Review your positions and orders.” What can I do?
The trade you are trying to do would result in your not having any more initial collateral left. On the first screen of the trade ticket, you will see the estimated initial collateral impact of your trade. If this is more than the initial collateral available, you will not be able to place the trade. If you wish to trade a smaller quantity of the asset, reduce the number of shares until the initial collateral impact is smaller than the initial collateral available.