Latest Govt Jobs, Reviews

Advertisement
Advertisement

Sunday, 16 December 2018

Margin buying - Share Marketing

Advertisement
Margin buying

In margin buying the trade borrow money to buy a stock and hopes for it to rise. Most industrialized country had regulation that require that if the borrowing is based on collateral from other stock the trader own outright, it can be a maximum of a certain percentage of those other stock value. In the United state, the margin requirement have been 50% for many year, that if you want to make a $1000 investment, you need to put up $500, and there is often a maintenance margin below the $500. A margin call is made if the total value of the investor account cannot support the loss of the trades. Upon a decline in the value of the margarine security addition fund may be the require to maintainthe account equity, and with or without notice the margin-ed securities or any other within the account may be sold by the brokerage to product it loan position. The investor is responsible for any shortfall following such forced sale. Exiting a short position by buying back the stock is called "covering" This strategy may also be used by unscrupulous trader in liquid or thinly trader market to artificially lower the price of a stock . Hence most market either prevent short selling or place restriction on when and how a short sale can occur. The trader eventually buys back the stock, make money if the price fell in the meantime and lose money if it close.

Regulation of margin requirement was implemented after the crash of 1929. Before that, speculator typically only needed to put up as little as 10 percent of the total investment represented by the stock purchased. other rule may include the prohibition of free riding putting in order to buy stock without paying initially, but then selling them before the three day are up and using part of the proceeds to make the original payment assume the value of the stock has not declined in the interim.
Advertisement

No comments:

Post a Comment