WHAT WILL HAPPEN?
IF PORTFOLIO ONLY CONTAINS STOCKS
- Your ACCOUNT VALUE won’t change.
- Your Profits & Losses won’t change.
- 1.5 x BLOCKED FUNDS will move from FREE FUNDS to BLOCKED FUNDS.
- Your MARGIN STATUS will decrease to reflect the increase in BLOCKED FUNDS.
- If your new MARGIN STATUS is above 45%, nothing else will happen.
- If your new MARGIN STATUS is above 25% but below 45% then you will receive a margin call, which is just a warning that you’re getting closer to 25%.
- If your new MARGIN STATUS is below 25% then Trading 212 will automatically liquidate your positions in the order they were opened one at a time. Each liquidation will cause the margin for that position to move from BLOCKED FUNDS to FREE FUNDS. Your MARGIN STATUS will increase to reflect the decrease in BLOCKED FUNDS. The liquidations will stop if the MARGIN STATUS goes above 25%.
It’s important to understand that your Profits/Losses won’t change, but if any positions are liquidated then they will move from unrealised to realised Profits/Losses.
SUMMARY - AFTER THE MARGIN INCREASE, IF YOUR MARGIN STATUS STAYS ABOVE 25% THEN THE ONLY CHANGE TO YOUR ACCOUNT WILL BE THAT YOUR FREE FUNDS HAVE DECREASED AND YOUR BLOCKED FUNDS HAVE INCREASED (by 1.5 x BLOCKED FUNDS). You can use the calculators to check what your MARGIN STATUS will be after the increase.
BLOCKED FUNDS are increasing by 1.5 x BLOCKED FUNDS (NEW BLOCKED FUNDS = 2.5 x BLOCKED FUNDS). Therefore, in order to maintain the same MARGIN STATUS, you’d need to add 1.5 x ACCOUNT VALUE (NEW ACCOUNT VALUE = 2.5 x ACCOUNT VALUE). I imagine that this will be out of the question for many people. However, since your leverage is dropping from 1:5 to 1:2, your portfolio will be less affected by movements in stock prices. It is therefore arguable that you don’t need to keep your MARGIN STATUS at its existing level (NOT FINANCIAL ADVICE). I therefore recommend using the calculators to determine how much funds you need to add (if any) to establish a new MARGIN STATUS that you’re comfortable with. You should use both calculators and verify that their results match.
IF PORTFOLIO CONTAINS INSTRUMENTS OTHER THAN STOCKS (e.g. INDEXES, COMMODITIES, FOREX, etc.)
If you don’t have time to do the complex calculation yourself, I think you could still use the calculators (despite the warnings) in order to get a worst-case-scenario. The original calculator will show a “Margin after leverage change if no action taken” that is too low (GOOD, extra contingency) and both calculators will show a “funds to add” figure that is too high (GOOD, extra contingency - you can always withdraw the funds once you’ve seen the actual effect of the margin increase).