I wonder if itâd be easier to think of it this way:
IF PORTFOLIO ONLY CONTAINS STOCKS
Your ACCOUNT VALUE wonât change.
Your Profits & Losses wonât 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 youâre 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%.
Itâs important to understand that your Profits/Losses wonât 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, youâd 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 donât 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 youâre comfortable with. You should use both calculators and verify that their results match.
If somebody can confirm this then Iâll add it to the posts at the top.
IF PORTFOLIO CONTAINS INSTRUMENTS OTHER THAN STOCKS (e.g. INDEXES, COMMODITIES, FOREX, etc.)
If you donât 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 âMargin after leverage change if no action takenâ that is too low (GOOD) and both calculators will show a âfunds to addâ figure that is too high (GOOD, in that it gives you extra contingency - you can always withdraw the funds once youâve seen the actual affect of the margin increase).
@Wankerooo, those replies above were very general and apply to everyone. My thoughts on your specific circumstance are that you will be uncomfortably close to 25%. If some of your positions dip after the margin increase and you fall below 25% then your earliest positions will start to liquidate. If you can figure out what positions will close first and youâre happy to lose them then thatâs fine. Otherwise, Iâd either add some more cash to your account or close a few more positions under your own terms.
Did my detailed post above clarify anything for you?
Itâll be done after 15:30. By gradually raising the requirements we mean that we wonât raise the margin requirements on every single stock all at once. It wonât be done in an instant.
@Richard.W has made some enhancements to âCalculator 2â.
I strongly recommend using Calculator 2 today; it contains the latest enhancements based on our testing and investigations over the weekend and on Monday.
If you previously used Calculator 1 to work out how much cash to add, I recommend checking your figures using Calculator 2.
I would like to emphasise the assumptions that have been made in Calculator 2
Our assumption (which is based on what staff have written in other posts) is that the margin indicator displayed in the app is the following function of AV (account value) and BF (blocked funds)
When leverage changes from 1:5 to 1:2 the margin indicator will change by replacing current BF by 2.5 BF, assuming that only stock CFDs are held. This will decrease the margin indicator, possibly to 25% or below, in which case positions will be closed). It can be increased by depositing funds to increase AV. The calculator shows you how much funds you need to add to achieve a target margin indicator value. It solves for x in
The process for calculating how much cash to add is unnecessarily complex. To calculate the figure suggested by T212, all you need to do is multiply the total margin of all your open stock positions by 1.5. If you only have stock instruments in your portfolio then all you need to do is multiply BLOCKED FUNDS by 1.5. However, I believe this figure is arguably meaningless anyway (see below).
It uses the general phrase âPriceâ without specifying whether it means opening price, buy price or sell price. I think it means either buy or sell price, but that would vary depending on whether it was a buy position (use the sell price) or a sell position (use the buy price). However, as I described above, itâs completely unnecessary.
It uses the phrase âThe difference you need to add to your account to make sure no positions get closedâ. I think this is very misleading as it completely ignores any FREE FUNDS, which might mean it isnât necessary to add anything to your account. They certainly shouldnât have used the word âneedâ.
It uses the phrase âThat means you will need 50% of the total value of the trade to guarantee your positionâ. What does that actually mean?
In fact, I believe the following is true (Iâve run out of time to test this theory):
If your MARGIN LEVEL is at 50% or below, I think that following this article will cause you to add too much cash to your account, resulting in a higher MARGIN LEVEL after the margin change.
If your MARGIN LEVEL is above 50%, I think that following this article will result in a lower MARGIN LEVEL after the margin change. That might be perfectly fine, but it seems a bit arbitrary to me.
To my mind, the article is really just an attempt to allow somebody to maintain an existing MARGIN LEVEL of 50%, but it gets that calculation (slightly) wrong because it doesnât take into account the increased ACCOUNT VALUE from adding new funds. For anybody with a MARGIN LEVEL above or below 50%, I recommend comparing the results of T212âs method with the calculator.
As regards first bullet point. If you have account value AV and blocked funds BF and AV/BF < 1 then adding 1.5 BF makes new margin indicator after leverage change
0.5(AV + 1.5 BF)/(BF+1.5 BF)
which is more than the old margin indicator value of 0.5 AV/BF. You will have added more than is necessary to maintain the same margin indicator value.
But it is not 100% clear to me what Trading 212 will require. Perhaps they want all blocked funds on stocks to increase by a factor of 2.5.
So you agree with me, right? What about the other scenario?
Well thatâs why I wrote that post. I believe that whoever wrote that article simply didnât understand the implications. However, I am concerned that Iâm missing something.
I realise this is far too late, but itâs the last thing on my to-do list so Iâm including it for completeness. If it turns out to be accurate then at least weâll have a record of it for future margin changes (if anybody is still here).
If you want to check your predicted NEW MARGIN LEVEL after the margin change, and your portfolio only contains stocks, use the calculator.
However, if your portfolio contains stocks and currencies, indexes, commodities, etc., then I think this technique might work:
Open every stock position (ignore non-stocks) and make a note of the âmarginâ (this is the margin that is a value, not the two that are percentages )
Sum all these margins to give BLOCKED FUNDS FOR STOCKS
Calculate BLOCKED FUNDS - BLOCKED FUNDS FOR STOCKS to give BLOCKED FUNDS FOR NON-STOCKS
Multiply BLOCKED FUNDS FOR STOCKS by 2.5 to give NEW BLOCKED FUNDS FOR STOCKS
Add NEW BLOCKED FUNDS FOR STOCKS to BLOCKED FUNDS FOR NON-STOCKS to give NEW BLOCKED FUNDS
Now, to calculate your new MARGIN LEVEL, do the following:
If ACCOUNT VALUE is greater than (>) NEW BLOCKED FUNDS:
NEW MARGIN LEVEL = (ACCOUNT VALUE / (ACCOUNT VALUE + NEW BLOCKED FUNDS)) * 100 ("/" means âdivided byâ)
If ACCOUNT VALUE is less than or equal to (<=) NEW BLOCKED FUNDS:
NEW MARGIN LEVEL = ((ACCOUNT VALUE / NEW BLOCKED FUNDS) / 2) * 100
If you are uncomfortable with your NEW MARGIN LEVEL, then consider adding NEW FUNDS:
NEW ACCOUNT VALUE = ACCOUNT VALUE + NEW FUNDS
Then repeat the MARGIN LEVEL calculation above, using NEW ACCOUNT VALUE instead of ACCOUNT VALUE.
Please let me know if anybody does this calculation before the margin change and whether it worked!
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