The Maintenance Margin Level is the minimum amount of equity you need to maintain an open position. If your equity falls below this minimum amount, Plus500 will execute a Margin Call and close any open positions until your account equity exceeds the Maintenance Margin Level requirement.
Example of how a Margin Call can occur:
You signed up and deposited $600 via credit card
* Balance: $600 (Deposits - Withdraws + P&L of closed positions)
* Available Balance: $600 (Balance + P&L of open positions - Initial Margins)
* P&L = $0 (total profit and loss of all open positions including daily premiums)
* Equity: $600 (Balance + P&L of open positions)
11.30am - you buy 10 Google Shares (CFDs) at $540.00
* The total amount you bought is: 10*$540.00 = $5400
* The Initial Margin that is needed for 10 Google Shares is 10%: $540
* The Maintenance Margin that is needed to maintain 10 Google Shares is 5%: $270
If your equity falls below $270 you will get a Margin Call. Plus500 will liquidate your open positions.
* Balance: $600.
* Available Balance after you bought the Google shares is: $60 ($600 - 10%*$5400)
* P&L = $0
* Equity: $600 ($600 + $0)
12.15pm - Google shares fall to $520
* Balance: $600
* Available Balance: $0 ($600 - 10%*$5400 + 10*($520-$540))
* P&L = -$200 (10*$520 - 10*$540)
* 'Equity' is $400 (-$200 + $600)
1.10pm - Google shares fall to $490. You get a Margin Call and Plus500 liquidates your position.
* Balance: $600
* Available Balance: $0 ($600 - 10%*$5400 + 10*($490-$540))
* P&L = -$500 (10*$490 - 10*$540)
* Equity: $100 (-$500 + $600)
The reason you get a Margin Call is because your Equity is $100 and you need $270 to maintain an open position on 10 Google Shares. Therefore, Plus500 has liquidated your position. Your current balance is:
* Balance: $100 (Balance changes only when closing a position or withdrawing funds).
* Available Balance: $100 (Deposits - Withdraws + P&L of closed positions)
* P&L = $0 (no open positions)
* Equity: $100 (Balance + P&L of open positions)
Source : Plus500.com
Friday, 11 March 2011
Margin Call
