Forum Archive Index - March 2004

[mixtrader <mixtrader@clear.net.nz>]

I have made use of margin trading in the past with mixed results although I am definitely ahead.  The key concept to remember is that you must retain sufficient liquidity to meet a margin call the instant that it arises.  Margin calls occur when the shares (or portfolio of shares) loses value relative to your purchase price and the financier that has funded your entry into the shares gets nervous and wants to cover the margin between the current market position and your cost.

 

Margin trading on a rising market has good potential as often you only pay 30% (plus or minus depending on source of finance) of the share value and as such can get into larger parcels.  Reality sets in fairly quickly if the market drops and you get a margin call from your financier.

 

For what it is worth, I would only advise experienced traders to use margin trading, the potential for loss is significant and must be factored into any risk assessment undertaken.  Certainly not for the risk averse.

----- Original Message -----

From: Allan Julian

To: sharechat@sharechat.co.nz

Sent: Tuesday, March 02, 2004 7:48 PM

Subject: RE: [sharechat] Share Loans

Its called margin trading, the bank needs to have the confidence that what ever happens they will not lose, and will ask you to fill out a form.

For the ANZ this can be downloaded off the internet.

They will also make clear to you the consequences of a margin call.

Trading on the margins can magnify your losses, and make any ganes well worth while.

It is not for the faint hearted.

I hope this helps.

Allan.

[Original Message-----
From: sharechat-owner@sharechat.co.nz [mailto:sharechat-owner@sharechat.co.nz]On Behalf Of Nairs
Sent: Tuesday, 2 March 2004 12:24 p.m.
To: sharechat@sharechat.co.nz
Subject: [sharechat] Share Loans

Hello everybody,

 

I have been reading all the topics on this forum and I must say it is quite informative.

What I am trying to find out is, if anybody knows much about taking a loan to buy shares, through the bank or any other source. And what process does it usually involve.

This will be  much appreciated.

 

Cheers