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Others Stock

[OTHERS] margin financing

hi
i think i can find alot expert here
any1 can help me regarding margin account?

currently personal loan oli charge 5 -6 %
but margin account is charge at blr , roughly 6.25%

borrow personal loan is better
or using margin account is better?

and how margin work?

let said i put in 25 k in a margin account
the margin allow me to buy share up to 100 k

Q1 :
so i used up maximally..
buying share worth 100 k
so do i need to paid interest on the extra 75 k that i had used to buy share? if the value of the share that i had invest is static/constant , no changes.


Q2
so the share that i buy is X
x = rm 1.00
so i had bought 100o lots @ 1.00= 100k

let said market suddenly crash

X drop to 0.50
so current value is 50k

so wat will happen to me?

Q3
i just used up the margin account till 25 k
same as the money i put in

the share drop
now my share worth 12.5 k

so wat will happen to the account?

Q4
i used up the account till 50 k
and the share drop, current value 25 k

wat will happen to me?

Q5
i used up the account till 50 k

and the share drop a bit
current value 45 k
wat will happen?

Q6
margin account count interest daily or monthly?

thanks
reply
Any seasoned margin account users or brokers willing to shade some light on the matter?
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Just sharing my view...

Personal loan charge interest until you make full settlement. Margin account only charge interest when you use it.

Q1: Yes, you will be charged with interest for
the extra 75K you used until either you bank
in 75K or you sell 75% of your stock.
Q2: Margin call!!! Top up or sell
Q3: Nothing happen. Your net worth will be 12.5K
Q4: Depending on the margin provider. There is a
rule for the ratio between amount you borrow
against share value. Normally, if the ratio
exceed 70% - margin call.
Q5: Same as Q4.
Q6: Margin acc count interest on a daily basis.

Hope this help...
I love margin :)
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thanks, after so many year,, now oli have reply from forumer, thinking about that..
very much appreciated,,

which stock broker chheapest?
i think major bank like,maybank, eonbank, offer cheaper margin interest than the stockbroker like osk.. wat is your opinion?
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hi allenoe,

i am currently using personal loan for trading,
seem ok for me..and cant get a good teacher on margin trading..

coz i get a very good offer which is 3.3 % p.a fixed
but need to pay monthly installment

i used up my personal loan maximally

btw how margin works?
also paid monthly installment like personal loan, or just service the interest oli ?
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Hi Icslam2000

I use Public Bank since day 1. Current margin at BLR -1%
I heard OSK is around 8%

In general, Margin Acc give 2.5times your balance in the account to buy shares and 1.5times of shares value you held in the account.
The advantage is you only pay interest if you use the margin. The interest is deducted after you sell your shares. If you held your shares for long time, interest will accumulate until margin call. That is quite unlikely to happen. For personal loan - you pay interest until you fully settle it.

FYI, i use personal loan + margin acc to trades. Extremely dangerous and risky but good leverage.

But, touchwood, so far so good for me :)

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thanks for your info.. i plan to open 1 with maybank..

i am avoiding osk coz i think osk is expensive

sound good , coz pay interest oli..

if can find a good share which give good dividen n have good chance of capital appreciation,

than i think can maximise the profit

use the dividend to offset the interest..

some share can give 8 % return

if reit now give returm 8 % annually

i use margin to buy reit, interest 6.35- 1% = 5.35
i use the dividen to pay the interest,
than i can untung 2.75 %
and can have chance for capital appreciation..

wat is your opinion on it?
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hm... sounds like a good plan!

although I see potential risks in,

1. the price of your shares on margin swings down, may be for its own reasons or being dragged down with the overall market, then there may be the risk of margin call?

2. Interest rate increases?

3. Dividend uncertainty?

generally I think margin financing is more for short term trading?
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Buying reit on margin...hmm, I never buy reit so far. Anyway,
The plan will lock your money for quite a long time because you can only see decent profit after two or more years. You got the chance to get capital appreciation but also having same chance to go the other way round.

BLR and REIT Dividen are not constant. You cannot be certain it will works in your favour all the time.

So, I guess i will agree with Xiaosong, margin financing is more for short term trading.
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Modified category to 'Others'
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How is the calculation like?
for eg if its 4%, how is it being calculated?

4% of 100k (i borrow) = RM 4,000 is the interest rate? so which means i pay back 104K per annum? After one year? Or how should i be paying to them?

What if i trade short term? buy n sell buy n sell? how do i pay back to the bank? after every transactions done? or i could accumualate to pay back after one year later? or until when i feel like paying or when i have the extra cash to pay?

whats the standard margin rate like for now? i was offered by pbb, blr - 2% i think or 2.++% =

and what is the blr now?
thanks in advance.

lastly, is it profitable and advisable to trade with margin?
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profitable... well it depends on what you trade on.
advisable... personally i say a BIG NO NO !
i can't say for others but to me the first and foremost rule that you MUST comply in trading or investing is NEVER USE BORROWED MONEY TO TRADE OR INVEST !
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well... what sort of shares do u trade, if you may share?
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me.. i trade mostly on my medium to longterm investment shares based on the TA charts and use the profits to add-on to the investment shares.
Also on a couple other recommendations by our fellow forumist here in tradeSignum...
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You Can Only Borrow This Margin Facilities If You Are Able To "Pay Back Mthly Installment-Until Balance = RM0" without expecting to use any cents from your share trading fund (profit/initial fund).
Otherwise...NEVER USE BORROWED MONEY TO TRADE OR INVEST !
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well, do u mean that i have to pay on monthly basis for the interest rate? sorry, am not too familiar with it , therefore would like to find out further from you guys here..

what if say, this money is used to invest in blue chips counters like consumer for instant... would that be a good idea then?

in my opinion, is to buy only when the market crashes, so that was why i asked, do i have to like pay back on monthly basis or after i sell off my shares?

bcz i read up there, someone given an answer is that, unless one kena margin call which is 70% of the total value, only then they will either force sell i suppose, or ill have to top up to keep the shares.

otherwise, it is only to pay back when i sold off my shares in the end of the day.
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