Description of Portfolio Margining
Portfolio Margining is a new margin policy offered by iDealing which can result in substantially lower margin requirements, improved leverage opportunities and no requirement to ring-fence cash in order to maintain margin positions.
Under Percentage-Of-Nominal or Covered Call Margin, a client was required to either ring-fence cash or securities to maintain a particular position. The risk of each position was considered in isolation - meaning a position could be closed out even when other positions in the account were significantly in profit.
With Portfolio Margining, the margin requirement is instead calculated across the portfolio as a whole, and is offset by the value of the portfolio. The advantage this offers to the client is that the margin requirement can be covered by cash, equities or even unrealized profit from a derivative position, maximizing the client's ability to diversify his account and potentially seize market opportunities.
A simple example illustrates the benefits of Portfolio Margin vs Percentage-of-Nominal Margin:
Percentage-of-Nominal Margin
| Instrument | Quantity | Entry Price (£) | Current Price (£) | PnL (£) | Margin Requirement |
|---|---|---|---|---|---|
| CFD ABC | 1000 | 5.20 | 7.00 | 1800 | £ 1040 |
| CFD DEF | 1000 | 4.10 | 3.95 | -150 | £ 820 |
| POUNDS | 3000 | ||||
| Account value | £ 3000 | ||||
| Total requirement | £ 1860 | ||||
| Available Margin | £ 1140 |
Portfolio Margining
| Instrument | Quantity | Entry Price (£) | Current Price (£) | PnL (£) | Margin Requirement |
|---|---|---|---|---|---|
| CFD ABC | 1000 | 5.20 | 7.00 | 1800 | £ 1040 |
| CFD DEF | 1000 | 4.10 | 3.95 | -150 | £ 820 |
| POUNDS | 3000 | ||||
| Account value | £ 4650 | ||||
| Total requirement | £ 1860 | ||||
| Available Margin | £ 2790 |
As can be seen from this example, Portfolio Margin can substantially increase a client's available margin, in this case by over 150%.
iDealing's Portfolio Margining is available to eligible investors who have a margin account. It is also accessible on iDealing's mobile apps for Android and iPhone.
Risk Warning
Warning: Margin accounts are only for clients that we can, and do, classify as Professional. Margin trading allows leverage and you can lose more than your deposit held with us.