๐The correct answer to this quiz is B: Stock A has a lower margin requirement. Why? Even though you are deploying an identical USD10,000 of principal into both assets, Tiger Brokers do not view them with equal risk.
Example: $BHP GROUP LTD(BHP.AU)$ vs $COBRE LTD(CBE.AU)$
BHP has a market cap of AUD 200 billion while Cobre has a market cap of only AUD 308 million. Price volatility: BHP is moderate & follows trends with global macro economic implications. Cobre is highly volatile & tends to swing wildly.
Why BHP is given maximum leverage: The asset is stable, transparent & ultra liquid.
Why Cobre commands high margin: Small cap explorers like Cobre may not have the buyers on the other side of the order book, creating a massive risk of capital slippage.
The Verdict: Using margin on BHP allows for capital efficiency. Using margin in Cobre is like playing with fire in a windstorm.
Check the Risk Classification Tier before trading.
@Tiger_AU @Tiger_comments @TigerStars
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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