To The Moon

Hello, Tigers! In the previous lesson, we discussed the three key types of Hong Kong ETFs. In this lesson, we will continue to delve into the practical knowledge of trading Hong Kong ETFs.

In this session, we will guide you through hands-on trading examples of Hong Kong ETFs from the following three perspectives:

1. Trading ETFs on the Tiger Trade app.

2. Margin trading

3. Requirements for margin trading

1.Trading ETFs on the Tiger Trade app

(1) Take "XL2CSOPCSI 300 (07233.HK)" as an example; open the "Tiger Trade app," click on "Home," then tap the search icon at the top right corner, enter the ETF code "07233," click on "Trade," and then click on "Buy/Long."

（Source：Tiger Trade app）

（Source：Tiger Trade app）

(2) In the trading interface, input the desired "quantity" you want to buy, then click "Buy" to place the order.

（Source：Tiger Trade app）

2.Margin trading

ETF's regular trading is actually just like stocks, very straightforward. Now, let's talk about how to engage in margin trading with ETFs.

Firstly, what is margin trading? In simple terms, margin trading is to trade with leverage.

ETF margin financing involves borrowing money to buy ETFs if you think their prices are going to go up, whereby margin short selling involves borrowing ETFs to sell if you think their prices are going to go down to buy back in the future, thereby earning the price difference.

In other words, if you have a positive outlook on the future performance of a certain ETF and believe it is likely to rise, you can use margin financing to obtain more funds for investing in that ETF. Conversely, if you have a negative outlook on the future performance of a certain ETF and believe it is likely to fall, you can use margin short selling to profit from the price difference.

The benefit of trading on margin is that you are using leverage. If you trade in the right direction, your returns could multiply, even with a relatively small order.

However, margin trading also comes with higher inherent risks:

Risk 1: If your position on the ETF is incorrect, margin trading can amplify your losses.

Risk 2: Both margin financing and margin short selling involve borrowing from your brokerage firms, which come with a financing cost, increasing your cost of investment.

Before engaging in margin trading, it's essential to fully understand the operational mechanisms, risks, and regulations of the related services. Make sure you have sufficient investment knowledge and risk tolerance. If you really need to use margin financing or margin short selling, how should you proceed?

Open the Tiger Trade app. We will use the XL2CSOPHSTECH 300 (07226.HK) as an example to guide you through margin financing and margin short selling operations.

(1) In the market interface, search for the ETF code "07233", click "Trade", and then click "Buy/Long".

（Source：Tiger Trade app）

（Source：Tiger Trade app）

(2) After you have entered the order page, you can see the maximum quantity available for margin financing and the corresponding loan amount.

（Source：Tiger Trade app）

（3）Clicking on "Sell" in the trading interface will display the maximum quantity available for selling.

（Source：Tiger Trade app）

When engaging in margin trading of Hong Kong ETFs, there is a crucial aspect to keep in mind: all forms of financing and margin involve assets borrowed from the broker, and since they are borrowed, they will accrue interest.

In other words, when we use margin trading for Hong Kong ETFs, we need to cover two types of costs:

The first type is the basic cost of trading the ETF, including commission fees, platform fees, stamp duty, and others. You can find details of these costs on our official website.

(Source: Tigerbrokers official website)

The second type is the interest charges for trading on margin, which can also be found on the Tiger Trade app and Tiger's official website.

(Source: Tigerbrokers official website)

（Source：Tiger Trade app）

3.Requirements for margin trading

At this point, you already have a clear understanding of the operation of going long or short on an asset, as well as the costs involved. We're sure you've also noticed the term "margin" in the chart above. So, what is margin, and how does it impact your trading? In fact, both going long or short on an asset fall under the category of trading with leverage - margin trading.

Next, let's talk about the margin requirements for margin trading.

When a investor wants to buy or sell a certain amount of security that is beyond their current level of equity, and the brokerage firm provides a certain amount of levarage to put through the investor's order (based on the investor's amount of equity - "initial margin"), that is margin trading. When an investor engages in margin trading, their assets in their brokerage account are collateralised for their margin loan(s). Interest charges will incur according to their loan balance(s).

By clicking the orange dollar sign icon ($) in the ETF trading interface, you can see the margin information specific to that ETF product:

（Source：Tiger Trade app）

（Source：Tiger Trade app）

The initial margin for the long position shown in the chart is 70%. How should we understand this?

It's quite simple. Let me give you an example: If you have a margin account and you're particularly bullish on an ETF and want to go long, you don't actually need to spend the full amount of the transaction. Instead, depending on the specific ETF, you only need to allocate a certain amount as margin to complete the trade.

For instance, if you currently have 10,000 Hong Kong dollars in cash and you want to go long on XL2CSOPCSI 300 (07233.HK), which has an initial margin requirement of 70%, you can buy up to an ETF value of 14,000, which is 1.4 times leverage.

The maintenance margin for long position in the chart is 65%, how should we understand this?

Firstly, let's understand what a maintenance margin is. The maintenance margin is the amount set to maintain the balance of interests between parties in margin trading or short selling when the ETF's market trends in the opposite direction. Specifically, the proportion between the amount of margin and the actual value of pledged securities or funds needs to be maintained above a certain minimum level. This proportion is known as the maintenance margin.

In simple terms, when a broker believes that your account funds are insufficient to handle market fluctuations, they might remind you to deposit additional funds to avoid forced liquidation of your positions. The maintenance margin can be seen as a "warning line" set by the broker.

So, how should you interpret this "warning line"? You can check the risk status of your account by opening the Tiger Trade app and clicking on "Excess Liquidity" in the "Portfolio" section. If your account risk level is in the "Very Safe" or "Safe" state, there's little risk of forced liquidation. However, if your account is in the "Alert", "At Risk," or "High Risk" state, then you should be extra cautious.

（Source：Tiger Trade app）

The initial margin and maintenance margin for short positions follow the same principles, so we won't explain them here. With this, we're concluding the "Advanced Course on Hong Kong ETFs". We've compiled a table summarizing the various indices and their corresponding ETFs discussed in these three lessons for your reference.

Compilation of Hong Kong Stock ETFs Table

(Data source: Compiled internally, this data is provided solely for educational purposes and does not constitute any financial advice.)

In addition to the table above, you can open the Tiger Trade app, go to the "Quotes" section, click on "Stocks", select "HK", and then click on "ETF Mall" to find more popular Hong Kong ETFs.

We hope this course has been informative for you, fellow investors. See you next time!