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.
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