To The Moon

Already have a margin account but haven't used it yet? Wondering how margin interest works, or what happens if a stock falls sharply after earnings?

Over the past 10 issues of Margin 101, we've covered everything from buying power and multi-currency financing to short selling and risk management.

Here's a quick recap of the 10 key lessons. Bookmark this guide whenever you need a margin refresher!

Important: This material is provided for general educational and informational purposes only and does not constitute financial product advice, investment advice, or a recommendation. Margin lending, short selling, and other leveraged trading strategies involve significant risks and may not be suitable for all investors. Losses may exceed your initial investment. Before investing, consider whether the product is appropriate for your objectives, financial situation and needs, and read the relevant PDS and risk disclosures.

01 |Does an unused limit accrue interest?

Your margin limit represents the financing capacity you may be able to draw on. Interest only arises once you actually use margin funds and a margin balance is created.

If your approved limit is AUD 80,000 but you've only borrowed AUD 10,000, interest is calculated on the AUD 10,000 actually used.

Read more: Buying AAPL before an Apple event: does an unused limit accrue interest?

02 | Sale proceeds haven't settled — does the next trade have to wait? 

Sold Apple but spotted another opportunity in NVIDIA before the proceeds have settled?

If your account has available margin capacity and meets the applicable requirements, a margin account may provide additional buying power for your next trade.

You don't necessarily have to wait for settlement, but actually using margin will incur interest and the associated risks.

Read more: Big swings in earnings season: sale proceeds haven't settled — does the next trade have to wait?

03 | Want to buy NVIDIA but only hold AUD — do you have to convert to USD first?

A margin account supports multi-currency financing in AUD, USD, HKD and CNH.

If you hold AUD but want to buy US stocks, you may use USD financing without converting your AUD first, subject to your available financing capacity.

However, doing so creates a USD debit balance, along with financing costs and FX risk.

Read more: Want to buy NVIDIA but only hold AUD — do you have to convert to USD first?

04 | How Does Short Selling Work? 

Short selling allows you to borrow a security, sell it first and buy it back later.

If the stock falls, you may profit from the price difference. If it rises, you may incur a loss.

Short selling requires a margin account and is subject to stock availability, margin requirements and trading permissions. Potential losses may be unlimited.

Read more: How does short selling work? Reading short risk through the 2021 GameStop squeeze

05 | Why Buying Power Differs Between Stocks

Maximum buying power can theoretically reach 4× available funds, but not every stock qualifies for 4× leverage.

Long margin rates typically range from 25% to 100%. Actual buying power depends on the security's applicable margin rate, your account position and available financing capacity. Margin requirements may also change with market conditions.

Read more: Same USD 10,000 order: why can the margin required differ so much between two stocks?

06 | Your position falls 15% — does that trigger a margin call?

A margin call occurs when your account no longer meets the applicable maintenance margin requirements.

Share-price declines, increased margin requirements, adverse exchange-rate movements and excessive concentration can all raise account risk.

Monitor your excess liquidity (EL) and overall account risk rather than focusing only on individual stock prices.

Read more: Your position falls 15% — does that trigger a margin call?

07 | How Much Margin Interest Will You Pay?

Margin interest is generally calculated as: Amount actually borrowed × annual interest rate ÷ day-count basis (e.g., 360 days) × number of days actually borrowed.

For example, borrowing USD 10,000 for 10 days at an annual rate of 7.99%, using a 360-day basis, results in approximately USD 22.19 in interest.

Tiger accrues margin interest daily and charges it monthly. Actual rates and applicable charges may vary.

Read more: How much interest do you actually pay when you trade on margin?

08 | Should You Use Your Entire Margin Limit?

A margin limit represents a ceiling on what you may use. It is not a suggested position size.

If you invest USD 10,000 without margin, a 10% stock decline results in a USD 1,000 loss.

With USD 20,000 in exposure using 2× leverage, the same decline results in a USD 2,000 loss, before financing costs.

Keeping part of your margin limit unused leaves room to adjust when markets move.

Read more: A 10% post-earnings drop: what happens to an account running 2× leverage?

09 | Is a Margin Account Right for You?

A margin account is not only for users who want to scale up positions.

It may also suit scenarios involving settlement timing, multi-currency financing, short selling and advanced options strategies.

Whether it is suitable depends on your personal experience, financial position, risk tolerance and actual trading needs.

Read more: The more volatile the market, the more you should ask: is a margin account really right for me?

10 | Seven Risk Checks for a Margin Account Before Earnings

Before establishing a margin position around earnings, remember to:

1. Check your actual margin balance.

2. Review the stock's margin requirements.

3. Confirm whether your holdings are over-concentrated.

4. Keep some buying power in reserve and watch excess liquidity.

5. Review foreign-currency debit balances and auto-conversion settings.

6. Set up price alerts and account risk notifications.

7. Plan your exit or repayment in advance.

Read more: Don't just watch the share price into earnings season: seven risk checks for a margin account 

Upgrade to Margin Account now! Learn more about margin account features, eligibility requirements and associated risks. Eligible clients may participate in the limited-time account opening promotion and receive up to 10 brokerage-free trades* and 2,000 Tiger Coins (Tiger Coins may be redeemed for vouchers, merchandise and other rewards).

*Min. brokerage waived. Third-party trading fees and other fees still apply. The card is valid for 60 days. See T&Cs . Trading in derivatives or leveraged financial products involves significant risks, including the risk of losses exceeding initial investment, and may not be suitable for every investor.

Upgrading to a margin account may provide access to additional account features and trading tools. Whether to use these features should be carefully considered in light of your investment objectives, financial situation, investment experience and risk tolerance.

This material is provided for general informational purposes only and does not constitute financial product advice, investment advice or a recommendation. Margin lending, short selling and other leveraged trading strategies involve significant risks, including the risk of losses exceeding your initial investment, and may not be suitable for all investors. Please read the relevant Product Disclosure Statement (PDS), risk disclosures and applicable terms and conditions before trading. $Tesla Motors(TSLA)$ $NVIDIA(NVDA)$ $Apple(AAPL)$