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Margin margin trading and the balance of margin financing are concepts that can often be seen when investing in stocks.
Many friends who are new to stock investment may not know what margin trading and securities lending and margin financing are.
Today’s article is to share with friends the concepts of margin financing and securities lending and margin financing.
# 01 What is margin financing and securities lending
Although margin financing and securities lending often appear together, they are actually two concepts, namely financing and securities lending.
Financing: A simple understanding is to borrow money from a brokerage firm to buy stocks. Usually one time leverage. For example, if you have 100,000 yuan in funds, the brokerage will give you a 100,000 yuan credit line. Then, you can buy a total of 200,000 yuan in stocks.
Securities lending: A simple understanding is to borrow stocks from a securities firm, but the borrowed stocks must be sold immediately. This is actually a short-selling behavior. You have to repay the borrowed stocks. If the stock price drops, you can make a profit by buying it back at a low price. If the stock price rises, if you buy it back at a high price and return it to the brokerage, you will lose money.
Financing amplifies the investor's principal, because it is 1x leverage, and the money that can be operated is doubled.
Securities lending gives investors the ability to short-sell. If it is predicted that the stock price will fall, then through securities lending, they can also make money when the stock price falls.
In the process of financing and securities lending, money and stocks are borrowed from securities companies.
Brokerages will not lend you money and stocks for free. You need to pay interest to the brokerage.
This interest is not cheap. The usual annualized interest is 8% to 10%. In addition to the interest, you also have to pay transaction commissions to the brokerage.
Overall, the cost of margin trading is relatively high.
At the same time, let me say one more thing. Margin lending is not the only option for using leverage or shorting.
For those who know options, if you want to use leverage or go short, there are more, more flexible, safer and lower-cost strategies.
It’s just that margin trading is very simple and easy to understand, so there are many people who can operate margin trading. There are very few people who can operate options.
# 02 Conditions for opening margin trading and securities lending
The above describes what margin trading and securities lending are.
Some friends think it is very good. You can double the leverage, and you can also sell short, and you can make money even if the stock falls.
So I wanted to open a margin trading account.
However, the threshold for opening this margin trading is not low. The most important threshold for
is the following.
"The average daily account assets for 20 consecutive trading days before application are greater than 500,000."
This threshold blocks many retail investors.
The current total number of A-share financing accounts is more than 5 million.
There are more than 300 million retail investors in the A-share market.
is equivalent to one out of every 60 retail investors who has opened a two-finance account.
If you really want to open a margin trading account, you can find a way to deposit 500,000 in the account and keep it for 20 working days. You can open a margin trading account.
After opening a two-finance account, the two-finance account will not be canceled if the average daily assets are less than 500,000.
# 03 What is the balance of margin financing
The balance of margin financing and securities lending refers to the balance of margin financing and securities lending, which is financing balance + securities lending balance.
The financing balance is the difference between the money used to buy stocks and the repayment amount on that day. If the financing balance increases, it means that market sentiment is strong and it is a buyer's market.
The balance of securities lending is the difference between the money sold for securities lending and the repayment amount of securities lending on that day. The increase in the balance of securities lending indicates that the market is becoming a seller's market.
In China's market, there are far more financing investors than securities lending investors.
Therefore, the financing balance is much larger than the securities lending balance. The balance of securities lending is often only a few tenths of the balance of financing.
Therefore, the balance of the two financings is approximately equivalent to the financing balance.
On the brokerage app, you will be able to check the balance of margin financing and margin financing, and you can also see the rankings of financing purchases and securities lending sales.
The screenshot below is an China Merchants Securities app for viewing the balance of margin financing.
General stock market commentators will use the balance of margin trading and securities lending as an indicator of short-term market sentiment.
Because in the market, those who can open a margin account are investors who have been trading for at least 20 consecutive days and have average daily assets of more than 500,000.
These people have some advantages over ordinary retail investors in terms of their experience and abilities.
Therefore, it is more effective to use the balance of margin financing to judge the short-term market sentiment.
You can also refer to the screenshot above.
The time when the balance of financing and financing increased rapidly was also the time when the market was at its hottest.
For investors who want to judge short-term market sentiment, they can do so through the changing trends of the balance of financing and financing.
Today I shared with my friends what margin financing and securities lending and margin financing balance are.
hopes to help friends who like investment and financial management and bring more investment methods and strategies.
I am Zhongwei, follow me and make progress with you every day.
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