Initial Capital & Trade Size after leveraging

[tamarac]

Hi David

In a scenario where using margining for stocks could you consider allowing the following - initial trading capital $10K, margining 10%, leveraged trading capital will be $100K, allowing a trade size $20K (ie. capital in trade > initial trading capital).

I realise you could just input the leveraged amount $100K as your initial trading capital and then use a trade size $20K but I think this will produce different results to what I describe above?

Also on Trade parameters page when selecting Equal Dollar Units if enter same Capital per trade as Initial trading capital (eg. $10K each) following error occurs "Capital per trade > Portfolio capital limit". Can work around by selecting Equal Percent Units & entering 100% as Fraction of total trade capital per trade.

Regards,
Tamara

[David Samborsky]

The Initial Capital is always the real dollar capital. ie all of it is yours.

Profit and loss and a leveraged trade is not realised until a trade is closed in which case the normal sequence of events regarding capital management are taken just like they are with unleveraged instruments.


initial trading capital $10K, margining 10%, leveraged trading capital will be $100K, allowing a trade size $20K (ie. capital in trade > initial trading capital).


This won't be a problem because your contribution of capital in the trade is only 10% of 20K which is 2K.


Also on Trade parameters page when selecting Equal Dollar Units if enter same Capital per trade as Initial trading capital (eg. $10K each) following error occurs "Capital per trade > Portfolio capital limit". Can work around by selecting Equal Percent Units & entering 100% as Fraction of total trade capital per trade.


Yes this might be so if Transaction costs are included.

[tamarac]

Thanks David ... this clears up my misunderstanding.
Regards,
Tamara