Collateral is an asset that a borrower offers to a lender to secure a loan. Collateral can be cash, stocks, bonds, or other securities in your portfolio. The lender (Saxo) uses this collateral to ensure that you can repay the loan.
The collateral value is the amount of your assets that can be used as security for a loan. This value is not always equal to the market value of the assets. Saxo applies a "haircut" to the market value to determine the collateral value. For example, if you have stocks worth USD 1,000 and the haircut is 30%, the collateral value would be USD 700.
Saxo does periodic reviews on instruments so their collateral value could change according to the instrument rating change, especially when the market is volatile.
Can cash products be used as collateral for margin trading?
In line with the ESMA regulations, retail clients are only able to use cash as collateral for margin trading. If you are a retail client, collateral value will be 0% in the trading conditions.
For clients, classified as professionals, Saxo allows a percentage of the investment in certain stocks, ETFs and bonds to be used as collateral for margin trading activities.
Read more: Can cash products be used as collateral for margin trading?
Read also: Retail or Professional? How do I check my classification status?
Can Bonds be used as collateral for margin trading?
Saxo allows bonds to be used as collateral for margin trading for professional clients only.
Read more: Can Bonds be used as collateral for margin trading?
Where can I view the collateral value for an instrument?
Navigate to the trading conditions by clicking the "i" > Click on the Instrument tab > See Collateral value as shown below:
If you hold a position worth USD 10,000 with a collateral value of 75%, the collateral value of the position is USD 7,500.
What is margin trading?
Margin trading is another tool that allows you to amplify your potential returns, though it comes with increased risk. It enables you to amplify the potential of your trade by using borrowed funds to trade securities, also known as leveraging or gearing. This allows you to get a bigger exposure than your initial capital would.
On SaxoTrader/SaxoTrader desktop. you can engage in margin trading through different instruments including Contracts for Difference (CFDs), Options, FX, and Futures enabling you to open both long and short positions.