If deposit 1 billion, broker give-me 2 billions? There is any absolute limit for margin buy power ?
- Thread starter secic22935
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Wrong. The bank will never wait till the market is going to zero. They will limit their risk.
With a 30% drop they will already lose 80 million. Do you really think they will take the portfolio at 100% of the value as guarantee? I don't think so. Especially not when we speak about this amount of money.
I know that. But I was responding to the guy that asked "who is going to pay the $500m loan if the market moves against their client" So I said the market would have to go to zero [for there to be a $500m loss]
No, with a 6 to 1 leverage (your example), a mere 17% drop in the market will already trigger a margin call.
And like @virtusa said, brokers will not even wait that long to liquidate the position.
If the customer was long EUR/CHF in January 2015 for instance then game over for the broker and his $500 mil loan (not to mention the client's deposit), after the gigantic crash.
Again, brokers (and banksters) are not crazy, their primary goal is to protect their cash, that's why they only loan big money to the super rich.
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If the client has an edge (long and short positions at the same time) then the account cannot go to zero, by definition, regardless of price action, yes?
By the way, most high net worth individuals will put their trading account balance in T-bills or other interest-producing financial instruments, of course, but that does not change the facts.
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Are you speaking from personal experience?
Not even remotely close.
I will probably be eating cat food in 20 years. But, that's a very different story and should not be construed as reflective of my business knowledge which is strong...er...semi-strong.