Tesla
TSLA
Disney
DIS
Adobe
ADBE
4
Meta Platforms
META
5
Qualcomm
QCOM
Account Risk
1. Understanding account risk levels
1. Risk Status
|
Status
|
Description
|
|
Safe
|
No short positions and no margin financing used.
|
|
Moderate
|
Either: - Margin financing is used, but the leverage ratio is low. - Holding options that are about to expire, where exercising them will not result in short positions.
|
|
Warning
|
Insufficient excess liquidity in your account.
|
|
Margin Call
|
Either:
- Your Equity with Loan Value (ELV) is below the maintenance margin requirement.
- Exercising expiring options would cause your ELV to fall below the maintenance margin requirement.
|
2. Leverage Ratio
Leverage Ratio is a risk indicator calculated as:
Leverage Ratio = Total Absolute Market Value of Portfolio / Net Assets
A higher leverage ratio indicates higher portfolio risk.
3. Excess Liquidity
Excess liquidity is the amount of funds in your account that exceeds the minimum required to maintain your current positions. If your excess liquidity falls below zero, it means you no longer meet margin requirements. In this situation, Moomoo Canada may liquidate some or all of your positions at any time, depending on market conditions.
4. Initial Margin
Initial Margin is the minimum amount of funds required to open a new position. It is calculated as:
Initial Margin = Market Value × Initial Margin Ratio
If your Equity with Loan Value (ELV) falls below the initial margin requirement for your holdings, your account status will be "Moderate", and you will not be able to open new positions.
5. Maintenance Margin
Maintenance Margin is the minimum amount of equity required to maintain your open positions. It is calculated as:
Maintenance Margin = Market Value × Maintenance Margin Ratio
If your Equity with Loan Value (ELV) falls below the maintenance margin requirement for your holdings, your account status will be "Margin Call". You will need to promptly deposit additional funds or close positions to ensure your ELV meets or exceeds the maintenance margin requirement.
2. How can I find out the current risk status of my account?
To check your account's current risk status, open the app and go to Accounts > Assets > Risk Status.
On the Risk Status page, you will find detailed information about your account's risk level, including descriptions of any risks and suggested actions.
3. When will my account be at risk of forced liquidation?
Your account may be at risk of forced liquidation under the following circumstances:
1. Your Equity with Loan Value (ELV) remains below the maintenance margin requirement for more than 48 hours.
2. Your ELV falls below the Soft Edge Margin (SEM) requirement.
3. When holding zero days to expiration (0DTE) options, exercise or assignment causes your ELV to fall below the maintenance margin or SEM requirement.
4. When holding 0DTE options, exercise or assignment results in new short positions in your account.
Soft Edge Margin (SEM): SEM is the actual trigger for forced liquidation. If your ELV falls below the SEM requirement, your positions may be liquidated immediately. SEM ratios are typically increased before weekends or holidays and decreased on the first trading day after these periods.
Note: We reserve the right to liquidate your positions at any time based on market conditions until your account's ELV exceeds the maintenance margin requirement.
Example:
Suppose a stock has an initial margin ratio of 40%, a maintenance margin ratio of 30%, and a Soft Edge Margin (SEM) ratio adjusted to 20% after the market opens on Monday, and increases to 30% before the market closes on Friday. A client has a cash balance of 4,000 CAD. Here are some scenarios the client may encounter:
1) The client uses margin to buy this stock, and their Equity with Loan Value (ELV) exactly meets the initial margin requirement. The client's position is as follows:
|
Item
|
Amount (CAD)
|
|
Total Market Value
|
10,000
|
|
Initial Margin
|
4,000
|
|
Maintenance Margin
|
3,000
|
|
SEM
|
2,000
|
|
Margin Loan
|
6,000
|
|
ELV
|
4,000
|
2) If the market value falls to 8,500 CAD, the client's ELV is now below the maintenance margin requirement. The risk of forced liquidation depends on the SEM adjustment:
● If it is not before the market closes on Friday: The SEM ratio is typically 20%. The client's ELV is below the maintenance margin requirement, but above the SEM. If the ELV remains below the maintenance margin for over 48 hours, the client may be subject to forced liquidation at any time. The client's position is as follows:
|
Item
|
Amount (CAD)
|
|
Total Market Value
|
8,500
|
|
Initial Margin
|
4,000
|
|
Maintenance Margin
|
3,000
|
|
SEM
|
2,000
|
|
Margin Loan
|
6,000
|
|
ELV
|
2,500
|
● If it is before the market close on Friday:
The SEM ratio is increased to 30%. In this situation, the client's ELV does not meet the SEM requirement, which will trigger a forced liquidation. The client's position is as follows:
|
Item
|
Amount (CAD)
|
|
Total Market Value
|
8,500
|
|
Initial Margin
|
4,000
|
|
Maintenance Margin
|
3,000
|
|
SEM
|
3,000
|
|
Margin Loan
|
6,000
|
|
ELV
|
2,500
|
3) If the market value drops to 7,900 CAD, the client's ELV will fall below the SEM requirement, regardless of whether it is before the Friday market close or not. This means the client will be at risk of forced liquidation at any time. The client's position is as follows:
|
Item
|
Amount (CAD)
|
|
Total Market Value
|
7,900
|
|
Initial Margin
|
4,000
|
|
Maintenance Margin
|
3,000
|
|
SEM
|
3,000
|
|
Margin Loan
|
6,000
|
|
ELV
|
1,900
|
4. If forced liquidation occurs, will only part of my positions be liquidated?
This depends on the status of your account. The primary goal of forced liquidation is to make sure your Equity with Loan Value (ELV) exceeds the maintenance margin requirement for your positions.
5. How can I avoid forced liquidation?
● When your excess liquidity falls below 10%, Moomoo Canada will notify you by email and in-app notification. Please pay close attention to market conditions and your account status, and avoid letting your excess liquidity drop below zero. (This means your Equity with Loan Value, or ELV, is below the maintenance margin.)
● If your ELV falls below the maintenance margin requirement, Moomoo Canada will notify you by email and in-app notification. To avoid forced liquidation, you can deposit more funds or sell some of your positions to raise your ELV above the maintenance margin.
● Please note that if the market is highly volatile, Moomoo Canada reserves the right to liquidate your positions at any time.
Overview
- 1. Understanding account risk levels
- 1. Risk Status
- 2. Leverage Ratio
- 3. Excess Liquidity
- 4. Initial Margin
- 5. Maintenance Margin
- 2. How can I find out the current risk status of my account?
- 3. When will my account be at risk of forced liquidation?
- 4. If forced liquidation occurs, will only part of my positions be liquidated?
- 5. How can I avoid forced liquidation?
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