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Do I understand margin calls on spread bets?


colfah2

Question

I'm playing around with a demo account before I open a real account.

Below is my understanding of how it works.

Do I understand correctly what is going on?

 

I intend to buy €4.73 per point of the S&P500 at a price of 4235.

It appears that all buys are leveraged at 5:1 and there is no way of reducing this?

I will pay an overnight charge at the libor rate + 2.5% on €15,000

The margin requirement is 15% because the total value of this trade is above 7500 USD

Once the price falls below 5% (4023) I will start receiving margin calls

If the price falls 15% (to 3599.75) I'm calculating that I would need to deposit an additional €2,000 if I want to keep the trade open.

If it fell further than that, and I chose not to deposit any additional funds, the trade would be closed and I would lose a total of €3000 (initial margin of €1000 and €2000 deposited after margin call)

I cannot lose more than I deposit in my (retail) account because I live in EU and am therefore covered by ESMA.

 

Apologies if I'm asking some very basic questions. Just want to ensure I understand what I'm doing before I play with real money!

 

 

 

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