# Why is the margin the same for trades with normal and guaranteed stops?

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Hi,

For example, a spread bet on the GBP/USD market, £1/point, with a stop at -£50, the margin is about £300 regardless of whether the stop is normal or guaranteed. When the stop is guaranteed, I don't understand why the margin needs to be so much higher than the potential loss. Could someone explain please?

Thanks,

Russ

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15 hours ago, Russ said:

Hi,

For example, a spread bet on the GBP/USD market, £1/point, with a stop at -£50, the margin is about £300 regardless of whether the stop is normal or guaranteed. When the stop is guaranteed, I don't understand why the margin needs to be so much higher than the potential loss. Could someone explain please?

Thanks,

Russ

Hi @Russ

We may offer reduced margin on tier 1 positions with a non-guaranteed stop attached. This does not apply to higher tiers, where margin is calculated using the 'without a stop' formula.

Your overall margin requirement is calculated as follows:

Without a stop
Margin = Size x price x margin factor

With a non-guaranteed stop
We calculate your margin with a non-guaranteed stop, compare it to the margin required without a stop, and charge the lower of the two figures as margin.

Margin = (size x price x slippage factor x margin factor) + (size x stop distance)

With a guaranteed stop
Margin = (size x stop distance) + limited-risk premium

All the best, OfentseIG

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ok, understood. Thank you.

I guess the natural next question is... why? What's the rationale? The trade has a guaranteed stop. As I understand it, that means I can't owe IG more than that. So why am I required to have a margin that is many times more than I could ever lose? The margin will never be used. Am I missing something?

Russ

##### Link to comment
4 hours ago, Russ said:

ok, understood. Thank you.

I guess the natural next question is... why? What's the rationale? The trade has a guaranteed stop. As I understand it, that means I can't owe IG more than that. So why am I required to have a margin that is many times more than I could ever lose? The margin will never be used. Am I missing something?

Russ

Hi @Russ

For non-professional traders regulated by ESMA, the margin required will be whichever is greater out of ‘Normal Margin’ vs ‘Guaranteed Stop Margin’.

In non-ESMA regions, ‘Guaranteed Stop Margin' will apply.

This is because even though a client's maximum loss is the 'Guaranteed Stop margin', changing the margin requirement simultaneously changes the leverage client's trade with. Thus, a reduced margin requirement would result in greater leverage.

ESMA regulation caps the amount of leverage that non-professional (Retail) traders can trade with. Therefore, we will cap the leverage at the margin factor we set, meaning ESMA Retail clients will be required to deposit at least ‘Normal Margin’.

All the best, OfentseIG

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ok, thanks for the detailed explanation.

Russ

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