Margin trading

Margin trading by marketindex and is similar to trading Contracts for Differences. As with the Contract for Differences, margin trading is a billateral over the counter agreement between ABN AMRO and you, the client. The difference between the buying and selling price of a deal is settled in cash, which is the profit or loss.

Unlike CFD's, marketindex underlyings are bespoke products and are unavailable elsewhere in the market. Even though marketindex Prices are derived from Reference Markets, they can differ from the corresponding prices on those markets.

Margin trading avoids the physical transfer of an underlying value or security, along with all related settlement or exchange costs.

Margin trading allows you to leverage your account balance enabling you to trade positions of greater value than that which you hold on deposit. In contrast to "normal" trading you do not put up the full value of the trade. Instead, you need only set the fraction of the price to be held as collateral for the trade. The more conservative the leverage the higher the margin required and the higher the leverage the lower the margin required.

If you believe that a particular market is going to rise, you can go long (buy). If your prediction is correct, you can sell your position at a higher price, making a profit. If you are wrong, you incur a loss by selling the position at a lower price.

If, on the other hand, you think a particular market is going down, you can go short (sell). If your prediction is correct, you can buy back their position at a lower price, making a profit. If you are wrong, you will incur a loss by buying back the position at a higher price.

Open a sub account to hold opposing positions, set a different leverage level for your trades or manage exchange rate risk by opening a sub account in JPY, USD, EUR or CHF.

Added safety - the "Airbag" marketindex enforces a mandatory close-out of all open positions for each trading account when the net asset value (the balance plus or minus any unrealised profits or losses) falls below the Close-out Level or "Airbag". The Airbag is 50% of the aggregate margin requirements relating to all open positions on the trading account at that time. The Airbag applies separately to each trading Account, so that a close-out of positions may occur on one trading account without affecting the others.

The customer must maintain on each trading account the necessary margin requirement for all open positions recorded on that account.

Calculation of margin required: M = (SxPo) x C/L