Portfolio Trader - Possible Margin Calculation Error
Posted: Jun 09 2017
First of all the scenario involves using stocks/etf's for the portfolio.
Whether I use "Required Capital Assumptions in Margin Trader - Margin value 100% of contract cost" or "Potential Loss per Contract - Max Potential Loss 100" the results are the same.
Initial Capital: 1,000,000
Trade 1: (day 1) utilizes all 1,000,000 of capital
(day 2) Trade 1: appreciates by 45,000
Trade 2: (day 2) Trade 2: is entered utilizing the 45,000 of capital appreciation from Trade 1
To enter Trade 2, the account would need to borrow cash to place the trade, and go into margin greater than 100%. I would think, the max potential loss would be greater than 100% at that point in time (Trade 1 => 1,045,000 and Trade 2 => 45,000 == 1,090,000 potential loss).
I would think the Margin Value would be 1,090,000 / 1,045,000 == 104.3%
What I am suggesting is that at least one of these settings should be based on the cash curve (i.e. cash available).
Am I missing something?
Whether I use "Required Capital Assumptions in Margin Trader - Margin value 100% of contract cost" or "Potential Loss per Contract - Max Potential Loss 100" the results are the same.
Initial Capital: 1,000,000
Trade 1: (day 1) utilizes all 1,000,000 of capital
(day 2) Trade 1: appreciates by 45,000
Trade 2: (day 2) Trade 2: is entered utilizing the 45,000 of capital appreciation from Trade 1
To enter Trade 2, the account would need to borrow cash to place the trade, and go into margin greater than 100%. I would think, the max potential loss would be greater than 100% at that point in time (Trade 1 => 1,045,000 and Trade 2 => 45,000 == 1,090,000 potential loss).
I would think the Margin Value would be 1,090,000 / 1,045,000 == 104.3%
What I am suggesting is that at least one of these settings should be based on the cash curve (i.e. cash available).
Am I missing something?