1. Trading on Margin
(1). Trading on margin refers to investor using the funds or securities in their brokerage account as collateral to borrow more funding from the broker to buy securities.The amount borrowed will be returned at a specified time with interest.
(2). With TradeUP, investors enjoy 4 times leverage for day trades and 2 times leverage for other trades.Margin funding is only available to accounts with a net value of $2,000 or above.(Note: If the net value of an account under margin funding drops below $2,000, the account runs the risk of mandatory liquidation.)
2. Shorting Securities
(1). Shorting refers to an investor using funds or securities as collateral to borrow securities from their brokers to sell.At an agreed upon time later, the investors agree to return the same number of shares of the same security, and agree to pay interest accordingly.
(2). At TradeUP, shorting is only allowed when an account has a net balance above $2,000. (Note: If the account balance drops to under $2,000 after the investor shorts a security, the account faces the risk of mandatory liquidation.)
(3). Cost for shorting is complex.Cost is usually related to the risk of the stock in question, including the stock’s liquidity, percentage of the particular stock being shorted currently, i.e. how many shares of the particular stock can be loaned.The cost for shorting a stock is not fixed.Investors can check details related to shorting each security on TWS.The details are presented as annualized percentage rates based on daily settlement.
(4). Investors who short securities may face the risk of margin calls, due to a shortage of shares for loan or the lender deciding to recall borrowed securities.
If the account balance drops to under $2,000 after the investor shorts a security, the account faces the risk of mandatory liquidation.After a short order is executed, if there is a shortage of the security for lending, the broker may liquidate without informing the investor.