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Two Days Margin (Margin T+2)

Two Days Margin - Margin T+2
ALPHA FINANCE provides its clients with the opportunity to buy shares listed on the Athens Exchange on credit. Holders of a portfolio are able to buy new shares utilizing the liquidity provided to them by ALPHA FINANCE.
In order to secure the amount of credit extended, ALPHA FINANCE uses part of the client’s share portfolio as collateral, which goes to make up a “Margin Portfolio”, including all the shares purchased with credit. Alpha Finance charges the client with a daily interest on the utilized credit.

How Margin T+2 Works
Upon the signing of the contract, the ALPHA FINANCE client designates the shares that will make up the collateral portfolio and is ready to buy on margin. The extra liquidity made available by ALPHA FINANCE may be used whenever the client considers that market conditions make this worth while. Interest is based on the prevailing rates.

For risk management purposes, the mark to market value of the securities included in the collateral portfolio is weighted with regard to the risk they carry. The level of credit may reach an amount up to and including 60% of the weighted value of the total collateral portfolio. 

According to Margin T+2 rules and procedures, you are obliged to settle up each purchase through sell of equal or greater value or/and cash deposit. Sell must take place within the settlement period (up to T+2), that is, two working days from the day of purchase (T) while cash deposit on the settlement day (T+2). Consequently, the longest credit period is set to two working days.

In any other case Alpha Finance, one day after the settlement day (T+3), must liquidate part of your portfolio in order to cover the value of your purchase. 

Opportunities and Risks of Margin Τ+2
Margin T+3 is a product that includes many levels of risk. In a volatile market, if stock proceeds decline, the client may be required to add additional cash or stocks to the collateral portfolio to eliminate the credit or to increase the collateral value. By using Margin T+3 the client leverages his investment. This means that a possible rise in the price of shares will lead to higher returns. Accordingly, a drop in share prices will lead to greater losses.

Example
Supposing that you have in your possession shares to the value of €70.000 euros which can be used to form the basis of the collateral portfolio. By using a part of the amount of the available credit extended to you, you could be able to buy shares to a value of 30.000 euros, thus creating a collateral portfolio with a total mark to market value of €100.000 euros. Accordingly, by borrowing from ALPHA FINANCE, you are able to create a portfolio with a value greater than your own personal liquidity capacity, thus leveraging your rate of return. 

In the following table you can see how the leverage mechanism contributes to the profits and losses derived from the “Margin Portfolio” and how it can lead to the achievement of a rate of return which is greater than the corresponding change in the price of shares held in your “Margin Portfolio”. Of course, the corresponding potential losses will also exceed the level of any fall in share prices.

 

Change in Share Prices (%)

Resulting Value of Margin Portfolio in Euros

Credit in Euros

Profit or Loss on Initial Capital in Euros

Profit or Loss Percentage(%)

50%

150.000

30.000

50.000

71,4%

25%

125.000

30.000

25.000

35,7%

10%

110.000

30.000

10.000

14,3%

0%

100.000

30.000

0

0%

-10%

90.000

30.000

-10.000

-14,3%

-25%

75.000

30.000

-25.000

-35,7%

-50%

50.000

30.000

-50.000

-71,4%

The Customer Services is at your disposal for any information or clarification you require, through telephone at (+30)210 370 5700 or through  email at alphatrade@alphafinance.gr.