June 21, 2011
new to options trading?
TheStreetTrader asked:
i have a vitual account about a month or so ago i bought 20K of the eur/usd bought at 142.72 now its 146.27… it says i used only 50$ margin and have a profit of 709$$ im not really sure what this means did i only risk 50$ and made 700$??
i have a vitual account about a month or so ago i bought 20K of the eur/usd bought at 142.72 now its 146.27… it says i used only 50$ margin and have a profit of 709$$ im not really sure what this means did i only risk 50$ and made 700$??
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Comments on new to options trading? »
Margin is not how much your money was at risk. In worst case scenerio, EUR could to 0, you would lose all 20K of your investment. Because this is a highly unlike scenerio, forex brokers generally allow very high leverage, in your case, 400x, because 20K/50 = 400, which is abnomrally high, and usaully only bucket shops offer. Most legitimate forex brokers will not allow leverage above 50x. During normal trading hours, with a 20K position, you should expect to lose or gain $50 within minutes, and much much more within a month.
hello,
it means you borrowed 50$ to trade and made profit 709$. Margin means you use broker money to trade.
cheers.