Descriptions of account risk management terms
1. Leverage Ratio: Leverage Ratio= Market Value/Net Assets
When leverage ratio ≤ 1, no margin is used and the risk level is low. When the leverage ratio >1, margins are used and you should pay more attention to your risk status.
2. Market Value: The market value of all positions in your portfolio, both long and short.
3. Net Assets: It covers market prices of all positions and cash in your portfolio, both long and short.
4. Initial Margin: It refers to the margin required to open a position and it is equal to a given percentage of the market value of the current position. When Initial Margin > Net Assets, the buying power is insufficient and new positions cannot be opened.
5. Maintenance Margin: It refers to the minimum margin required to maintain the current quantity of positions and it is equal to a given percentage of the market value of the current positions. When maintenance margin requirement > Net Assets, Sahm may close out your position depending on the market condition.
6. Variation Margin: When the risk level reaches "Danger "or "Closeout", you are required to reduce the variation margin to 0 to restore "Safe" status. You can transfer this amount into the account, or actively close the position to release this amount of margin.