Forced liquidation is a professional term for futures, but it also exists in the stock market. It refers to the fact that all the stocks held by investors have been sold, which means liquidation. In this case, investors are most worried about themselves. financial security.
Is forced liquidation of stocks a total loss?
It is not necessarily a total loss, it depends on the specific situation. If the guarantee ratio is above 100% when the position is closed, there will still be leftovers after the position is closed. If the guarantee ratio is less than 100% when the position is closed, then the position will still be owed money , not only is a total loss, but investors also need to invest a sum of money.
The closing line of stock financing is that the maintenance guarantee ratio is mostly 130%. Calculated according to the closing price, if the investor maintains the guarantee ratio less than 130%, the investor needs to supplement the collateral or settle the relevant debt within 1 trading day to make it Maintain the guarantee ratio above the warning line, otherwise you will face the risk of the company’s forced liquidation of the collateral.
Although forced liquidation of stocks generally does not lose all the principal, it is only the part that will cause losses. Therefore, if financing is used to make stocks, trend and position control are very important. If you are not familiar with financing trading stocks, don’t try it lightly.
There are three situations in which stocks are forced to liquidate:
1. The investor cannot pay off the margin financing and securities lending debts within the time limit agreed in the contract;
2. Maintain the guarantee ratio down to less than 130%, the securities company sends a notice of additional collateral to the client, and the client cannot add collateral in full within the agreed time;
3. The investor’s assets are subject to property preservation or enforcement measures by the judicial authorities due to their own reasons.
Stock forced liquidation line = investor’s total assets/liability assets x 100%. After daily securities lending to buy stocks, you should pay attention that your stocks will not be forced to liquidate.
