Risks Associated with Margin Trading

 

When investing in shares through a margin account, an investor acquires shares of greater value than he/she could otherwise have bought when using only his/her cash. This means that in the event of rising share prices, the return on te portfolio will be amplified by the level of leverage employed. However, the risk is also higher when prices decline and the loss becomes also greater.

Investors should be aware that:
⦁ Losses may exceed the initial investment,
⦁ Additional cash and/or stocks may need to be deposited in a very short period of time in order to cover losses,
⦁ There may be a need to liquidate part or all of the Security Portfolio to cover any margin calls due to the decrease of prices and the value of the Security Portfolio,
⦁ CISCO can liquidate part or all of the Security Portfolio without the client's consent in order to cover any debit balances the client may have in his margin account.

A more extensive report on the risks involved can be found in the relevant agreement.