Why use margin trading and short selling?

The most significant advantage of margin trading is that it can help you expand your investment returns. The benefits of margin trading can be illustrated with the following example:

Suppose you have 10,000 yuan in cash, a stock is priced at 100 yuan, and the margin rate is 50%. You can purchase 100 shares with your own cash. After mortgaging the initially purchased shares, you can borrow another 10,000 yuan from BiyaPay to buy more stocks. Through margin trading, you can ultimately hold 200 shares at 100 yuan/share, with a total position value of 20,000 yuan.

When the stock price rises by 50% to 150 yuan/share, your position value becomes 30,000 yuan. The funds you borrowed from BiyaPay remain at 10,000 yuan, while your net assets have increased to 20,000 yuan.

Short selling is a common strategy when investors believe that stock prices will fall. You do not actually own the stock yourself; you need to borrow the stock from a broker to sell it, and then buy back the same number of shares after the stock price falls to return to the broker, profiting from this "sell high, buy low" method. Here's a simple example:

Suppose a stock is priced at 100 yuan/share, and you believe it will fall in the near future. You first borrow 100 shares from the broker and sell them. At this time, your account's cash increases by 10,000 yuan from selling 100 shares, while the stock quantity becomes -100 shares. After some time, the stock price drops to 50 yuan/share. You only need to spend 5,000 yuan to buy 100 shares to return to the broker, and the remaining 5,000 yuan is your profit from the short selling transaction.