Why use financing and margin trading?

The most significant advantage of financing transactions is that it can help you expand your ROI. The following examples can briefly illustrate the advantages of financing transactions.

Assuming you have 10,000 yuan in cash, the market price of a certain stock is 100 yuan, and the margin rate is 50%. You can purchase 100 shares of stocks with your own cash, and after mortgaging the initial purchase of stocks, you can borrow 10,000 yuan from BiyaPay to buy stocks. Through financing transactions, you can ultimately hold 200 shares of stocks worth 100 yuan per share, with a market value of 20,000 yuan.

When the stock price rises by 50% to 150 yuan/share, the market value of your position becomes 30,000 yuan, the funds you borrowed from BiyaPay remain unchanged at 10,000 yuan, and your net assets rise to 20,000 yuan.

Margin trading is a common strategy used by investors when they believe that the stock price is about to fall. You do not hold the stock yourself, so you need to borrow stocks from a securities firm to sell, and then buy the same amount of stocks to return to the securities firm after the stock price falls. This method of “selling high and buying low” earns the price difference. Let me give you a simple example to illustrate:

Assuming the market price of a stock is 100 yuan/share, and you believe that the stock will fall in the future, you first borrow 100 shares from the broker to sell. At this time, selling 100 shares will increase your cash by 10,000 yuan, and the number of stocks will become -100 shares. After a period of time, the stock price falls to 50 yuan/share. At this time, you only need to spend 5,000 yuan to buy 100 shares and return them to the broker. The remaining 5,000 yuan is your margin trading income.