How to properly calculate Equity/Margin ratio?

December 8th, 2023, 09:16 AM

Hello,

do you calculate your Equity/Margin ratio? Can anyone confirm my formula (I was checking Google, but I'm not sure... it looks too easy to me)?:

$2000 (account size) / $123 (one Micro ES contract) = 16,3%

Thanks you
Tom

kevinkdog · December 8th, 2023, 03:09 PM

tomanatura

Hello,

do you calculate your Equity/Margin ratio? Can anyone confirm my formula (I was checking Google, but I'm not sure... it looks too easy to me)?:

$2000 (account size) / $123 (one Micro ES contract) = 16,3%

Thanks you
Tom

That calculation is not a percent. 2000/123 = 16.3

If you mean "what % of my account is taken up in margin?" it would be 123 / 2000 = 6.2%

Not sure which one is most useful to you, it depends on what you are looking to do.

December 9th, 2023, 08:09 AM

kevinkdog

That calculation is not a percent. 2000/123 = 16.3

If you mean "what % of my account is taken up in margin?" it would be 123 / 2000 = 6.2%

Not sure which one is most useful to you, it depends on what you are looking to do.

My broker informed me, that: If the Equity/Margin ratio drops below 5%, or the Net Liquidating Value (NLV) (based off the last traded market price) of your account drops below $200, or in the event that you lose 90% of your starting cash on hand (whichever comes first), the risk desk will make an attempt liquidate your entire position and charge a liquidation fee of $25/contract.

So I'm trying to make excel sheet to calculate that Equity/Margin ratio. If I'm trying to calculate 123 / 2000 = 6.2%, every time I lover account size percentage is going up, not down. So is there any other method to calculate this?

Thanks you
Tom

kevinkdog · December 9th, 2023, 08:18 AM

tomanatura

My broker informed me, that: If the Equity/Margin ratio drops below 5%, or the Net Liquidating Value (NLV) (based off the last traded market price) of your account drops below $200, or in the event that you lose 90% of your starting cash on hand (whichever comes first), the risk desk will make an attempt liquidate your entire position and charge a liquidation fee of $25/contract.

So I'm trying to make excel sheet to calculate that Equity/Margin ratio. If I'm trying to calculate 123 / 2000 = 6.2%, every time I lover account size percentage is going up, not down. So is there any other method to calculate this?

Thanks you
Tom

Why not just ask the broker to explain it, or for an explanation? Get the info and exact answer directly from the source.

December 9th, 2023, 08:28 AM

kevinkdog

Why not just ask the broker to explain it, or for an explanation? Get the info and exact answer directly from the source.

That is possibility, of course... I just thought, that it is common and well known thing - I wanted to discuss it more deeply after basic clarification... and that it is not discussion for broker.

kevinkdog · December 9th, 2023, 08:45 AM

tomanatura

That is possibility, of course... I just thought, that it is common and well known thing - I wanted to discuss it more deeply after basic clarification... and that it is not discussion for broker.

Margin to Equity is the common calculation. Your broker says "equity/margin ratio"

That is the twist here.

How to properly calculate Equity/Margin ratio?

Discussion in Psychology and Money Management

How to properly calculate Equity/Margin ratio?