Understanding margin utilisation and margin calls at Saxo

Margin utilisation and its implications

High margin utilisation occurs when a significant portion of your maintenance margin in a trading account is used to finance open positions.

You might also want to read:
•    What is margin trading?

If your margin utilisation reaches its maximum capacity, meaning your collateral no longer covers your margin positions, Saxo may be obliged to close all your margin products positions. This process, commonly referred to as being "stopped out".

Be aware that option contracts are also considered margin products, even if the specific contract doesn’t utilise any margin. Any cash products, such as shares, bonds, ETFs or mutual funds will not be closed.

Although Saxo will make every effort to warn you with margin calls when your margin utilisation is approaching critical levels, ultimately, the responsibility lies with you to monitor and manage your margin positions and usage.
 

Preventing stop-outs

A stop-out in trading is the automatic closure of all margin positions when your margin utilisation reaches its maximum capacity and available collateral can no longer cover those positions. This mechanism protects both the client and the broker from excessive losses by preventing the account from falling into a deficit.

While rapid market fluctuations may sometimes constrain your reaction time, you can reduce the risk of being stopped out by increasing your collateral or lowering your market exposure.

• Increase your collateral (deposit more funds).
• Reduce your market exposure by closing or reducing positions.
• Regularly monitor your account and set alerts in the Saxo platform to stay informed about your margin status and market trends.

Margin calls or margin alerts

A margin alert or call happens when your the account value drops below the required maintenance margin. The need for additional collateral can arise from adverse market conditions or increased volatility. If margin requirements are not met, Saxo may issue a margin call. This can happen via platform notification and/or email.

Responding to a margin call

When a margin call is issued, Saxo’s general business terms outline several actions you can take:

• Meet the margin requirement: Deposit additional funds or approved securities to cover the shortfall.
• Adjust positions: Reduce open positions to lower exposure and align margin usage with available collateral. Saxo may also close or reduce positions to prevent significant deficits.
• Consider Saxo’s rights: In exceptional or emergency market conditions, Saxo may increase margin requirements, close positions, or reduce exposure.
• Act promptly: Immediate action is essential, as delays may result in Saxo intervening to close or reduce positions to mitigate uncovered deficits.

Why margin calls matter

Margin calls help manage risk for both you and Saxo by ensuring your account has enough collateral to cover open positions. They are a safeguard against excessive losses and help maintain account integrity.