What is margin trading?
Order ID |
53563633773 |
Type |
Essay |
Writer Level |
Masters |
Style |
APA |
Sources/References |
4 |
Perfect Number of Pages to Order |
5-10 Pages |
Description/Paper Instructions
What is margin trading?
Description/Paper Instructions
Margin trading is a type of investment strategy in which an investor borrows funds from a broker to purchase securities. The securities purchased with the borrowed funds act as collateral for the loan. This allows investors to leverage their investment capital, increasing the potential returns they can earn, while also increasing their potential losses.
Margin trading works as follows:
An investor opens a margin account with a broker: To participate in margin trading, an investor must open a margin account with a broker. This account allows the investor to borrow money from the broker to purchase securities.
The investor borrows money from the broker: The investor can then use the borrowed funds to purchase securities. The amount of money that can be borrowed depends on the broker’s margin requirements and the value of the securities in the investor’s margin account.
The investor buys securities with the borrowed funds: The securities purchased with the borrowed funds are used as collateral for the loan. The investor now has a larger investment position than they would have had if they had only used their own funds to purchase the securities.
The value of the securities in the margin account fluctuates: The value of the securities in the margin account will fluctuate based on changes in the market value of the securities. As the value of the securities increases, the equity in the margin account also increases, allowing the investor to borrow more money if they choose to. Conversely, as the value of the securities decreases, the equity in the margin account decreases, which can result in a margin call from the broker if the equity falls below the broker’s minimum margin requirement.
The investor must repay the loan: The loan from the broker must be repaid with interest. The investor must either repay the loan with cash or sell some of the securities in their margin account to repay the loan.
Margin trading provides investors with the opportunity to increase their potential returns by leveraging their investment capital. However, margin trading also increases the risk of losses, as the investor is responsible for repaying the loan if the value of the securities in their margin account decreases. Additionally, margin trading also exposes the investor to the risk of a margin call, which can result in the forced sale of securities in the margin account if the equity falls below the broker’s minimum margin requirement.
It is important for investors to understand the risks involved in margin trading before participating in this investment strategy. Investors should also understand their broker’s margin requirements and be prepared to manage their margin account to avoid a margin call.
In conclusion, margin trading is a type of investment strategy in which an investor borrows funds from a broker to purchase securities. This allows investors to leverage their investment capital, increasing the potential returns they can earn, while also increasing their potential losses. Margin trading involves several risks, including the risk of a margin call and the risk of increased losses, and it is important for investors to understand these risks before participating in this investment strategy.
What is margin trading?
RUBRIC
QUALITY OF RESPONSE |
NO RESPONSE |
POOR / UNSATISFACTORY |
SATISFACTORY |
GOOD |
EXCELLENT |
Content (worth a maximum of 50% of the total points) |
Zero points: Student failed to submit the final paper. |
20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. |
30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. |
40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. |
50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. |
Use of Sources (worth a maximum of 20% of the total points). |
Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. |
5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. |
10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. |
15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. |
20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. |
Grammar (worth maximum of 20% of total points) |
Zero points: Student failed to submit the final paper. |
5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors |
10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors |
15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. |
20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. |
Structure of the Paper (worth 10% of total points) |
Zero points: Student failed to submit the final paper. |
3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. |
5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper |
7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. |
10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. |
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