Margin-related calculations

The examples below illustrate the margin calculation differences between v20 and OANDA One sub-account types, including the potential impact around MarginClosedThe required collateral to open and maintain a leveraged position. Close-Out.

In these hypothetical examples, we use sample values that may not reflect the current prices or margin rates

Let’s assume that you have two sub-accounts with a balance of GBP 50,000 on each and the EUR/GBP margin rate is 3.33333%.

You buy 1 million units in EUR/GBP on both your v20 account and your OANDA One account at the same time and same price. When you place the order, the EUR/GBP market price is 0.8566 / 0.8568 so you buy EUR/GBP at 0.8568.

 

BidClosedThe prevailing buy price.

Mid

Offer

EUR/GBP

0.8566

0.8567

0.8568

Balance

50,000.00

Margin_Used

28,556.64

Unrealised Profit/Loss mid
(UPL_midClosedUnrealised P/L calculated using the current mid prices for margin calculations)

-100.00

NAV_midClosedNAV calculated at the current mid prices only for margin calculations.

49,900.00

Margin_Available

21,343.36

Margin_%

28.61%

Margin_Used = Margin_Rate * TradeClosedThe actual execution of buying or selling an asset, resulting in a completed transaction._Quantity * Instrument_To_Home_Ccy Conversion current mid-rate

Margin_Used = 3.33333% x 1,000,000 x 0.8567 = 28,556.64 GBP

The position is revalued against the mid-price of EUR/GBP, so the position has:

UPL_mid = Trade_Quantity x (Current mid – Trade price) = 1,000,000 x (0.8567 – 0.8568) = -100 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 100 = 49,900 GBP

Margin_Available = NAV_mid – Margin_Used = 49,900 – 28,556.64 = 21,343.36 GBP

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 28,556.64) / 49,900 = 28.61%

The displayed “Margin_%” is a “Margin Close-Out Percentage” that ranges from 0 up to 100%, at which point a Margin Close-Out event is triggered.

Balance

50,000.00

Margin

28,559.97

UPL

-200.00

Equity

49,800.00

Free_Margin

21,240.03

Margin_Level_%

174.37%

Margin = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion ‘time_of_trade’ sided-rate

Margin = 3.33333% * 1,000,000 * 0.8568 = 28,559.97 GBP

The position is revalued against the bid price of EUR/GBP, so the position has:

UPL = Trade_Quantity x (Current bid – Trade price) = 1,000,000 x (0.8566 – 0.8568) = -200 GBP

Equity = Balance + UPL = 50,000 – 200 = 49,800 GBP

Free_Margin = Equity – Margin = 49,800 – 28,559.97 = 21,240.03 GBP

Margin_Level_% = Equity / Margin = 49,800 / 28,559.97 = 174.37%

The displayed “Margin_Level_%” is a “Margin Coverage Percentage” that ranges from infinity down to 50%, at which point a Margin Close-Out event is triggered.

At the point of trade opening, both sub-accounts act in a very similar way, except for the different representations for margin % and the different rate used for home currency conversion.

 

Bid

Mid

Offer

EUR/GBP Price

0.8536

0.8537

0.8538

EUR/GBP has dropped in price by 30 pips.

Balance

50,000.00

Margin_Used

28,456.64

UPL_mid

-3,100.00

NAV_mid

46,900.00

Margin_Available

18,443.36

Margin_%

30.34%

Margin_Used = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion current mid-rate

Margin_Used = 3.33333% x 1,000,000 x 0.8537 = 28,456.64 GBP

The position is revalued against the mid-price of EUR/GBP, so the position has:

UPL_mid = Trade_Quantity x (Current mid – Trade price) =  1,000,000 x (0.8537 – 0.8568) = -3,100 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 3,100 = 46,900 GBP

Margin_Available = NAV_mid – Margin_Used = 46,900 – 28,456.64 = 18,443.36 GBP

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 28,456.64) / 46,900 = 30.34%

Balance

50,000.00

Margin

28,559.97

UPL

-3,200.00

Equity

46,800.00

Free_Margin

18,240.03

Margin_Level_%

163.87%

Margin = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion ‘time_of_trade’ sided-rate

Margin = 3.33333% * 1,000,000 * 0.8568 = 28,559.97 GBP

The position is revalued against the bid price of EUR/GBP, so the position has:

UPL = Trade_Quantity x (Current bid – Trade price) = 1,000,000 x (0.8536 – 0.8568) = -3,200 GBP

Equity = Balance + UPL = 50,000 –3,200 = 46,800 GBP

Free_Margin = Equity – Margin = 46,800 – 28,559.97 = 18,240.03 GBP

Margin_Level_% = Equity / Margin = 46,800 / 28,559.97 = 163.87%

  1. On the OANDA One sub-account, the initial margin amount (in Home currency units) is static, i.e. the margin amount reserved when you open the position stays constant throughout the life of the position.

  2. V20 sub-accounts use only mid-rates in all UPL and conversion calculations for margin purposes. OANDA One sub-accounts use relevant sided-rates in all UPL and conversion calculations.

 

Bid

Mid

Offer

EUR/GBP Price

0.82107

0.82117

0.82127

EUR/GBP has dropped in price by some 350+ pips.

Balance

50,000.00

Margin_Used

27,372.31

UPL_mid

-35,630.00

NAV_mid

14,370.00

Margin_Available

-13,002.31

Margin_%

95.24%

Margin_Used = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion current mid-rate

Margin_Used = 3.33333% x 1,000,000 x 0.82117= 27,372.31 GBP

The position is revalued against the mid-price of EUR/GBP, so the position has:

UPL_mid = Trade_Quantity x (Current mid – Trade price) = 1,000,000 x (0.82117 – 0.8568) = -35,630 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 35,630 = 14,370 GBP

Margin_Available = NAV_mid – Margin_Used = 14,370.00 – 27,372.31 = -13,002.31 GBP

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 27,372.31) / 14,370 = 95.24%

As Margin_% has not yet reached 100%, a margin closeout event is not initiated.

Balance

50,000.00

Margin

28,559.97

UPL

-35,730.00

Equity

14,270.00

Free_Margin

-14,289.97

Margin_Level_%

49.97%

Margin = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion ‘time_of_trade’ sided-rate

Margin = 3.33333% * 1,000,000 * 0.8568 = 28,559.97 GBP

The position is revalued against the bid price of EUR/GBP, so the position has:

UPL = Trade_Quantity x (Current bid – Trade price) = 1,000,000 x (0.82107 – 0.8568) = -35,730 GBP

Equity = Balance + UPL = 50,000 –35,730 = 14,270 GBP

Free_Margin = Equity – Margin = 14,270 – 28.559.97 = -14,289.97 GBP

Margin_Level_% = Equity / Margin = 14,270 / 28,559.97 = 49.97%

As Margin_Level_% has fallen below 50%, a margin closeout event is initiated.

Let’s assume that you have two sub-accounts with a balance of GBP 50,000 on each and the EUR/GBP margin rate is 3.33333%.

You buy 1 million units in EUR/USD on both your v20 account and your OANDA One account at the same time and same price. When you place the order, the EUR/USD market price is 1.0780 / 1.0782 so you buy EUR/USD at 1.0782.

 

Bid

Mid

Offer

EUR/USD

1.0780

1.0781

1.0782

GBP/USD

1.2590

1.2591

1.2592

EUR/GBP

0.8561

0.85625

0.8564

Balance

50,000.00

Margin_Used

28,541.64

UPL_mid

-79.42

NAV_mid

49,920.58

Margin_Available

21,378.94

Margin_%

28.59%

Margin_Used = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion current mid-rate

Margin_Used = 3.33333% x 1,000,000 x 0.85625 = 28,541.64 GBP

The position is revalued against the mid-price of EUR/USD, so the position has:

UPL_mid = Trade_Quantity x (Current mid – Trade price) x Quote_To_Home_Ccy Conversion current mid-rate = 1,000,000 x (1.0781 – 1.0782) x (1/1.2591)= -79.42 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 79.42 = 49,920.58 GBP

Margin_Available = NAV_mid – Margin_Used = 49,920.58 – 28,541.64 = 21,378.94 GBP

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 28,541.64) / 49,920.58 = 28.59%

Balance

50,000.00

Margin

28,546.64

UPL

-158.86

Equity

49,841.14

Free_Margin

21,294.50

Margin_Level_%

174.60%

Margin = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion ‘time_of_trade’ sided-rate

Margin = 3.33333% * 1,000,000 * 0.8564 = 28,546.64 GBP

The position is revalued against the bid price of EUR/USD, so the position has:

UPL = Trade_Quantity x (Current bid – Trade price) x Quote_To_Home_Ccy Conversion current sided-rate = 1,000,000 x (1.0780 – 1.0782)  x (1/1.2590)= -158.86 GBP

Equity = Balance + UPL = 50,000 – 158.86 = 49,841.14 GBP

Free_Margin = Equity – Margin = 49,841.14 – 28,546.64 = 21,294.50 GBP

Margin_Level_% = Equity / Margin = 49,841.14 / 28,546.64 = 174.60%

If the UPL is a negative value, then we use the ask side of the current quote/home price (in this case USD/GBP). If the UPL is a positive number, then we use the bid of USD/GBP. The bid of USD/GBP is the reciprocal of the ask of GBP/USD and vice versa.

In this case, the value is -$200, so we use the ask price of USD/GBP; that is 1/1.2590.

 

Bid

Mid

Offer

EUR/USD

1.0720

1.0721

1.0722

GBP/USD

1.2470

1.2471

1.2472

EUR/GBP

0.8595

0.85965

0.8598

EUR/USD has dropped in price by 60 pips while GBPUSD has decreased by 120 pips, with EUR/GBP moving accordingly.

Balance

50,000.00

Margin_Used

28,654.97

UPL_mid

-4,891.35

NAV_mid

45,108.65

Margin_Available

16,453.68

Margin %

31.76%

Margin_Used = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion current mid-rate

Margin_Used = 3.33333% x 1,000,000 x 0.85965 = 28,654.97 GBP

The position is revalued against the mid-price of EUR/USD, so the position has:

UPL_mid = Trade_Quantity x (Current mid – Trade price) x Quote_To_Home_Ccy Conversion current mid-rate = 1,000,000 x (1.0721 – 1.0782) x (1/1.2471) = -4,891.35 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 4,891.35 = 45,108.65 GBP

Margin_Available = NAV_mid – Margin_Used = 45,108.65 – 28,654.97 = 16,453.68 GBP

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 28,654.97) / 45,108.65 = 31.76%

Balance

50,000.00

Margin

28,546.64

UPL

-4,971.93

Equity

45,028.07

Free_Margin

16,481.43

Margin_Level_%

157.74%

Margin = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion ‘time_of_trade’ sided-rate

Margin = 3.33333% * 1,000,000 * 0.8564 = 28,546.64 GBP

The position is revalued against the bid price of EUR/USD, so the position has:

UPL = Trade_Quantity x (Current bid – Trade price) x Quote_To_Home_Ccy Conversion current sided-rate = 1,000,000 x (1.0720 – 1.0782)  x (1/1.2470)= -4,971.93 GBP

Equity = Balance + UPL = 50,000 – 4,971.93 = 45,028.07 GBP

Free_Margin = Equity – Margin = 45,028.07– 28,546.64 = 16,481.43 GBP

Margin_Level_% = Equity / Margin
= 45,028.07 / 28,546.64 = 157.74%

 

Bid

Mid

Offer

EUR/USD

1.03418

1.03428

1.03438

GBP/USD

1.2320

1.2321

1.2322

EUR/GBP

0.8393

0.83945

0.8396

EUR/USD has dropped in price by about 440 pips while GBPUSD has decreased by 270 pips, with EUR/GBP moving accordingly.

Balance

50,000.00

Margin_Used

27,981.64

UPL_mid

-35,646.46

NAV_mid

14,353.54

Margin_Available

13,628.10

Margin_%

97.47%

Margin_Used = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion current mid-rate

Margin_Used = 3.33333% x 1,000,000 x 0.83945 = 27,981.64 GBP

The position is revalued against the mid-price of EUR/USD, so the position has:

UPL_mid = Trade_Quantity x (Current mid – Trade price) x Quote_To_Home_Ccy Conversion current mid-rate = 1,000,000 x (1.03428 – 1.0782) x (1/1.2321) =  - 35,646.46 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 35,646.46 = 14,353.54 GBP

Margin_Available = NAV_mid – Margin_Used = 14,353.54 – 27,981.64 = - 13,628.10

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 27,981.64) / 14,353.54 = 97.47%

As Margin_% has not yet reached 100%, a margin closeout event is not initiated.

Balance

50,000.00

Margin

28,546.64

UPL

-35,730.52

Equity

14,269.48

Free_Margin

14,277.16

Margin_Level_%

49.99%

Margin = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion ‘time_of_trade’ sided-rate

Margin = 3.33333% * 1,000,000 * 0.8564 = 28,546.64 GBP

The position is revalued against the bid price of EUR/USD, so the position has:

UPL = Trade_Quantity x (Current bid – Trade price) x Quote_To_Home_Ccy Conversion current sided rate = 1,000,000 x (1.03418 – 1.0782)  x (1/1.2320) = -35,730.52 GBP

Equity = Balance + UPL = 50,000 – 35,730.52 = 14,269.48 GBP

Free_Margin = Equity – Margin = 14,269.48 – 28,546.64 = - 14,277.16 GBP

Margin_Level_% = Equity / Margin = 14,269.48 / 28,546.64 = 49.99%

As Margin_Level_% has fallen below 50%, a margin closeout event is initiated.

The amount of margin needed to hold the position open (Margin) remains constant throughout the life of the trade in the OANDA One sub-account. In the v20 account, the amount of margin needed (Margin_Used) is dynamic since it increases or decreases as conversion rate changes.

All calculations relevant for margin purposes for the OANDA One account use appropriately sided market prices (so are affected by spread changes even if no change in mid-price). Calculations for the v20 account always only use mid-prices.

Different Margin Close-Out (MCO) methodology between OANDA sub-account type

A Margin Close-Out event is initiated:

  • in v20 sub-accounts, when the Margin Close-Out Percentage increases to 100% or higher.

  • in OANDA One sub-accounts, when the Margin Coverage Percentage decreases to 50% or lower.

A Margin Close-Out event results:

  • in v20 sub-accounts, a FULL liquidation of all open positions and cancellation of any contingent orders on those positions. Orders not linked/related to the liquidated trades remain active.

  • in OANDA One sub-accounts, liquidation of the single trade with the largest loss, repeatedly, until the Margin Coverage Percentage exceeds 50%.  This iterative process can result in a PARTIAL liquidation of a portfolio of open positions. Also, pending orders that are not directly related to an open trade that is closed, remain active.

If a market in an underlying Instrument is closed or halted, those open trades will be skipped during the MCO process since they cannot be liquidated at the time.