v20 Margin-related calculations

Please note that Unrealized P/L and NAV calculations used for margin determination purposes ARE DIFFERENT from the estimated Unrealized P/L and NAV calculations/values that appear on the OANDA Trading Platform UIs. Only mid-prices are used in the margin calculations, with the rationale being that the margin requirements do not change if only the bid/ask spread changes. Whereas sided-prices (either bid or ask) per size are used to calculate estimated Unrealized P/L values, with the rationale being that we strive to show Unrealized P/L values that best approximate what Realized P/L would be when trades or positions are closed.

The purpose of this content is to facilitate better understanding of the margin-related calculations, by illustrating those through examples. The examples below therefore refer to ‘UPL_midClosedUnrealised P/L calculated using the current mid prices for margin calculations’ and ‘NAV_midClosedNAV calculated at the current mid prices only for margin calculations.’ because those are the values used for margin determination purposes.

In these hypothetical examples, we assume the prices and the margin rates (sample values that may not reflect the current prices or rates).

Let’s assume that you have a sub-account with a balance of GBP 50,000.

You buy 1 million EURGBP when the market price is 0.8566 / 0.8568 so you buy the 1 million EURGBP at 0.8568.

Immediately after making the trade:

 

BidClosedThe prevailing buy price.

Mid

Offer

EUR/GBP

0.8566

0.8567

0.8568

V20 sub-account

Balance

50,000.00

MarginClosedThe required collateral to open and maintain a leveraged position._Used

28,556.64

UPL_mid

-100.00

NAV_mid

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 = 3.33333% x 1,000,000 x 0.8567 = 28.556.64 GBP

The position is revalued against the mid-price of EURGBP, 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.

Some time later:

 

Bid

Mid

Offer

EUR/GBP

0.8536

0.8537

0.8538

EURGBP has dropped in price by 30 pips.

V20 sub-account

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

The position is revalued against the mid-price of EURGBP, 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%

V20 sub-accounts use only mid-rates in all UPL and conversion calculations for margin purposes.

At a Margin Close-Out scenario:

 

Bid

Mid

Offer

EUR/GBP

0.82037

0.82047

0.82057

EURGBP has dropped in price by 360+ pips.

V20 sub-account

Balance

50,000.00

Margin_Used

27,348.97

UPL_mid

-36,330.00

NAV_mid

13,670.00

Margin_Available

-13,678.97

Margin_%

100.03%

Margin_Used = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion current mid-rate = 3.33333% x 1,000,000 x 0.82047 = 27,348.97 GBP

The position is revalued against the mid-price of EURGBP, so the position has:

UPL_mid = Trade_Quantity x (Current mid – Trade price) = 1,000,000 x (0.82047 – 0.8568) = -36,330 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 36,330 = 13,670 GBP

Margin_Available = NAV_mid – Margin_Used = 13,670.00 – 27,348.97 = -13,678.97 GBP

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 27,348.97) / 13,670 = 100.03%

Let’s assume that you have a sub- account with a balance of GBP 50,000.

You buy 1 million EURUSD when the market price is 1.0780 / 1.0782 so you buy the 1 million EURUSD at 1.0782.

Immediately after making the trade:

 

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

V20 sub-account

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

The position is revalued against the mid-price of EURUSD, 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%

Some time later:

 

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

EURUSD has dropped in price by 60 pips while GBPUSD has decreased by 120 pips, with EURGBP moving accordingly.

V20 sub-account

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

The position is revalued against the mid-price of EURUSD, 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%

At a Margin Close-Out scenario:

 

Bid

Mid

Offer

EUR/USD

1.03369

1.03379

1.03389

GBP/USD

1.2320

1.2321

1.2322

EUR/GBP

0.8389

0.83905

0.8392

EURUSD has dropped in price by 440+ pips while GBPUSD has decreased by 270 pips, with EURGBP moving accordingly.

V20 sub-account

Balance

50,000.00

Margin_Used

27,968.31

UPL_mid

-36,044.15

NAV_mid

13,955.85

Margin_Available

-14,012.46

Margin_%

100.20%

Margin_Used = Margin_Rate * Trade_Quantity * Instrument_To_Home_Ccy Conversion current mid-rate = 3.33333% x 1,000,000 x 0.83905 = 27,968.31 GBP

The position is revalued against the mid-price of EURUSD, 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 (1.03379 – 1.0782) x (1/1.2321) = -36,044.15 GBP

NAV_mid = Balance + UPL_mid = 50,000 – 36,044.15 = 13,955.85 GBP

Margin_Available = NAV_mid – Margin_Used = 13,955.85 – 27,968.31 = -14,012.46

Margin_% = (0.5 x Margin_Used) / NAV_mid = (0.5 x 27,968.31) / 13,955.85 = 100.20%

  1. In the v20 sub-account, the amount of margin needed (Margin_Used) is dynamic since it increases or decreases as conversion rate changes.

  2. All calculations relevant for margin purposes for the v20 sub-account always only use mid-prices.

  3. A Margin Close-Out event (MCO) is initiated/triggered when the Margin Close-Out Percentage increases to 100% or higher.

  4. A Margin Close-Out event results in 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.

    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.