Simply put, earnings are what a company has made in profits during the span of a year. To protect traders and the company, we increase the margin of certain stocks against any adverse movements in the markets.
This is what we call earnings.
It’s important to take a look at the earnings calendar before you decide to trade a specific volume of shares.
When it comes to a “Corporate Event”, which can be any upcoming company reports or other corporate actions, there’s a good chance that the margin requirements for Stocks and Indices will increase. The increase in margin requirements normally takes place 5 business days before any corporate event is announced.
Furthermore, the increase in margin requirements might also remain in effect after the corporate event has been announced. The increase of margin requirements are at uexo’s sole discretion, so be sure to adjust your trades and risk management settings accordingly.
We’ve provided you with some percentages, and these indicate the margin that’s required. The margin is based on the volume of stocks you’re trading.
Take this example into consideration. Let’s say Apple Inc has earnings. Our margin level requirements are as follows:
- 0-5k USD at 12%
- 5k-15k at 20%
- 15k-75k at 50%
- Greater than 75k is at 75%
Taking the above tiers into consideration, if you’re trading Apple stock CFDs and the value /volume is greater than 75k USD, the margin will be calculated at 75%.
Let’s continue our example relating to a uexo trader trading Apple stock CFDs. Say the current stock price is at $160.00 and you’re trading 150 shares, your exposure is 24,000. We work this out by using the following simple formula:
150 Shares Traded × $160.00 per the stock price.
Now, if we take the 4 different tiers into account, we can calculate the following:
- The first 5k will be with 12% margin = $600
- The next 10k will be with 20% margin = $2,000
- The remaining 9k will be with 50% margin = $4,500
How does this affect your margin? We now know that your total used margin will be $7,100
It’s also really important for you to note that when it comes to trading stock CFDs that are denominated in other currencies, the value must first be converted into USD. How? The best way is by using the appropriate current FX exchange rate. When you’ve done that, you can calculate it properly.
If you notice that the four tiers don’t apply to your trade, it’s better to cap the dynamic leverage according to the maximum exposure.
Let’s take the following example:
- 0-5k USD at 12%
- 5k-15k at 20%
- 15k-25k at 50%, and that’s if the max exposure is 25k
Then we have the following:
- 0-3k USD at 12%
- 3k-10k at 20%
- 10k-15k at 50%, if the max exposure is at 15k.
If you still need more help understanding how earnings on Stock CFDs are calculated, check out the section below, as the uexo Customer Experience Team is more than happy to help.