How much stock pledge will lead to liquidation_Why pledged stocks will liquidate

Why will stock pledge lead to liquidation? What should we pay attention to when pledging? Is liquidation a problem? Must they all be bad? The following is the amount of stock pledge that the editor has compiled for everyone before the position will be liquidated. I hope it can help everyone.

How much of the stock pledge will be liquidated?

The specific situation of stock pledge liquidation depends on the proportion of pledged stocks and contract requirements. Generally speaking, when the proportion of stock pledges exceeds a certain limit or cannot meet the requirements of the contract, a liquidation may be triggered.

The main reasons for the liquidation of pledged stocks are as follows:

The pledge ratio exceeds the limit: When pledging stocks, financial institutions usually set certain pledge ratio limits, that is, the pledged The ratio between the value of the stock and the amount borrowed. If the pledge ratio exceeds the limit, for example, exceeds the warning line or liquidation line specified by the institution, the financial institution may take measures to require additional collateral or perform forced liquidation, resulting in the risk of liquidation.

Fall in stock price: If the market price of the pledged stocks drops significantly, the value of the pledged stocks may be lower than the loan amount. In this case, the financial institution may require additional collateral or perform forced liquidation to ensure the safety of the loan and avoid expansion of losses.

The borrower is unable to repay: If the borrower who pledged stocks is unable to repay the loan on time or add collateral, financial institutions may take measures such as forced liquidation to recover the debt.

It should be noted that different financial institutions may have slightly different requirements and handling methods for liquidating pledged stocks. Investors should understand the contract terms and risk warnings in detail before conducting stock pledge transactions, and make prudent judgments and decisions based on their own risk tolerance.

What are pledged stocks?

Pledged stocks refer to a way for investors to use the stocks they hold as collateral to raise funds from securities companies or banks. Investors can obtain a certain amount of financing by pledging stocks, which can be used to purchase more stocks or make other investments. However, you need to be careful when pledging stocks. If the price of the stocks you hold drops, the value of the pledge may be insufficient to repay the borrowing principal and interest, leading to a liquidation.

How to avoid stock collapse?

1. Don’t buy bad stocks

Staying away from bad companies is also the most important principle to avoid plummeting. Poor fundamentals and poor performance are the most important reasons affecting a company's stock price.

2 Don’t buy stocks without integrity

Before buying a company’s stocks, it is best to carefully inquire whether the company has violated laws and regulations in the past. If a company fails to be honest once, it will happen again.

3 Don’t buy stocks whose performance has declined significantly

Before buying a company’s shares, we should look at the performance of the stock in the past six months. If there is a sharp decline in performance, it is recommended not to buy, because the decline in performance is the trigger for a sharp decline.

4 Don’t buy stocks that continue to fall

Under normal circumstances, if the market or individual stocks fall sharply for three consecutive days, it may be a dangerous signal of a change in trend, and you need to close your position immediately to ensure that you Safety.

The stock liquidation can be mainly divided into the following two situations:

1. After the futures customer closes the position, he still owes the futures exchange money, which means: the floating profit and loss of the stock account ≥Total funds in the account, that is, customer equity ≤ 0. Due to the rapid market changes, when investors have no time to add margin, the margin on the account can no longer maintain the original contract. This kind of forced liquidation due to insufficient margin The margin caused by the position is "returned to zero", commonly known as "liquidation".

2. Position liquidation caused by heavy positioning operations is relatively common. Heavy positioning operations, such as position ratio reaching more than 90%, will result in less unoccupied funds and less room to resist reverse changes. Because of the reverse movement and insufficient margin call, the position was liquidated. This is because the software system automatically stops the loss and closes the position for you.

Pledge ratio

When pledging stocks, attention should be paid to controlling the pledge ratio. The China Securities Regulatory Commission stipulates that in the A-share market, the pledge ratio of individual investors shall not exceed 50%, and the pledge ratio of institutional investors shall not exceed 60%. If the specified ratio is exceeded, the risk of liquidation will be greatly increased once the stock price drops.