Chapter 32 Chapter 32 "Empty City Plan" and Margin Credit Transaction

For a stockholder, it is also very important to understand the stock trading procedures on the stock exchange.There are many trading methods in the stock market. Different investors have different trading preferences, the amount of their own funds in their hands and the evaluation of risk and income are different, so the trading methods adopted will not be exactly the same.There is no distinction between high and low, good and bad among the various trading methods of stocks, which can be used by investors to make different choices according to their specific conditions.Unfortunately, due to the late start of my country's stock market, the trading method is relatively simple.However, with the continuous maturity and improvement of the stock market in our country, the trading methods will definitely become more diversified.In order to welcome the arrival of this change, investors must first understand some stock trading methods before entering the stock market.In this section, we will introduce a trading method that is quite popular in western stock markets - margin credit trading.

At present, cash transactions are commonly used in my country's stock market.To put it bluntly, it means paying with one hand and delivering the goods with the other. One of the two parties to the transaction must hold cash, while the other party that needs cash holds equivalent stocks. If one of these two conditions is missing, the transaction cannot proceed.This is also the most traditional, simplest and most acceptable stock trading method for the majority of investors. Playing stocks can bring considerable income, which is very attractive to people from all walks of life.However, due to the limitation of their own funds, many people are unable to get involved in the stock market at all, and some investors will watch opportunities pass by because of limited time and strength, but they cannot make more money, or try their best when risks come. minimize losses.In this way, in the western stock market, a new stock trading method that is different from the previous trading method came into being.This is Margin Credit Transaction.

The so-called margin credit transaction, also known as the advance transaction, means that when the investor buys and sells stocks, he pays a certain amount of cash or stocks to the broker. For example: An investor wants to buy 300 shares of Class A stock, the market price is 40 yuan per share, and 12,000 yuan is payable in cash. This is a cash transaction.If he buys with margin credit transaction, he only needs to pay a certain amount of cash, for example, 6,000 yuan, and the remaining 6,000 yuan will be advanced by the broker or bank. This situation is called margin purchase.Another example: 8 An investor wants to sell 300 shares of Class A stock at a market price of 40 yuan per share. If he uses margin credit trading, he only needs to deliver a part of the stock, such as 150 shares of Class A stock, and the difference of 150 shares will be paid in advance by the broker. , this situation is called short selling on margin.After such a transaction is concluded, the investor must return the cash and stocks advanced by the broker, and must pay a certain amount of interest.Those engaged in margin credit trading mainly attempt to make huge profits by taking advantage of short-term changes in stock prices.Of course, the risks they took were enormous.

Why do investors use margin to buy?In cash transactions, if the amount of cash in the hands of shareholders is small, then he can only get a correspondingly small number of stocks.Margin credit trading can enable shareholders to use less capital to acquire more stocks and obtain more profits from it.For example: Eight investors have a principal of 30,000 yuan, and the price of the stock he wants to buy is 30 yuan per share.If he trades in cash, he can only buy 1,000 shares.When the price rises to a certain level, such as 20%, that is, 36 yuan per share, he sells all the stocks, and he can get 36,000 yuan in cash and a profit of 6,000 yuan (not including broker commission), which is the investor's principal. 20X, which is the same as the increase in the stock price.Then the investor buys by margin, and assuming that the margin ratio is 50%, then he can buy 2,000 shares with a principal of 30,000 yuan, and the shortfall of 30,000 yuan in cash will be paid by the broker. At Yuanshi, he sold the stocks, got 72,000 yuan in cash, paid off the 30,000 yuan in arrears, deducted 30,000 yuan from the principal, and made a profit of 12,000 yuan, which was 40% of the investor's principal. If you buy gold, you will double your profit.Of course, when the stock price falls, the investor's loss will also be doubled.

In a margin short sale, an investor borrows stock from a broker to sell it, then buys the stock back to pay off the debt.Investors also need to pay a certain amount of margin to the broker when borrowing stocks. The margin ratio is usually about 50%, and interest is also paid.During the period of stock borrowing, if the issuing company pays dividends, the investor should pay the dividends due to the original owner of the stock. Some people sell short on margin for speculation, taking advantage of fluctuations in stock prices to profit.Those who sell short on margin estimate that the stock price will fall, so they sell at a high price and buy at a low price to obtain income.For example: The investor has a principal of 30,000 yuan, and the margin ratio is 50%. At that time, the price of Class A stock was 30 yuan per share. According to the regulations, the investor can borrow 2,000 shares of the stock and get 60,000 yuan in cash after selling.When the stock price fell by 20% to 24 yuan per share, he decided to buy back 2,000 shares of Class A stock to repay the debt. At this time, he only needed to pay 48,000 yuan and made a profit of 12,000 yuan (not including broker commission, payable interest and dividends) , which is 40% of the basic fund.

Margin credit trading can also be used as a means of preservation for stock investors.For example, investor C bought 50 shares of Class A stock in 1990 at a market price of 100 yuan per share.By the end of 1991, the stock price rose to 150 yuan per share. If investor C sold the stock, he could immediately make a profit of 2,500 yuan. However, due to various reasons, he did not sell the stock immediately, but wanted to wait until the beginning of 1991 to make a profit. But he was worried that the stock price would fall in early 1991, which would cause the loss of the profit he could have received. In order to keep this part of the profit, he could short sell 50 shares of the same stock on margin. By early 1991, if the stock price fell, such as per share At this time, the stock in his hand lost 20 yuan per share, but he could earn back 20 yuan per share of the stock he sold short with margin, and still keep the profit of 2,500 yuan. If the stock price continued to rise in early 1991, for example, If it reaches 170 yuan per share, then he will lose 20 yuan per share of the stock he sells short with guarantee, but he will earn 10 yuan more per share of the stock in his hand, which can still break even and keep the profit of 2,500 yuan unchanged. New York, USA Professional stock dealers on the stock exchange also commonly use short selling to satisfy buyers and regulate the stock market.

Through the above introduction to margin cash trading, it is not difficult for stockholders to see some salient features of this trading method. What is interesting is that these features can be found in the ancient Chinese military strategy "Empty City Strategy". "Empty city strategy" is the second strategy of the sixth set of defeat strategies in "Thirty-Six Strategies": "The imaginary is vain, doubts arise from doubts, when hardness is soft, strange and complex." Deliberately appear undefended, making it difficult for the enemy to fathom.This method of using troops is even more wonderful when the enemy is outnumbered.

On many occasions, "empty city plan" is combined with "bluff".In war, due to the insufficient strength of one's own side, this strategy is used to confuse the opponent, relax its fighting spirit, weaken its combat readiness, infiltrate or overwhelm the situation, and use actual actions to achieve the purpose of plundering.The reason for bluffing is mainly because one's own conditions are not enough to control others, and the prestige is not enough to scare people, so one has to use this to strengthen one's own prestige.Since the purpose is to defeat the opponent, the means are naturally vicious.Generally, the use of this strategy requires three steps: "scare, squeeze, and dismantle".In World War II, the British Royal Navy successfully used this strategy to destroy the main battleship of Nazi Germany-"Admiral Earl Spey".

"Spee" is the cream of the German Navy's heavy surface ships.The ship has a displacement of 11,700 tons, a speed of 26 knots, and is armed with six 280mm cannons.Although known as a cruiser, no ordinary cruiser can match it in terms of artillery, armor, and speed. After the outbreak of the war, in just three months, the "Spey" sank 9 British ships totaling 50,000 tons.After repeated searches by the British Navy, finally on December 13, 1939, the "Spee" was intercepted by the British "0" fleet at the mouth of the La Plata River in South America.After a fierce battle, after paying a heavy price (the main cruiser "Exeter" was destroyed), the British finally forced "Spey" into the port of Montevideo, Uruguay.

However, the situation is still not optimistic for the British "0" fleet.Due to the damage to the main force, only two light cruisers remained in the fleet.If within 24 hours, "Spee" turned back from the harbor, then no British ship could stop it.The British Admiralty acted urgently and ordered the British fleet to sail quickly to the mouth of the Laputa River.Although there are many battleships and aircraft carriers in these fleets, which are enough to deal with "Spey", the closest of them is 900 nautical miles away from the destination.In order to create the illusion that the "Spee" was surrounded, the British began to make a big noise: the Secretary of the Navy, Winston Churchill, announced on the radio broadcast that the "Spee" had been surrounded, and the British radio station 880 also contributed to the flames, advocating La Plata The blockade outside the mouth of the river is like gold.In fact, at that time, the British army had only two light cruisers in the area, with only 152 mm guns, and both of them had been injured in the battle. They were not the opponents of "Spey" at all.

The propaganda campaign in London has had remarkable results. "Spey" Captain Lansdorf was deeply impressed by the radio: Even if he broke through the blockade of the fleet, it would be difficult to escape the encirclement of the powerful British fleet coming from all directions. Worn out after battle and voyage, Lansdorf fell into despair.He was forced to transfer more than 700 officers and soldiers to German merchant ships, and then sank the "Spey" outside the mouth of the Rio de la Plata.The British Navy has since lost a strong enemy. From this battle example, we can summarize some characteristics of "empty city strategy", which has many similarities with margin credit trading.First, the "empty city plan" is an emergency measure adopted by one party due to insufficient troops; margin trading is an emergency measure adopted by one party due to insufficient funds.Second, if successful, the "empty city plan" can repel the enemy without firing a shot. 5 Margin trading can obtain more benefits with less funds; third, there are great risks.It can be seen how similar the two are.Therefore, it is not an exaggeration to call margin credit trading an "empty city strategy" in the stock market. Those who trade on margin credit should also pay special attention to the margin ratio (the ratio of the margin to the total value of the stock that the customer wants to buy or sell).Due to the influence of many factors, the stock price often backfires.When this happens, investors will suffer.The more you fall, the more you lose.As the stock price falls, not only the absolute amount of margin paid by the customer decreases, but also its relative value (the remaining margin as a percentage of the total market value of the stock owned by the investor at the time) also decreases.For example, an investor has a principal of 30,000 yuan, a stock price of 30 yuan per share, and a margin ratio of 50%. He can buy 2,060 shares of stock with margin credit trading. Suppose the stock price falls by 20%, and each share falls to 24 yuan. The total value of the individual’s stock is 48,000 yuan. If the broker’s 30,000 yuan is removed, there is 18,000 yuan left, accounting for 37.5% of 48,000 yuan. From this we can see that the absolute amount of the investor’s margin has changed from the original 30,000 yuan. It is reduced to 18,000 yuan, and the relative value is reduced from the original 50% to 37.5%. If the stock price continues to decline, these two figures will also decrease.We refer to the percentage of the investor's remaining margin in the total market value of the stocks he purchased at that time as the actual maintenance rate of the margin, as shown above 37*55%.Each exchange broker has a minimum standard for the actual maintenance rate of the margin. If it is lower than the minimum standard, the broker will ask investors to increase the margin.If an investor has hope that the stock price will rise in the short term, he will continue to save the stock in order to turn a profit or reduce the loss, but at this time he must increase the margin to the broker, which is commonly called "covering the position" by Hong Kong stockholders, so that the margin will actually be maintained. rate is not lower than the specified standard.If the stock price continues to fall, he will continue to "cover up his position."If the investor has no hope that the stock price will rise in a short time, he can ask the broker to sell his stock, pay off the debt, and would rather suffer some losses.If the customer is unable to increase the deposit, the broker has the right to sell part of his stocks. In these two situations, Hong Kong stockholders call it "cutting the position". Through the above introduction, readers must have a certain understanding of this margin credit transaction.Although the current trading method of my country's stock market is still very simple, as time goes by, this trading method similar to the "empty city plan" will definitely be popularized in my country's stock market.