Yes, got the maths mixed up! Experience with FOREX and how those calls work on leveraged trades there.. But different, yes.
So, 40% LVR means that if you did actually borrow say 40k for 100k worth of shares, then the lender could call you if they dropped below 100k in value - Pretty ordinary I reckon - in other words, that's their risk limit - get out as it drops through 100k in value so they can recover their 40k! So, this means that if you wanted to allow for fluctuation of say 50%, you could only borrow 20k on a 100k parcel, so that if it dropped in value to 51k then the LVR would not quite be at 40%, and you wouldn't get called.
Wow, that's pretty ordinary! The last time I was called in FOREX, many years ago, they let it run right down to the value of the "loan" and then sell out - I guess they can then because it's so liquid.
Happy to learn!
But doesn't that also mean that there could be margin calls at any level, depending on how close the original loan fraction was to the lenders max LVR? And therefore only an issue "now" if people can't keep topping up with extra cash to not exceed the LVR..?
Cheers
GXY Price at posting:
$1.55 Sentiment: Buy Disclosure: Held
