moomoo MY Help Center-Why use margin trading and short selling
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Why use margin trading and short selling

The most significant advantage of margin trading is that it can help amplify your returns on investment. Here is an example:
Suppose you have $10,000 in cash, and the market price of a stock is $100, with a margin requirement of 50%. You can buy 100 shares with your own cash, and borrow another $10,000 from Moomoo MY to buy another 100 shares, with the shares you previously bought as collateral. Now you hold 200 shares ($100 per share) through margin trading, and the market value of your position is $20,000.
When the stock price rises by 50% to $150 per share, the market value of your position becomes $30,000. Since the funds you borrowed from Moomoo MY remain unchanged at $10,000, your equity rises to $20,000.
Short selling is a strategy commonly used when you believe the price of a stock is about to fall. For short selling, you do not own the stock yourself; instead, you need to borrow it from a brokerage and sell it. When the stock price falls, you buy back the stock and return it to the brokerage, thus earning the spread. Here is another example:
Suppose the market price of a stock is $100 per share, and you anticipate a future decline in its price. To profit from this, you initially borrow 100 shares of the stock from a brokerage and sell them. As a result, you have $10,000 in cash from the sale, but you now hold -100 shares. After some time, when the stock price drops to $50 per share, you only need to spend $5,000 to repurchase 100 shares and return them to the brokerage. The remaining $5,000 constitutes your profit from the short sale.