What is the relationship between financing and credit accounts?

Financing and financing is a kind of credit transaction with leverage effect, suitable for well-prepared investors to participate under appropriate circumstance...

Aug 11,2021 | Cherry

Financing and financing is a kind of credit transaction with leverage effect, suitable for well-prepared investors to participate under appropriate circumstances. Rational investors should first have an understanding of their risk tolerance, master the rules specific to financing and financing transactions, and make adequate financial arrangements to act within their means.

Investors with insufficient investment experience, who have not yet mastered the rules of financing and financing business, who lack risk tolerance and who have not made good financial arrangements should be cautious and not blindly optimistic. Financing and financing transactions, also known as securities credit transactions, and financing and financing accounts, which are often referred to as credit accounts in stock accounts, refer to the act of investors providing collateral to securities companies qualified for financing and financing business, borrowing funds to buy listed underlying securities or borrowing listed underlying securities and selling them.

Role of financing and securities financing transactions: Financing and securities financing transactions are divided into two parts: financing transactions and securities financing transactions.

Financing transactions can obtain financial leverage, improve capital utilization and magnify the investment income of own funds. Financing transactions can obtain hedging tools to lock in gains in advance when stock prices fall, that is, to help investors realize shorting when the stock market falls. If we understand it simply, financing trading means borrowing funds from a securities company to buy stocks, and then selling the stocks to return the money to the securities company. Financing trading means borrowing stock from a securities firm, selling the stock, and then buying it back after the price of the stock has fallen to return it to the securities firm, earning the price difference.

Because of the incorporation of leverage, the risk of financing and financing transactions is relatively high, so the opening of financing and financing transactions need to meet relatively high thresholds, such as having at least six months of trading experience, such as the average daily securities assets of 500,000 yuan in the last 20 trading days, and some other suitability requirements.