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Margin call question

I am little confused about this, can someone please help me out?

Let's say:
Initial Portfolio value: $100k
Leverage: 3x (300k)
Margin maintenance: 30%

In my backtest, the max draw down is 40%. Since 40% of 300k is 120k, does that mean I would have received a margin call, and my account would have been wiped out?

Thank you.

2 responses

Your initial margin = 33% = 100k / 300k
Your max allowable drawdown = 3% = initial margin - min margin = 33% - 30%

Note that drawdown is measured relative to your equity so it's 40% of 100k.

Oh wow, only 3%? Thank you so much Minh. That helps a lot.