What is Collateral?
Collateral refers to shares that you lodge with the ASX to offset your portfolio margin against specific option strategies or your entire portfolio. This process aims to enhance risk management and optimize margin requirements.
General vs. Specific Collateral
Specific Lodgement: In specific lodgement, the full value of the shares is lodged against a particular option position, effectively offsetting the associated margin. For example, in a Covered Call strategy, the margin from the sold leg is negated by the lodged stock, eliminating margin requirements for that specific position.
General Lodgement: In general lodgement, the portfolio margin is reduced by the Loan-to-Value Ratio (LVR) assigned to each relevant stock, also known as a haircut. For instance, if CBA is currently valued at $100 with an LVR of 80% (or 20% haircut), lodging 100 shares as general collateral reduces the margin by $8,000.
Where Can I Find Accepted Stocks and LVR?
ASX updates the list of accepted stocks and their associated haircuts monthly. You can find this information by searching here.
How Do I Lodge and Unlodge Collateral?
Our team is developing an in-app solution to simplify the lodging and unlodging process. To lodge and unlodge stock, please send a message to our support team via the chat button in the platform (bottom right-hand side).
How Long Does it Take to Lodge/Unlodge?
Stocks will be lodged on the same day, but the impact on margin and the portfolio will be reflected the next day.
Is There a Cut-Off to Request?
There is no cut-off for lodgement requests. However, Morrisons must send the list of stocks to the ASX by 3 pm. Requests made after 3 pm will be processed on a best endeavours basis.
What Happens When Stocks Are Lodged as Collateral?
Morrisons sends/confirms a list of lodged stocks to the ASX. It is important to note. The stocks do not leave custody.
Can I Sell Stocks While They Are Lodged as Collateral?
Certainly, you can still execute stock sales while they are lodged as collateral. It's crucial to be aware that selling stocks currently lodged will increase margin requirements. This is because the lodged stocks are actively offsetting your margin, and selling them will remove that offset, impacting your overall margin position.
Need Assistance?
If you have questions about collateral, the lodgement process, or any related inquiries, our support team is here to help. Reach out through the "Contact Support" option on the platform or visit Volatility.com.au/support/contact.