Inventory explosion and its causes

There are many short positions in the stock market. Novices in stock trading don't know what it means when they see this word. In fact, there is no normal stock trading in the stock market. Short positions can only appear in those investors who are financing or leveraged investors who are funded over the counter. What is a stock short position? Why did it explode?

What is a stock explosion?

What do you mean by stock explosion? The so-called short position refers to the situation that the customer's rights and interests in the investor's margin account are negative under some special circumstances. When the market situation changes greatly, if most of the funds in the investor's margin account are occupied by trading margin, and the trading direction is opposite to the market trend, it is easy to explode the position because of the leverage effect of margin trading.

What will happen if the stock explodes?

At present, China's stock market will not explode. In foreign markets, you borrow money from securities companies to buy stocks. In order to avoid risks, you will be asked to sign a contract. The contract stipulates that when the stock or futures fall to a certain price, you must increase your capital investment, otherwise the computer will automatically sell your stock or futures (so as to get cash and return it to the securities company). But you may not have enough money to reinvest, so your stock is sold at a lower price.

Causes of inventory explosion

Explosion can be mainly divided into the following two situations:

1. Futures customers still owe money to the futures exchange after closing their positions, that is, the floating profit and loss of the account ≥ the total amount of funds in the account, that is, the customer's equity ≤0. Due to the rapid changes in the market, the deposit in the account can no longer maintain the original contract before investors have time to add the deposit. The margin generated by forced liquidation due to insufficient margin is "zero", commonly known as "short position" and "short position".

Second, the explosion caused by heavy positions is more common. Take heavy positions as an example. If the proportion of positions reaches more than 90%, there will be less unused funds and less room to resist reverse changes. Heavy warehouse operation is a way of small profits but quick turnover. Why? Because of the reverse change, if the margin is insufficient, you will explode. This is a software system that will automatically prevent you from closing your position. After the explosion, you didn't lose much money in your account, let alone negative, but the value of the contract you held, which is a lot of money.