Leveraged DARWIN portfolios

For investors who are comfortable with higher risk levels than DARWINs' default 6.5% monthly target VaR(95%), we offer the possibility to increase your portfolio leverage up to 4:1.

By default, investment portfolios are not leveraged. However, for investors who are comfortable with a higher risk, we offer the possibility to invest with a 4X leverage, that is 25% own funds and 75% debt. The max. leverage will ultimately depend on the information given on the suitability and appropriateness test filled in the registration process.

Thus, in a portfolio with an equity of 5,000 euros, you could invest up to 20,000 euros. 20,000 invested in DARWINs with a monthly VaR(95%) of 6.5% is equivalent to 5,000 invested with a monthly VaR(95%) of 26%.

Once activated, the leverage cannot be deactivated. Please do not activate it if you are not completely clear on how it works.

For your information, investing 20,000 USD in a 6.5% VaR DARWIN is the same as investing 5,000 USD in (an hypothetical) 26% VaR DARWIN.

How can you activate leverage in your DARWIN portfolios

1. Click on 'Activate Leverage' from the 'Chart' section

Go to the top left-hand corner of the "Chart section" in your portfolio and click on "Activate leverage".

 

 

2. Update to the new level of leverage 

3. Notice ''Available to invest'' in the portfolio header

Once activated, you will observe that a new section called ''Available to invest'' appears in the portfolio header, where funds will be multiplied (depending on max. leverage available) compared to the amount of capital than in the ''Available'' section.

Case Study

Let's see how to increase the equity ''Available to invest'' so you can make the most of the leveraged capital which Darwinex offers you.

To do so, you'll need to have a profitable investment open in one of the DARWINs in your portfolio.

1. Make an investment with leverage

Imagine you transfer 5,000 EUR to your portfolio, activate leverage (x3 in your case) so you have 15,000 EUR available to invest, and invest it all in a single DARWIN.

2. Have a positive Open P&L with a DARWIN

A few days later, you have an open P&L that reflects +1,000 EUR.

3. You collect the profits and observe your available capital to invest

After selling 100% of the investment, the system automatically retains 200 EUR in Performance Fees (20% of 1,000 EUR).

The amount "Available" now reflects 5,800 EUR. and the amount "Available to invest" changes from 15,000 EUR to 17,400 EUR.

(5.000 + 800 ) * 3 = 17,400 EUR

4. Reinvest your "Available to invest"

You can now invest 17,400 EUR in the DARWIN instead of the initial 15,000 EUR.

Margin calculation in investment portfolios

For regulatory reasons, there is a limit to the maximum exposure in DARWINs portfolios to protect retail investors from a certain level of losses, and ultimately from losing more than the capital deposited (although this would already be guaranteed by Darwinex, as there is an automatic stop-out or sell order at 90% loss by default).

This exposure is determined on the basis of the underlying assets in which the DARWINs in which you are invested have open trades, based on the margin percentage required for each asset (this value can be found for each asset in this table).

As an example, if a DARWIN opens a trade that involves the investor in that DARWIN opening an exposure of €10,000 in EURUSD, the margin retained would be €333.33, as the margin retained for EURUSD is 3.33% of the nominal amount opened.

The margin % is calculated as the ratio of the portfolio's equity to the summed consumed margin of all open underlyings.

In other words, if the equity of the portfolio is €1,000 and all open trades add up to €500 retained, the margin % will be 1,000/500 = 200%.

The current margin can be viewed at the top of the investment account:

 

How does it affect to an investment account?

There are 2 levels of protection:

• If the margin % falls below 100%, no new purchases will be allowed and no withdrawals from the investment account will be allowed (until you have made any sales that increase the margin above 100%), i.e. no action can be taken that would result in that action reducing the margin below 100%.
• If the margin % falls below 50%, part of the exposure will be automatically closed.

 

What to do if the portfolio margin is close to 100% or below?

• The simplest way to increase your margin % is to deposit more capital into your investment account and NOT invest it. If, for example, you have €1,000 of equity and 100% margin and you want to raise your margin level to 200%, you should deposit another €1,000 in the account. Depositing capital does not imply more risk, as long as it is not invested, since investing it would retain the margin corresponding to the underlying trades of the new investment.
• Redistribute the investment among more DARWINs. The greater the diversification in DARWINs, the lower the margin retained by the diversification effect will tend to be.
• Sell some of the amount invested in DARWINs in the portfolio. By doing so, the level of open exposure will decrease and, consequently, the % of available margin will increase.

FAQ

These are some of the most frequently asked questions by our users about leveraged DARWIN portfolios.

How are management fees applied in leveraged portfolios?

Management fees apply to the whole of the invested amount, including the leveraged part (and including also open PnL).

How can I de-activate leverage?

Once the leverage has been activated, it can NOT be deactivated.

Nevertheless, this does not have to affect your investment as you don't have to use all the capital "Available to invest".

With € 5,000 "Available", you'll have up to € 20,000 "Available to invest", which means that if you don't invest more than the "Available", it'd would be like investing with no leverage.

Once activated, you'll be also able to invest with levels of leverage ranging from 1:1 to 4:1.

For example, let's say that you invest € 10,000 of the 20,000 "available to invest". In this case, your leverage would be 2:1.

Is investing in a 6.5% VaR DARWINs leveraged x4 the same as investing in a 24% VaR DARWINs?

It's not exactly the same due to the reasons explained in the ''Case Study'' above.

In order to obtain the same results as investing in a 25% VaR DARWIN, every so often you'd need to close the investment in the leveraged DARWIN and then reinvest it in using the leveraged profits.

The more often you do so, the more similar the 6.5% VaR DARWIN x4 will be to a 26% VaR DARWIN.

Can I lose all my money using leverage?

If you use X4 leverage, your profits and losses will be tripled.

Therefore, a loss of 25% in your portfolio would mean a loss of 100% of your Equity.

Nevertheless, take the following factors into account:

• If you invest in a basket of uncorrelated DARWINs, you'll obtain a diversification benefit that might bring the VaR of your portfolio below 6.5%. In other words, your equity at risk could be lower investing 100% of your "Available to invest" in an uncorrelated portfolio of DARWINs, than investing 100% of your "Available" in just one DARWIN.
• By investing all your capital in one DARWIN, the monthly VaR will not go above 26%.
• As an investor, you can use Stop Loss orders to limit your portfolio's risk.