Chapter 18 Flashcards
If a client’s equity falls below ___%, the maintenance call must be met promptly.
25%
Document that allows a broker-dealer to lend customer securities to someone wishing to sell them short.
Loan Consent Agreement
A customer is using _____ when they borrow funds to increase the size of their position.
leverage
On margin, an investor buys 100 shares of ABN at 50 and sells 1 ABN Oct 55 call at 3. The margin requirement is:
$2,500
50% of the stock position. Since it’s a covered position, there is no requirement on the short call
Short Against the Box
Investors who have sold stock short that they currently hold in their portfolio.
The rate of interest that a bank charges a broker-dealer on margin loans is referred to as the:
call rate
The industry minimum maintenance requirement for a short account is ___%.
30%
Equity must be at least 30% of SMV
Any amount of equity greater than 50% is called:
excess equity
The margin requirement for a short against the box position is ___% of the long position.
5%
The industry minimum maintenance requirement for a long account is ___%.
25%
New issues must be held ___ days before they may be used as collateral.
30 days
The credit balance is made up of:
short sales proceeds plus the Reg. T requirement
Formula for determining equity in a short margin account:
Credit Balance - Short Market Value = Equity
The formula for determining equity in a long margin account:
Long Market Value - Debit Balance = Equity
Before a broker-dealer may offer a portfolio margin program to its clients, the firm must obtain approval from:
FINRA
