Chapter 8 - Margin Accounts Flashcards
Day Trading Disclosures
The pattern for Day Trading accounts
The minimum initial equity requirement for a pattern day trader increases from $2000-$25,000. A pattern day trader’s buying power is four times the investor’s maintenance margin excess.
All deposits used to meet a day trading margin call must remain in the account for at least two business days.
Portfolio margin accounts
Portfolio margin = strategy margin - value at risk
For sophisticated investors only. Not for typical retail investors.
A securities-backed Line of Credit is not a margin loan.
Margin for leveraged ETFs
Margin for treasuries and municipal securities
Special requirements for new margin accounts
How to meet a margin call
Withdrawing SMA in a short margin account
Using selling power in a short margin account
Short Margin Account
Margin call for a falling stock (long position)
Minimum equity = debit balance / .75
Minimum equity in a long margin account
Minimum equity = LMV X 25%
SMA withdrawals
Note: Excess equities are always credited to SMAs
Using buying power in a long margin account
Establishing a long position in a margin account
Equity = Long market value - debit
Marginable securities
- All exchange list of stocks and bonds
- All NASDAQ global markets stocks
- All securities on the federal reserve boards approved list (OTC approved)
Nonmarginable securities include:
- Non-NASDAQ OTC securities
- Options
- IPOs and new issues for 30 days
- When issued, nonexempt securities
Buying power
Excess equity X 2 (also stated as SMA X 2)
Establishing a short position in a margin account
Equity = credit balance - SMV
Minimum equity in a short margin account
minimum equity = SMV X 30%
Margin call for a rising stock (short position)
minimum equity = total credit balance / 1.3
Equity in a combined account
equity = (LMV - debit) + (credit - SMV)
