Chapter 8 - Margin Accounts

Question 1

Day Trading Disclosures

Answer 1

Question 2

The pattern for Day Trading accounts

Answer 2

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.

Question 3

Portfolio margin accounts

Answer 3

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.

Question 4

Margin for leveraged ETFs

Answer 4

Question 5

Margin for treasuries and municipal securities

Answer 5

Question 6

Special requirements for new margin accounts

Answer 6

Question 7

How to meet a margin call

Answer 7

Question 8

Withdrawing SMA in a short margin account

Answer 8

Question 9

Using selling power in a short margin account

Answer 9

Question 10

Short Margin Account

Answer 10

Question 11

Margin call for a falling stock (long position)

Answer 11

Minimum equity = debit balance / .75

Question 12

Minimum equity in a long margin account

Answer 12

Minimum equity = LMV X 25%

Question 13

SMA withdrawals

Answer 13

Note: Excess equities are always credited to SMAs

Question 14

Using buying power in a long margin account

Answer 14

Question 15

Establishing a long position in a margin account

Answer 15

Equity = Long market value - debit

Question 16

Marginable securities

Answer 16

• 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

Question 17

Buying power

Answer 17

Excess equity X 2 (also stated as SMA X 2)

Question 18

Establishing a short position in a margin account

Answer 18

Equity = credit balance - SMV

Question 19

Minimum equity in a short margin account

Answer 19

minimum equity = SMV X 30%

Question 20

Margin call for a rising stock (short position)

Answer 20

minimum equity = total credit balance / 1.3

Question 21

Equity in a combined account

Answer 21

equity = (LMV - debit) + (credit - SMV)