Long Margin Accounts Flashcards
The account must be “marked to market” every ____
day
As the market price changes at the close of every day, so does the _____
equity
The debit balance in a margin account is noted as “–”
Dr
If the customer has excess equity, this is noted on an SMA, which is a ______
Special Memorandum Account
The SMA formula is:
SMA = 50% of market value - debit
SMA is created ONLY if the value of the account rises above ______
the margin of 50%
A customer may borrow against the _____ amount
SMA
For every $1 of market value added, an additional ____ of SMA is created
$0.50
An account that falls beneath the initial margin but has not yet hit the min margin is termed ______
restricted
For restricted accounts:
- the 50% initial margin rule still applies
- if a sale is made, 50% of the proceeds must be used to reduce the debit
When a customer has a margin call, the additional funds are netted against the existing _____
debit
Market value at maintenance formula =
MV at maintenance = debit / .75
If the customer wants to make a margin call using owned securities, the debit must remain ______
constant - so they will have to deposit more paid securities than they would cash (use the mv at maintenance formula to determine this amount)
Maintenance calls at ______ or less need not be sent
$1000
If the market value drops, the SMA ____
does not decline - it is locked in. they can borrow against it unless they hit the minimum maintenance level
