Long Margin Rules

Question 1

How to find market value of stock at maintenance level?

Answer 1

.75 (assuming a .25 main. margin)

Question 2

What is the definition of a restricted account?

Answer 2

When the equity has fallen below 50%, but is still above the minimum maintenance requirement

Question 3

What happens when an account is restricted?

Answer 3

50% of proceeds of any sale must be retained to reduce debt

Question 4

What is the smallest amount a maintenance call can be sent for?

Answer 4

$1000

Question 5

What is SMA?

Answer 5

Special Memorandum Amount - excess equity that the customer can borrow against to purchase more stock

Question 6

Formula for SMA

Answer 6

50% of Market Value - Debit
or
1/2 of market value increase

Question 7

How many securities are needed to meet a margin call?

Answer 7

2x call amount

Question 8

How many securities are needed to meet a margin call

Answer 8

Total securities in account must be equal to debit/.75

Question 9

What happens to SMA when the market value of an account falls?

Answer 9

Nothing, SMA locks gains in position