Margin Flashcards
What is in the Margin Agreement
Hypothetication Agreement - MUST be signed by customer
Consent to Loan agreement (optional)
Credit Agreement - Interest rate for loan aount
What securities are able to be margined
Listed stocks and bonds on any exchange
EFTs
NASDAQ stocks and bonds
30 Days Post issue - IPOs, Investment Company Shares (mutuals/uits) because they have a pro
What securities can not be margined
Options (wasting asset)
other OTC not FRB (benny stock)
Reg T requires what % of deposit for
50%
What is your SMA
A line of credit that doesn’t go away
Provides 2X buying power
Can withdraw 1x cash
What is the MV @ Min Maintenance for a LMV
DR/.75 = MM
What is the MV @ MM for a SMA
CR/1.3 = MM
What is the combined Equity calc
(LMV-DR) + (CR-SMV) = Combined Equity
What is the min deposit for LMV
2k or 100% of premium
What is the min deposit for SMV
2k min
Common Stock
Capital appreciation
Issued - Treasury Stock = Oustanding stock
Decrease in outstanding stockm, increases value
What is treasury stock
When the company repurchases stock, makes less stock available and increases the value
For common stock, when does ownership occur
on the Settlement date = transfer of ownership
T+2
Payment is due on CS according to the FRB when
T+4, gives you two additional days post transfer of ownership
What rights do CS holders have
Voting rights - BOD, issuance of additional securities, stock splits, mergers, business reorg
DO NOT HAVE RiGHTS over - dividends, officers (voted on by BOD)
Right to dividend if declared (cash - ordinary income tax) or Stock (cap gain/loss using adj cb)
What is the ex-dividend date
the too late date (1 business day prior to record date)
What happens when a split occurs
the shares increase and the cost decreases
2: 1 100% stock dividend
5: 4 - 1 addtl share for every 4 you own
3: 2 50 % stock dividend
What happens with a reverse split
1:5 increase the price and decrease outstanding shares
This happens when a company is in danger of being delisted
What are pre-emptive rights
the right to not have shares diluted
company must offer additional shares to existing shareholders first
VERY short term
How can I determine what I can buy additionial shares for, as an existing shareholder
CMV-Subscription price / # rights - 1
What is a warrant
the right to buy stock @ specific time and price in the future
longer term
offered above CMV
only issued at intrinsic value
offered through employee stock purchase plans or attached to new bond to make more marketable
What is preferred stock
a stock that pays a fixed stated dividend
RISK: interest rate - when rates rise, the market price decreases, makes less attractive
objective - income
acts like a bond
What is beta
the volatility of the overall market (1.0)
if beta is up 1.2, then it is riskier than the mkt
systematic risk
what is alpha
it is the measured business risk
