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Thread: Margin accounts

  1. #1
    Airbladekyj Guest

    Default Margin accounts

    Hi everyone,

    I've been a lurker for quite sometime, just registered now because I couldn't find this answer in the search anywhere.

    This might sound silly, but I've never had a margin account setup. I realize that with different brokers there are different policies, but generally speaking if I understand this correctly you can get a margin account for twice your equity (or more if it's a portfolio margin), and that there is a minimum percentage you must be invested in with a stock or be threatened with a margin call.

    I've been getting mixed signals on the following: If I have a 25k account, and I place an order for 10k, can I get the other 10k on margin eventhough I have 15k leftover equity? Or do I have to spend my own 20k money first, and only use the margin when my money has run short? ie. 20k on a stock, and 5k on another stock with 5k on margin?

    Also, I've read that some places allow a 4:1 margin account. Do you not need to initially invest with 50% of the stock?

    I'm just trying to figure out how to best optimize a margin account since it doesn't have the same T+3 regulations as equity accounts. Thanks!

  2. #2
    Airbladexdc Guest

    Default

    Your own money is used before margin is used. If this were not the case, many would be charged margin interest unnecessarily, which would make for a lot of unhappy campers (to put it mildly).

    4:1 margin is available to those who have at least $25k in their account and have been flagged as pattern day traders. The 4:1 is for the DAY ONLY--overnight positions are still limited to 2:1.

  3. #3
    Airbladeuhx Guest

    Default

    I appreciate the quick response!

    I have a follow-up question. If my own money has to be used before the margin, then in the above example with 25k equity and 25k margin, does that mean once I spend 25k of my own money I can spend another 25k margin? Meaning 0% personal investment on an individual stock?

  4. #4
    Airbladeznf Guest

    Default

    Right, assuming you're buying a marginable security, which not all of them are. Be careful though--just because you're borrowing the broker's money to buy doesn't make you any less accountable for losses. I would recommend NOT using margin until you have plenty of experience and a proven methodology (if then).

 

 

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