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The minimum margin requirement, sometimes called the maintenance margin requirement, is the ratio of (stock equity − leveraged dollars) to stock equity, where "stock equity" is the stock price multiplied by the number of shares bought and "leveraged dollars" is the amount borrowed in the margin account.
In the United States, the margin requirements have been 50% for many years (that is, if you want to make a $1000 investment, you need to put up $500, and there is often a maintenance margin below the $500). A margin call is made if the total value of the investor's account cannot support the loss of the trade.
Regulation T governs the extension of credit by securities brokers and dealers in the United States. [1] Its best-known function is the control of margin requirements for stocks bought on margin. The initial margin requirement for such margin stock purchases has been 50% [ 2 ] since 1974, [ 3 ] but Regulation T gives the Federal Reserve the ...
Besides using a margin loan to buy more stock than investors have cash for in a brokerage account, there are other advantages. For instance, margin accounts offer faster and easier liquidity.
If a margin account with your broker runs short of funds, you could face a margin call. Here’s what that means. ... 800-290-4726 more ways to reach us. Mail. Sign in. Subscriptions;
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Special memorandum account (SMA) [1] is a margin credit account used for calculating US Regulation T requirements on brokerage accounts. In addition to Initial Margin and Maintenance Margin requirements, the SMA ledger is used to lock in unrealized gains that augment the client's buying power. According to Regulation T, Section 220.5: [2]
A naked option involving a "call" is called a "naked call" or "uncovered call", while one involving a "put" is a "naked put" or "uncovered put". [1] The naked option is one of riskiest options strategies, and therefore most brokers restrict them to only those traders that have the highest options level approval and have a margin account. Naked ...