You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
about margin buying power
- Thread starter gsz55
- Start date
Thank you a lot for very kindly answer!
I understand most broker system will make buying power reduce immidiately when loss in trading.
and I believed margin buying power is 2 times larger than cash balance in margin account.
but u said
BTW, intraday BP is 4:1 for PDT accounts over $25K (not 2:1).
I dont understand why 4times larger than cash balance?
If I have $500,000 in account, I can buy $1000,000 only, not
$2000,000.
I understand most broker system will make buying power reduce immidiately when loss in trading.
and I believed margin buying power is 2 times larger than cash balance in margin account.
but u said
BTW, intraday BP is 4:1 for PDT accounts over $25K (not 2:1).
I dont understand why 4times larger than cash balance?
If I have $500,000 in account, I can buy $1000,000 only, not
$2000,000.
Read: http://www.mbtrading.com/margin.pdfQuote from gsz55:
but u said
BTW, intraday BP is 4:1 for PDT accounts over $25K (not 2:1).
I dont understand why 4times larger than cash balance?
If I have $500,000 in account, I can buy $1000,000 only, not
$2000,000.
Quote from gsz55:
Thank you a lot for very kindly answer!
I understand most broker system will make buying power reduce immidiately when loss in trading.
and I believed margin buying power is 2 times larger than cash balance in margin account.
but u said
BTW, intraday BP is 4:1 for PDT accounts over $25K (not 2:1).
I dont understand why 4times larger than cash balance?
If I have $500,000 in account, I can buy $1000,000 only, not
$2000,000.
Can someone get this guy a English dictionary. please?
I read the website and realize the buying power is 4 times of
cash amount.
But that is government law or rule.
I would like to know that the all brokers must follow this rule,
or brokers can make own rule within the government rule, or not.
For example, government said the margin buying power is 4 times of cash account, but some brokers can make their own rule such as margin buying power is 2 times large amount of cash amount, or not?
I am looking for your earily reply!
cash amount.
But that is government law or rule.
I would like to know that the all brokers must follow this rule,
or brokers can make own rule within the government rule, or not.
For example, government said the margin buying power is 4 times of cash account, but some brokers can make their own rule such as margin buying power is 2 times large amount of cash amount, or not?
I am looking for your earily reply!
When determining buying power there are several figures you need to look at.
You are alway held to the greatest requirement:
1> Reg T req.- 50% (gives a 2:1 BP)
2> NYSE req. - 25% (gives a 4:1 BP)
3> house req. - ?? (if applicable)
A brokerage house may increase the minimum margin req form 25% across the board or on individual stocks. Most competitive brokers do not do this any more.
Schwab used to require 35% across the board and up to 80% on certain individual stocks that they felt had a significant credit risk.
When an account is opened, you will have a BP of 2:1 based on the Reg T excess equity, also called SMA (special memorandum account). What makes SMA hard to understand is that it does not decrease with market depreciation. It will decrease however once a position is closed for a lose. With an account that maintains several open positions at all times (closing some and opening new ones) SMA will tend to become inflated, showing a "high water mark" of the accounts market value.
As SMA becomes inflated it will no longer be the most restrictive and you will then see the NYSE req come in to play as well as the 4:1 buying power.
You are alway held to the greatest requirement:
1> Reg T req.- 50% (gives a 2:1 BP)
2> NYSE req. - 25% (gives a 4:1 BP)
3> house req. - ?? (if applicable)
A brokerage house may increase the minimum margin req form 25% across the board or on individual stocks. Most competitive brokers do not do this any more.
Schwab used to require 35% across the board and up to 80% on certain individual stocks that they felt had a significant credit risk.
When an account is opened, you will have a BP of 2:1 based on the Reg T excess equity, also called SMA (special memorandum account). What makes SMA hard to understand is that it does not decrease with market depreciation. It will decrease however once a position is closed for a lose. With an account that maintains several open positions at all times (closing some and opening new ones) SMA will tend to become inflated, showing a "high water mark" of the accounts market value.
As SMA becomes inflated it will no longer be the most restrictive and you will then see the NYSE req come in to play as well as the 4:1 buying power.
As I said, you should have 4:1 intraday buying power for a >$25K account at any reasonable broker. You generally will have only 2:1 if you want to hold a position overnight. How and when each broker enforces that rule varies - you need to check with the broker to be sure.
In the case of IB, for example, you have to meet the 2:1 requirement at about 15:45 ET. So, with 100K cash, you can take a 400K position, but you have to sell at least half of it (down to 200K) by 15:45. You can buy back 200K (total 400K) again after about 16:00 and hold it overnight. I think you probably have to do the same again the next day if you want to continue to hold the position, since it's considered a new position.
That is, I believe the max you can do with $100K is:
Day 1, 10:00 Buy 4000 XYZ @ $100 (total position 4000 = $400K)
Day 1, 15:40 Sell 2000 XYZ @ $100 (total position 2000 = $200K)
Day 1, 16:15 Buy 2000 XYZ @ $100 (total position 4000 = $400K)
Day 2, 15:40 Sell 2000 XYZ @ $100 (total position 2000 = $200K)
etc.
In the case of IB, for example, you have to meet the 2:1 requirement at about 15:45 ET. So, with 100K cash, you can take a 400K position, but you have to sell at least half of it (down to 200K) by 15:45. You can buy back 200K (total 400K) again after about 16:00 and hold it overnight. I think you probably have to do the same again the next day if you want to continue to hold the position, since it's considered a new position.
That is, I believe the max you can do with $100K is:
Day 1, 10:00 Buy 4000 XYZ @ $100 (total position 4000 = $400K)
Day 1, 15:40 Sell 2000 XYZ @ $100 (total position 2000 = $200K)
Day 1, 16:15 Buy 2000 XYZ @ $100 (total position 4000 = $400K)
Day 2, 15:40 Sell 2000 XYZ @ $100 (total position 2000 = $200K)
etc.