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Question about day trade margin call
- Thread starter befi
- Start date
Quote from befi:
The buying power for day trade is 4:1
Let say I have $10000 in the account, I bought 3000 shares @ $10 Total: $30000
My question is how to calculate the Maintenance Margin?
How much $10 per share have to decline to get a margin call?
Unless IB has a different set of rules, you need $25K in the account for 4:1 Day Trading BP, so your example is moot.
A regular margin account with $10K in the account only has $20K in BP.
The day trade margin rules are as follows for retail accounts:
Let's use the previous example of an equity balance of $10,000 in the account. If you buy 3000 shares @ $10, the equity value will equate to $30,000. A maintenance requirement for a long position is 25% of the equity value. So in this case, $30,000 * .25 = $7,500. You would have to keep the equity value of your account above $7,500 to avoid a margin call.
For short positions, the value is 30%. $30,000 * .30 = $9,000. You would have to keep the equity value of your account above $9,000 to avoid a margin call.
If you are looking for more leverage and "extended" margin call requirements, you should consider going prop.
Thanks
Let's use the previous example of an equity balance of $10,000 in the account. If you buy 3000 shares @ $10, the equity value will equate to $30,000. A maintenance requirement for a long position is 25% of the equity value. So in this case, $30,000 * .25 = $7,500. You would have to keep the equity value of your account above $7,500 to avoid a margin call.
For short positions, the value is 30%. $30,000 * .30 = $9,000. You would have to keep the equity value of your account above $9,000 to avoid a margin call.
If you are looking for more leverage and "extended" margin call requirements, you should consider going prop.
Thanks
Wondering if I could get some education here:
I got a 'fed call' or margin call today on my Scottrade acct. I did not get a call, I got message when I came back and loggin in just now. I am confused on margin calls and margin.
I always have 25,000 in long term positons and the other 25,000 I use for daytrading.
Today was the first time in a month I held two short positons at the same time. I couldn't pass up these trades and they paid off!
Anyway...I shorted 25,000 on one stock and 25,000 on another. Then at the end of the day I bought 25,000 of a stock, putting me about 100% into stocks.
The only reason I think that I got a margin call was maybe the T+3 rule.
I went long at 9:30:35 on a stock and sold at 9:31:20. Did this 25,000 sale hurt my ability to go short later for 50,000 worth due to the T+3?
Oh, if I just sell my latest position Monday morning will that take care of the margin call.
Thanks
I got a 'fed call' or margin call today on my Scottrade acct. I did not get a call, I got message when I came back and loggin in just now. I am confused on margin calls and margin.
I always have 25,000 in long term positons and the other 25,000 I use for daytrading.
Today was the first time in a month I held two short positons at the same time. I couldn't pass up these trades and they paid off!
Anyway...I shorted 25,000 on one stock and 25,000 on another. Then at the end of the day I bought 25,000 of a stock, putting me about 100% into stocks.
The only reason I think that I got a margin call was maybe the T+3 rule.
I went long at 9:30:35 on a stock and sold at 9:31:20. Did this 25,000 sale hurt my ability to go short later for 50,000 worth due to the T+3?
Oh, if I just sell my latest position Monday morning will that take care of the margin call.
Thanks
For what is worth I use IB as my broker and I don't get 4X margin when daytrading equities. A little less, somewhere along the 3.5x mark.
The statement above is not clear. Do you have a $50K account or a $25K account. That is, do you have $25K in the account in long positions and no cash\debit balance or do you have $25K in long positions and $25K in cash?Quote from urrterrible:
I always have 25,000 in long term positons and the other 25,000 I use for daytrading.
Jack
JackR,
Your response is appreciated thanks...
I have 25K in long term positions and also 25K in cash.
To rehash what I did on Friday... I bought a stock early Friday with my 25K in cash and then sold it within a minute. So I had had the 25K in cash again at 9:31am. Then I shorted two stocks at 9:35am for a total of 50K. After buying those stocks back for another profit I took the rest of my 25K in cash and bought two other stocks and I am holding until I feel I should sell. So as of now I am long ~50K in stocks.
To summarize at 9:35am I had 25K in LT positions and 50K short. That means I have 50% of my short position covered in equity. So I am confused why I got a margin call. Maybe the stock I bought and sold at 9:31 froze those funds for 3 days(T+3)???
Thanks,
UT
Your response is appreciated thanks...
I have 25K in long term positions and also 25K in cash.
To rehash what I did on Friday... I bought a stock early Friday with my 25K in cash and then sold it within a minute. So I had had the 25K in cash again at 9:31am. Then I shorted two stocks at 9:35am for a total of 50K. After buying those stocks back for another profit I took the rest of my 25K in cash and bought two other stocks and I am holding until I feel I should sell. So as of now I am long ~50K in stocks.
To summarize at 9:35am I had 25K in LT positions and 50K short. That means I have 50% of my short position covered in equity. So I am confused why I got a margin call. Maybe the stock I bought and sold at 9:31 froze those funds for 3 days(T+3)???
Thanks,
UT
UT:
THe settlement date, can, for all practical purposes, be ignored in a margin account.
The basic margin requirement is set by the Federal Reserve. It is called Regulation T. The Fed sets the minimum margin requirements for equities. Your broker can set higher requirements if they desire (and often do for very volatile stocks).
In addition, once you are in the position there is a Fed maintenance margin of 25%, but the brokers almost always kick it up to 30 to 35%.
If you are a "Pattern Day Trader" (PDT) the day trading rules have an impact on margin requirements as they allow you to trade at a 25% margin rate. However, the four times the account balance we normally think of is not exactly correct unless the account is all cash at the start of the day. The PDT rule actually gives you four times the maintenance margin excess, not four times the account value. In your case that means less than $50K, whether you are a PDT or not. What follows might not apply but it's the best I can do. This assumes you are not a PDT.
You went short $50K while holding $25K in stock and $25K in cash. Your available "buying power" was $25K x 2 = $50K for your cash, plus some loan (margin) value of your $25K equity position. Let's say your broker uses a 30% maintenance margin. Thus $25K x .7 = $17.5K. So you had 50 + 17.5 = $67.5K of buying power. However, per Reg T you needed 50% initial margin to go short. Thus the short position of $50K needed an additional $25K ($75K). You only had $67.5K so you got a margin call.
You must sell enough to satisfy the margin call. You can also send them the money - normally not a good idea.
You did not mention the amount needed but the above might help you to see if that is what is going on. Call you broker on Monday to tell them what to sell or they'll just pick something - never a good idea from my point of view. However, if you are a PDT and you exceeded the 4X limit you may need to deposit the money or they may restrict your account for 90 days.
Hope that helps a bit.
Jack
THe settlement date, can, for all practical purposes, be ignored in a margin account.
The basic margin requirement is set by the Federal Reserve. It is called Regulation T. The Fed sets the minimum margin requirements for equities. Your broker can set higher requirements if they desire (and often do for very volatile stocks).
In addition, once you are in the position there is a Fed maintenance margin of 25%, but the brokers almost always kick it up to 30 to 35%.
If you are a "Pattern Day Trader" (PDT) the day trading rules have an impact on margin requirements as they allow you to trade at a 25% margin rate. However, the four times the account balance we normally think of is not exactly correct unless the account is all cash at the start of the day. The PDT rule actually gives you four times the maintenance margin excess, not four times the account value. In your case that means less than $50K, whether you are a PDT or not. What follows might not apply but it's the best I can do. This assumes you are not a PDT.
You went short $50K while holding $25K in stock and $25K in cash. Your available "buying power" was $25K x 2 = $50K for your cash, plus some loan (margin) value of your $25K equity position. Let's say your broker uses a 30% maintenance margin. Thus $25K x .7 = $17.5K. So you had 50 + 17.5 = $67.5K of buying power. However, per Reg T you needed 50% initial margin to go short. Thus the short position of $50K needed an additional $25K ($75K). You only had $67.5K so you got a margin call.
You must sell enough to satisfy the margin call. You can also send them the money - normally not a good idea.
You did not mention the amount needed but the above might help you to see if that is what is going on. Call you broker on Monday to tell them what to sell or they'll just pick something - never a good idea from my point of view. However, if you are a PDT and you exceeded the 4X limit you may need to deposit the money or they may restrict your account for 90 days.
Hope that helps a bit.
Jack