Reduced Margin

[plugger]

TD Waterhouse posted this gem for their clients today:




FYI: Reduced Loan Value for Select US Securities


SUMMARY:
This information is relevant to margin accounts only.

Due to recent market events, effective immediately, TD Waterhouse has reduced the loan value for 27 securities in the US Financials sector to 50%.

In addition, the loan value of Lehman Brothers stock has been reduced to 0% and E*Trade Financial Corp has been reduced to 25%.

Please refer to the list of affected securities below:

Americredit Corp
Anworth Mortgage Asset C
Ashford Hospitality Trust
China Direct Inc
CIT Group Inc
Compucredit Corp
Corus Bankshares Inc
Country Wide Financial Crp
Downey Financial Corp
Heritage Financial Group
E*Trade Financial Corp
FC Stone Group Inc
First Marblehead Corp
Lehman Brothers
MF Global Ltd
MGIC Investment Corp WIS
National City Corp
Newcastle Investment Corp
Old National Banccorp Inc
Penson Worldwide Inc
PMI Group Inc
Radian Group Inc
Rait Financial Trust
Redwood Trust Inc
Resource Capital Corp
Temecula Valley Bancorp
Triad GTY Inc
Washington Mutual Inc
Western Alliance Bancorp
MARGIN ACCOUNT IMPACT:
If you are holding any of these listed securities in your TD Waterhouse account, your loan value and available margin will be reduced until further notice.

CONTACT INFORMATION:
If you have any questions or concerns, please contact an Investment Representative.


They did the same thing for tech when the tech bubble started to unwind.

 

[HolyGrail]

Looks like buying puts on some of these stocks may be a good strategy. Some will be forced to sell their stocks, and with less margin others may not be tempted to buy them in the future. No demand=lower price.

 

[switze22]

I agree. I think puts would be a good idea here

 

[xflat2186]

They're not the first ones to tell clients those stocks are crap so a lot of that is priced into the puts. You'll be paying top top dollar/implied volatility for those already.

 

[dumpandbasher]

These restrictions would also reduce one's ability to short. So less buying demand, but also less selling demand.

 

[ammo]

Quote from dumpandbasher:

These restrictions would also reduce one's ability to short. So less buying demand, but also less selling demand.

might mean increased option demand