Why is portfolio margin only available to those with >=$100,000

T

TSLexi

Hi guys!

Why is portfolio margin only available to those with >=$100,000. I've never really figured out why those of us with <$100K s are stuck with margin requirements developed in the 1930s. Portfolio margin is based on risk analysis and stress-testing, so it should be less risky for the broker as well.

Thanks.
 
TSLexi said:
Hi guys!

Why is portfolio margin only available to those with >=$100,000. I've never really figured out why those of us with <$100K s are stuck with margin requirements developed in the 1930s. Portfolio margin is based on risk analysis and stress-testing, so it should be less risky for the broker as well.

Thanks.
More...

It's not economies of scale. It's a combination of the economic principles of adverse selection and moral hazard. This has been well modeled.
 
Guys with a bit of money in the game -- say 100K + -- tend not to play it as fast and loose as those with a 10 K account. Their ideal client for portfolio margin is not a directional trader trading Tesla etc. with 10 or 20K trying to hit home runs. They prefer the $500,000 (or larger)account with primarily dividend paying stocks or fixed income looking for the rate differential that also does some trading to generate commissions. That's their sweet spot.
 
Swan Noir said:
Guys with a bit of money in the game -- say 100K + -- tend not to play it as fast and loose as those with a 10 K account. Their ideal client for portfolio margin is not a directional trader trading Tesla etc. with 10 or 20K trying to hit home runs. They prefer the $500,000 (or larger)account with primarily dividend paying stocks or fixed income looking for the rate differential that also does some trading to generate commissions. That's their sweet spot.
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I'm not trying to hit grand slams, just consistent singles.

It would make things so much easier. Don't have to worry about maintenance margin, and would make my delta hedging so much easier.
 
But your question was why they will not provide you with it. Not why you, as an individual, want it. Think insurance ... you fall into a higher risk group.

TSLexi said:
I'm not trying to hit grand slams, just consistent singles.

It would make things so much easier. Don't have to worry about maintenance margin, and would make my delta hedging so much easier.
More...
 
Swan Noir said:
But your question was why they will not provide you with it. Not why you, as an individual, want it. Think insurance ... you fall into a higher risk group.
More...

They're not really focused on the customer then. They should ask for a detailed description of your proposed trading strategies, goals, and methodology.
 
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