Can anyone be kind enough to explain the Initial and Maintainance margin calculations at interactive brokers?? If I have a margin account with a 30k balance and I wish to purchase 60k worth of stock, how does it work?? what happens if the 60k purchase goes down to (for instance) 55k or goes up to 65k??
If you have 30k in your account and you buy 60k worth of stocks then your cash value becomes negative -30K. ( It means you have borrowed 30K from your broker). The total account value ( 30K in your case ) = total equity value ( 60K in your case ) + cash value ( -30K in your case ). Once account value goes down to 0 ( it happens when your equity value decreases to 30K) they will eliminate your stock positions and the proceeds will go to the broker. Plus you will have to pay margin interest on your negative cash balance.
ok i got it. so what if the equity value increases, will the broker take a cut or are the profits all mine?
ever hear of maintenance margin. with the knowledge that the two of you show both of you should not be allowed to trade.
well zdreg there's a first time for everybody, even you. this is why i'm getting informed. you were not born knowing it all so who tha fuck are you to determine who should or should not be allowed to trade.
The profits are all yours. The cash value of your account ( -30K ) stays unchanged (minus margin interest). That's the only money that your broker wants from you and it has to be returned to him at some point. Either by selling 30K of your securities or by adding 30K of cash to your account. Meanwhile as long as your cash value is negative he collects the margin interest on this amount. In other words your cash value today = cash value yesterday - overnight margin interest. As for the maintenance margin I guess zdreg explains it better than me.
i suggest u google maintenance margin and correct your calculations.. the OP's lack of basic knowledge shows that he should not be trading.
This is why I like ET - the entertainment value... Noob comes in asks a dumb fucking question. Another noob comes to the help gives clueless answer. Someone who has been around long enough to be sometimes right is frustrated by all the noobs who can't even read or are too lazy/dumb to do their own homework. Noob gets offended when he is made to face that he is a noob and clueless and all he causes is frustration to the ones who come here for something of substance. To clarify - I'm not frustrated: I mostly come here for the entertainment...
I think it's kind of pointless to berate a noob for coming on and asking a question which most of us know the answer to. That's a part of the site's mandate - it's supposed to be a place where people who are interested in trading can come and get information. Most noob questions can be answered if the noob takes some time to do some reading and educate himself, sure, but this is the state of education in the West these days. I totally agree, however, that the idiot who answers by talking out his ass deserves to be flamed.
it's pretty sad that this is your concept of entertainment. i think you've been jerking off in front of your computer for way too long. if your trading matches your concept of entertainment then it's safe to assume you're a pretty shity trader my friend