margin account balance

Discussion in 'Retail Brokers' started by gsz55, Jan 10, 2006.

  1. gsz55


    I will open margin account in some brokers.
    The minimum balance for margin account is $2,000.
    So if the balance is less than $2,000, what will broker do for the account?
    If they change to cash account, after broker changed account to cash account, if I want to this account to be margin account again,
    what should I do? I send money only? or must I write dosument for open margin account again?
  2. ER9


    im going to take a wild guess and say no they probablly wouldn't change the account to a cash account.

    they may however reduce or restrict the margin amount until a time that the acct balance was back at a certain level through trading or depositing funds.

    so if you open an account with $2000 cash and get $8000 margin, trade the account down to $1000, you might end up with less than $8k margin or $0 and only be able to trade the amount equal to $cash in acct.
  3. gsz55


    Thank you a lot for reply me urgently!
    By the way, most broker need mentenance charge for account.
    So if the account balance is zero for more than 1 year,
    what can they transact to get account balance charge.
    Because there is no cash in account.
  4. ER9


    not sure... it probably varies from broker to broker. you would have to contact your broker for details but i guess they would have a time limit on inactive accounts before they were closed.
  5. hopback


    The only difference between a cash account and a margin account is a signed margin agreement.
    The margin feature will not be removed if the balance is below $2k, you simply will not be allowed to borrow on margin until the balance is $2k or higher.

    Brokers can also raise that equity requirement if they choose.
    Schwab raised theirs from $2k to $5k a few years back. Don't know it's stil like that or not. I'm guessing it may have been reversed in order to stay competitive, but I'm not sure.

    ER9 is correct, if your balance is less than $2k you will only be able to trade with the cash in the account.
    If you started with more than $2k and and are running a debit balance (on margin) and the account falls below $2k you will receive a FED call and be required to deposit enough cash to either cover the debit balance or bring the equity back above $2k, which ever is less. Or you could close some positions inorder to cover the debit.
  6. gsz55


    Thank you a lot!