Margin Agreement questions

Discussion in 'Professional Trading' started by IronFist, Jan 2, 2007.

  1. Sorry if this is the wrong forum.

    So I'm gonna sign a margin agreement with Scottrade, but I'm looking it over, and I have a few questions.

    What exactly does that mean? Does that mean I need to keep in my account at least 50% of the market value? So if I short $10k worth of a stock I have to still have at least $5k unused (cash) in my account?

    What is a maintenance level? Does that mean if I short $10k worth of a stock I have to have at least $14k in cash in my account?

    Same question about "what is maintenance requirement?" And what happens if I short a stock at $15 and it falls to under $12.50, do the requirements change?

    Does using margin and shorting stocks change anything at tax time?

    I'm really only signing this so I can short stocks, not so I can use leverage. So say I have $20k in my account. This will give me $40k buying power. Can I still use only the $20k so I'm not using any leverage? Like can I specify to buy/short stocks only from my original $20k contribution without touching the leverage?

  2. rwk


    The initial margin requirement is 150% of the value of a security. However, two-thirds of the required margin is satisfied by the proceeds of the sale of the security, so you are required to post the remaining one-third (i.e. 50%) in cash.
  3. ken__0


    this margin will help you with the reg t rules
    u hav 10k n ttl capital scotttrade has 3-1 or 4-1 intraday.
    ur buying power is between 30and 40 k intraday,Less overnight
    Dont use this to increase ur postion size as a retail trader, But rather as a tool to get around the reg t rules. enabling you to trade you max allowable amount of day trades everyweek.
    Im not good at examples so mayb some more skilled traders then me can explain it better.
  4. It eliminates the three day settlement rule, right?
  5. lol no one here must actually have a margin account :D
  6. ken__0


    no it doesnt eliminate the three day rule.
  7. jprad


    Margin is something I'm also considering and after reading this thread I'm not too clear on how 3 day settlement affects intraday buying power.

    If the account has 10K of capital and 4-1 intraday BP, what happens if you were trading a $10 stock @ 1K shares per trade and you were to make 4 roundtrip trades during the day?

    Would settlement prohibit you from making any more trades over the next 3 days?
  8. Don't want to throw any rain on this parade, but since you state that you are doing all this so you can "short stocks" - I suggest that you check out if IB pays you interest on the money collected from short stock sales. I'm told that they keep all the interest up to the first $100K tier (but as I said, check to be sure). Most retail brokers don't pay short stock interest, which eliminates any edge from most hedging strategies (pairs, mergers, etc.).

    The good news is that "if" these changes are how many of you perceive them (Reg T changes), then you should be able to trade more often regardless of whether you "use" the additional buying power.

    (minor plug coming, whoda thought, LOL) Again, since our traders can "use" (not abuse) a $million or more with $20K or so in their accounts, we can take part in working strategies that may be lower risk, higher reward, but capital intensive. So, between receiving good interest on short stock and using a $million or more to open the door to better strategies, you just might consider trading non-retail.

    Check with def about the short stock interest deal. If I recall, IB is better than most.

    All the best,

  9. 50:1 leverage?

    How much starting capital does one need to trade with you? If I start with $20k and lose $1 on my first trade so I'm at $19,999, am I kicked out? :)

    And how does the PDT rule apply? With only $20k you can't make more than 4 round trips in a week right?
  10. ken__0


    most all bright traders are licensed proffessionals not retail.
    your trading the firms money and your 20 k is more of a deposit.
    like poker when all your chips are gone so r u.
    I dont think don is crazy enough yet to take a brand new trader and allow 50-1 to start.
    So in essence you would be licensed trader and a member of the firm trading their money from their account.
    #10     Jan 4, 2007