margin call

Discussion in 'Trading' started by hotboats, Oct 11, 2008.

  1. hotboats


    Say one has 2 to 1 overnite buying power. I get a margin call and have to sell some shares to meet it. Now I have 900 shares left (QLD) at fridays close of 32.95 bid wich totals $29655. Shoulndnt my equity be half of this or $14827.50. Penson is the clearinghouse and Speed trader is the broker. It shows my equity is 11,406. What am I missing?
  2. JackR


    Initial margin is 50% under the Federal Reserve's Regulation T. Maintenance margin under Regulation T is 25%. Most brokerages make you maintain 30-35%.

    You are dealing with maintenance margin. Depending on your firm's requirements you are close to another margin call.

  3. And when you get the call, you have to sell a little over three times to meet the call at 30%. If you owe $5,000, you have to sell over 15,000 to meet it

    That's why if people hold no marginable equities, they sell those first. 100% release.

    Now, I'll give you the best advice you'll ever get.


    You can fool with the scenarios at your leisure, but most people sell the good stuff, and hope the bad comes back. That makes for piss poor gardening, as well as investing.
  4. i agree. you really have 4:1 leverage. 2:1 by the broker and 2:1 on the QLD's.
  5. GG1972


    good advice there bud--esp with QLD you can always buy it back wont miss a thing--you can actually time it intraday when it rallies just sell it.

    As for your margin call Here is scenario lets say yr equity was $30000 buying power 2 to 1 is $60000 and margin maintence ( if the margin call doesnt incur within first 3 days of you buying it ) will be approx equiv to $90000 worth of stock ( depends on indiv stock but most stocks come under this-over$5 and all that crap)

    So lets assume you bought 2k shares of qld at $30 for $60000 and qld goes to 25 your equity comes down to $20000 ($5loss x 2k shares ), then your need to sell enough to bring it down to $40000 but you got to stay over certain margin level to have margin like minimum $5k for most brokers. Also it depends what your broker is marking the stock price at--you can ask em or maybe see in your account

    But bottom line advice is sell, gather yrself take a break and come back to fight another day--ive been trading for over 4 years full time and I cant tell you enough that survival is the key--you wont miss anything--no bull run or anything

    Guy I know lost over 400k ( lost his house on margin call, cars everything in the 2000-2001 bubble burst) and rebuilt it all again and lost 700k ( yes--his house BMW suv and all ) this time. Go figure.