|
March 13, 2002
It is imperative that you read this memo
on margin rules before you begin trading your account!
As you are probably aware, new margin rules for Pattern Day Traders
were implemented in September of 2001. These rules have increased
the day trading buying power available to accounts that have a minimum
balance of $25,000 to 4:1, but have left the overnight buying power
at 2:1.
The new margin rules have created an environment where many of
our clients have created Reg-T calls (they exceeded their overnight
buying power) on many occasions because the trading software, RealTick,
does NOT provide your Overnight Buying Power or prevent you from
holding too much stock overnight. It is your responsibility to stay
within all of the margin rules, including the 2:1 limit on overnight
positions.
In general, if you have a $25,000 account, you can day trade up
to $100,000 (4:1) at any given time, but only hold a total of $50,000
(2:1) of stock overnight.
Your specific buying power may vary due to other factors, so please
review your Overnight Buying Power in the Buying Power Query on
https://online.penson.com/
every single day you intend to hold positions overnight. We also
suggest reviewing the rest of your account and other buying power
calculations on this web site on a daily basis to help keep you
completely informed of the activity and balances in your account.
For further help on understanding overnight margin rules please
review the examples below. The examples assume all positions are
marginable.
1) An account starts the day with $30,000 in cash and no
positions with the total account value being $30,000. The account
will start the day with Day Trading Buying Power of $120,000 and
Overnight Buying Power of $60,000. If you were to establish $70,000
in overnight positions, you would exceed your Overnight Buying Power
by $10,000 and create a $5,000 Reg T call. RealTick will not prevent
you from creating the Reg-T call.
2) An account starts the day with $20,000 in cash and $10,000
in fully paid for stock with the total Margin Equity being $30,000.
The account will start the day with Day Trading Buying Power of
$110,000* (see calculation below) and Overnight Buying Power of
$55,000* (see calculation below). If at any time during the day,
you close the $10,000 position, it will increase your Overnight
Buying Power by the amount of the sale. In the example, the account
would be able to establish $65,000 in overnight positions.
* Calculation (Sample Buying Power Query)
| EQUITY |
| Margin
Equity |
30,000.00 |
| MAINTENANCE REQUIREMENT |
| Account Number |
Symbol/(CUSIP) |
Position |
Closing Price |
Market Value |
Maint. Req. |
Maint. Excess |
| 58999999 |
XYZ XYZ CORP |
100.00 |
100.00 |
10,000.00 |
2,500.00 |
|
| |
|
|
Total M.V.
in: USD |
10,000.00 |
2,500.00 |
27,500.00 |
| DAYTRADING
BUYING POWER |
| (4
times Maintenance Excess if Margin Equity over $25,000) |
110,000.00 |
| REG-T
BUYING POWER |
| S.M.A. |
7,500.00 |
| Money Fund Balance |
20,000.00 |
| Cash Account Balance |
0.00 |
| Reg T BP |
55,000.00 |
| OVERNIGHT
BUYING POWER |
| (The
lesser of 2 times Maintenance Excess or Reg T BP) |
55,000.00
|
Read
more about Margin Accounts and Margin Calls
Please
review the NASDR glossary to look up key financial terms
If you have any questions regarding this type of call or any other
margin issues, please do not hesitate to contact our Trade Desk
for assistance.
|
