Margin

Question 1

Formula For Equity in a Long Margin Account

Answer 1

Equity (EQ) = Long Market Value (LMV) - Debit Balance

Question 2

Formula for Equity in a Short Margin Account

Answer 2

Equity (EQ) = Credit Balance (CR) - Short Market Value (SMV)

Question 3

Formula for Total (Combined) Equity

Answer 3

LMV + Credit - Debit - SMV

Question 4

Define Excess Equity

Answer 4

Equity that exceeds 50% of the Current Market Value

Question 5

Minimum Maintenance Requirement for a Long Position

Answer 5

25% of the Long Market Value (LMV)

Question 6

Minimum Maintenance Requirement for a Short Position

Answer 6

30% of the Short Market Value (SMV)

Question 7

Calculate the MRGN Requirement for a Leveraged ETF:

Answer 7

Leverage Factor x Minimum Maintenance Requirement

Question 8

Requirement if Initial Transaction is a Short Sale

Answer 8

If the initial transaction in a margin account is a short sale, industry rules require a minimum equity deposit of $2,000 or the required Reg. T deposit, whichever is greater.

Question 9

Requirement if Initial Transaction is a Purchase

Answer 9

If the initial transaction in a margin account is a purchase, the minimum equity requirement is the lesser of $2,000 or 100% of the purchase price.

Question 10

Define Pattern Day Trader

Answer 10

A trader who executes four or more day trades in a five business day period and has minimum account equity of $25,000

Question 11

Non-Marginable Securities

Answer 11

• OTC equities those quoted on the OTC Markets Group Pink Open Market

• Standard listed options (those with nine-month maturities)-buyers must deposit 100% of the premium

• New issues (e.g., IPOs) although new issues cannot be purchased on margin, the shares become marginable (have loan value of 50%) if they’ve been held and fully paid for 30 days.

Question 12

Marginable Securities

Answer 12

• Securities that are listed on a registered stock exchange (including ETFs)
• Securities that are listed on Nasdaq

Question 13

Account Event: Cash dividend received on stocks in the account, interest received on bonds in the account, or cash voluntarily deposited

Answer 13

Impact on Debit and SMA Balances:

• Debit is reduced by 100% of amount received/deposited
• SMA is increased by 100% of amount received/deposited

Question 14

Account Event: Proceeds received from selling securities in the account

Answer 14

Impact on Debit and SMA Balances:

• Debit is reduced by 100% of amount received account

• SMA is increased by 50% of the proceeds received