test topics Flashcards
(6 cards)
long margin concepts
• The basic margin equation is: LMV - DR = EQ.
•Regulation T=50% of LMV
• Minimum maintenance = 25% of the LMV (SRO rules).
• SMA can be borrowed from the account, dollar for dollar.
• Utilizing SMA increases the debit balance.
• The buying power of SMA is 2:1.
• EE and SMA are not necessarily equal.
• SMA cannot be used to meet a maintenance margin call.
-The market vale at maintenance equation for long margin accounts is
DR + 0.75 or DR × 4/3.
OTC quotes
• Markups and markdowns are charged when a market maker is acting as a principal (dealing from inventory with financial risk).
• Unless stated otherwise, firm quotes are good for the number of shares displayed. A quote of 11 - 11.50, 3 × 5 is a firm quote between dealers where there is a bid of $11.00 for 300 shares and an offer to sell
500 shares at $11.50.
• Nominal quotes can be given for informational purposes and can be printed only if clearly labeled as such.
• A relatively wide spread indicates a thin trading market for the security.
• Securities identified as OTC non-Nasdaq may not always have displayed information readily available.
That is because information may be difficult to find for these thinly traded securities.
orders reduced for cash dividends
Only those placed below the market price are automatically reduced. An easy way to remember the buy limits and sell stops is the word BLiSS.
These are the orders placed below the market price and are reduced for cash dividend distributions. Try to remember BLiSS (buy limits, sell stops) for orders below the current market price. All orders are adjusted for stock dividends and stock splits, whether placed above or below the market.
PHAS (or NHAs)
are the only municipal issues backed in full by the U.S. government. They are also called Section 8 bonds.
test topic
Growth managers expect to see high a P/E ratio (price-to-earnings ratio) or high price-to-book ratio with little or no dividends. On the other hand, value managers expect to see a low P/E ratio or low price-to-book ratio and dividends offering a reasonable yield.
test topic
There is one case that is not a primary offering where the issuer receives the proceeds. When a company resells treasury stock, it receives the proceeds. Because those shares were previously owned, they cannot be called a primary offering.
