Im looking online and I cant seem to find out what it means by 30% maintenance margin requirement.
I have 49 shares. The total value of the shares is 24979.91. I am currently borrowing 18154.60. My total brokrage account value is 6825.31.
Does anyone know how I can calculate at what point I would be at a margin call? Im afraid Im already at one, but I havent gotten any letters and my account hasnt had any warnings. I use scottrade.
Please no idi0ts, If anyone can help me understand thank you.
Just divide the account value by the 30% margin to find the stock value you must maintain. Below that number there will be a margin call. So 6825.31 divided by 0.3 = 22,751.03 The current value of your stock is $24,979.91 so you are still $2,228.88 away from a margin call. Divide 2228.88 by 49 shares which tells you that if Apple drops another $45.49/share you will get a margin call. At that time either deposit more cash or the brokerage will start selling off your shares. Good luck!
tdeanjohn, you're wrong as well. For illustrative purposes, suppose he deposited another 1000 dollars in his account. Now he has 7825.31. Using your incorrect method of calculating a margin call, he would need his balance to be above 7825.31/0.3=26084.
Are you trying to tell me that now this person needs the balance of his stock to be above 26084 in order to not get a margin call?
Instead, the correct way to calculate a margin call is to take the stock current value, multiply it by its margin requirements, and compare that to what you have in cash in the account.
24979.91 * 0.3= 7493.973. This is the amount you need in the account to not get a margin call.
Sorry. When your account value drops to 18000 / .7 = 25714, you'll get a margin call.
right now your account value is 25000. I suggest you sell half now.
A margin call will wipe you out.
Sentiment: Strong Buy
Basically, you can borrow up to 70% of your money. I don't have a calculator in front of me, but I believe that you would just need to divide 18154 by 6825. You need to have a ratio of higher than .3. You are definitely pushing it.
Sentiment: Strong Buy
This is my understanding:
Here is a hypothetical situation to walk through how i think this system works:
Begin with 20,000 dollars. Assume apple has a 30% margin cost and is 600 dollars/ share. You buy 100 shares, or 60,000 dollars of apple, and now you have 60,000-20,000= 40,000 Margin Debit balance.
You also "use up" 60,000*30% of your margin buying ability, or 18,000. So you don't end up with a margin call because your margin buying ability is the 20,000 that you have in the account.
Now, based on the above, we have to back calculate what you've got.
24,979.91*30%= $7493.97. This is how much of your margin buying ability you have used up. Since you only have 6825.31 dollars, I think that your margin buying ability is 6825.31 and so I think you have $7493.97-6825.31=668 dollar margin call.
Let me know how my reasoning and math stands up.