Margin Accounts: Rapid Fire
Chapters in this video
- 0:00 The $2,000 minimum equity to open
- 1:38 Mandatory vs optional margin agreement documents
- 2:41 Long equity and short equity formulas
- 3:24 Regulation T initial margin and FINRA maintenance layers
- 4:25 Long and short trigger price formulas
- 4:53 SMA as line of credit, not cash
- 5:58 SMA survives market declines
- 7:22 Restricted vs maintenance call: yellow light vs red light
- 7:57 Rapid-fire recap: pattern day trader, rehypothecation, non-marginable
What this video covers
- Why the $2,000 minimum equity to open is a hard floor, and how purchases under $2,000 must be fully paid in cash
- The three-part margin agreement: which two documents are mandatory (credit agreement, hypothecation agreement) and which is optional (loan consent form)
- How the customer's interest rate is the broker call rate plus a firm-set spread, not the call rate alone
- Long equity as Long Market Value minus Debit Balance, and short equity as Credit Balance minus Short Market Value, with both fixed loan amounts that do not move with the market
- The two trigger price formulas: debit balance divided by 0.75 for long positions, credit balance divided by 1.30 for short positions
- Why the Special Memorandum Account (SMA) is a line of credit, not cash, and how it survives market declines but drops only through customer action
- The distinction between restricted (equity below 50% Reg T, a yellow light) and maintenance call (equity below 25% long or 30% short, a red light)
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