Margin Accounts
Chapters in this video
- 0:00 Margin account defined: borrowing with securities as collateral
- 1:00 The three margin agreement forms and the optional trap
- 2:27 Regulation T versus FINRA: who controls what
- 3:41 House requirements: higher allowed, lower forbidden
- 4:07 Debit balance, equity, and buying power defined
- 4:42 Ivy's $20,000 trade: the crash to $12,000 and margin call math
- 6:12 Rapid-fire exam recap
What this video covers
- The three components of a margin agreement (credit agreement, hypothecation agreement, and loan consent form), and which one is optional
- Which regulator sets the initial margin requirement (the Federal Reserve Board via Regulation T at 50%), and which sets maintenance margin (the Financial Industry Regulatory Authority, or FINRA, at 25% for long positions)
- Why broker-dealer house requirements can be higher than FINRA minimums but never lower
- How to calculate equity in a margin account (market value minus debit balance) and why debit balance remains fixed unless repaid
- What buying power represents based on available excess equity
- The exact trigger for a margin call (equity falling below the maintenance requirement) and what the customer must do to meet it
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