Online equity brokers offer two types of accounts: cash accounts and marginal accounts. Both allow you to buy and sell investments, but margina accounts also lend you money for investments and come with special features for advanced investors, such as short selling. We`ll tell you what you need to know about brokerage cash accounts and margin accounts, and we`ll help you decide what type of account is right for you. Tap the account in the main menu on mobileTWS for your phone. You see that account information on mobileTWS is divided into several sections, including balances, margins and funds. All important values, including your start and maintenance margin, excess liquidity and the net worth of liquidity you want to monitor, are found in these sections. Note that some of the values names are shortened to fit the mobile screen. For example, current excess liquidity is reduced to „current surplus.“ Just tap one of the buttons at the bottom of the screen to view each section. Marginal accounts can be very risky and not suitable for everyone. Before opening a margina account, you should understand: for example, an investor with a margin account can take a short position in the XYZ stock if he thinks the price will probably fall. If the price actually drops, they can cover their short position at that time by a long position in XYZ shares.
They thus benefit from the difference between the amount received in the first short sale transaction and the amount they paid for the purchase of the shares at a lower price (deducted from their marginal interest during that period). If one or more securities in the account fall below a specified price and these requirements are not met, the investor receives a maintenance margin call. The deposit of money or tradable securities to increase the equity in the account, or the sale of positions in the account to repay the loan, responds to the maintenance margin call. In addition to the public requirements, IB takes into account the extreme movements and withdrawals of underlying products and may require a margin beyond the futures margin mandated by the exchange. The Account window displays key account information and allows you to monitor your account`s market value, margin requirements, cash credits and up-to-date position information. This page is updated every 3 minutes during the trading day and immediately after each transaction. Mr. Smith has read articles on investor education that say the minimum requirement for a margin account is $2,000.
However, if he attempts to open a margin account with Broker S, that broker`s clearing company will not allow him to trade with Margin at all. Mr. Smith will then attempt to open a margin account with Broker T, and it is said that he will not open a margina account for him unless he deposits $20,000. During this session, I will check the basic principles of margin and the operation of the margin here at IB, and then I will show you how you can monitor the margin requirements of your own account to avoid the most formidable situations: position dislocation. Under Federal Reserve Board Regulation T, you can borrow up to 50% of the purchase price of the shares that can be purchased on Margin. This is called the „initial margin.“ Some companies require you to pour more than 50 percent of the purchase price. With Reg T, you can currently borrow up to 50 percent of the price of the securities to be purchased. So for stock purchases, Reg asks. T an initial margin contribution of 50% of the purchase value, which in turn allows the broker to extend the credits or finance the remaining 50%. If the value of the securities had remained around $60,000, the broker would probably have allowed the client to have the number of days indicated to meet the margin call. It was only because the market continued to decline that the broker exercised his right to take further action and sell the account.
For example, you have securities worth US$20,000 purchased with $10,000 in cash and $10,000 in Margin. If the total value of your property falls to