Ads
related to: explain buying stock on margin
Search results
Results From The WOW.Com Content Network
Besides using a margin loan to buy more stock than investors have cash for in a brokerage account, there are other advantages. For instance, margin accounts offer faster and easier liquidity.
The minimum margin requirement, sometimes called the maintenance margin requirement, is the ratio of (stock equity − leveraged dollars) to stock equity, where "stock equity" is the stock price multiplied by the number of shares bought and "leveraged dollars" is the amount borrowed in the margin account.
Here’s a quick rundown on all the ways borrowing money to buy stocks can come back to bite you. Skip to main content. News. 24/7 help. For premium support please call: 800-290 ...
Special memorandum account (SMA) [1] is a margin credit account used for calculating US Regulation T requirements on brokerage accounts. In addition to Initial Margin and Maintenance Margin requirements, the SMA ledger is used to lock in unrealized gains that augment the client's buying power. According to Regulation T, Section 220.5: [2]
The initial margin requirement for such margin stock purchases has been 50% [2] since 1974, [3] but Regulation T gives the Federal Reserve the authority to change this percentage. Raising the margin requirement ostensibly reduces risk in the financial system by reducing the potential leverage and total buying power of investors.
Conceptually, buying stocks on margin isn't much different from using leverage to buy a home, but in practical terms, the practice raises much more dire concerns, with reminders of past financial ...