Allstocks.com's Bulletin Board: Margin or no?

This is topic Margin or no? in forum General Investing Topics at Allstocks.com's Bulletin Board.

To visit this topic, use this URL:
http://www.allstocks.com/stockmessageboard/ubb/ultimatebb.php/ubb/get_topic/f/9/t/000139.html

Posted by brandwilliams on :

My account will not have 25000 in it. Hate the 3 day wait with cash. Should I get a margin account, but read where it can get you in trouble to daytrade more than 4 times or something like that a week. Explain please

Thank you

Posted by glassman on :

if you have margin--your shares held in your acount are available to be used to short AGAINST YOU---
if you are not a day trader--margin is not needed or even wanted(IMO) because a margin call could affect your positions--this last market fluctuation is a good example of how that can happen--if you were using margin to invest and your LOAN from the brokerage came under fire by dropping prices--you could be forced to sell to convert your LOAN--in a MAJOR retracement this acounts for a significant portion of PANIC selling

if you are a daytrader--it doesn't matter----you don't worry about shorting against you.It's part of the game.
you are selling at the bell anyway--or on FRI

[This message has been edited by glassman (edited February 26, 2004).]

Posted by Bob Frey on :

I use margin as a day trader.

It allows me to play a larger position than my on hand cash would.

And the interest rates are so low these days it takes a real bad trade to get hurt.

Posted by brandwilliams on :

I dont plan on even using their money. I just want to be able to sell a stock and immediately take that money and invest elsewhere. As I use to be able to do through Ameritrade witha cash account. If i am not using there money a margin call cant affect me can it. So what do i do to get around the settlement date thing.

Brandon

Posted by Bob Frey on :

Write your congressman and complain about the rule.

It is unfair in my opinion to the lit. guy.

Posted by brandwilliams on :

Better yet a letter to O'Reily might get more accomplished..Possibly anyhow..

brandon williams

Posted by Bob Frey on :

Yea that might be the ticket.

Posted by gimmikk on :

quote:
Originally posted by Bob Frey:
I use margin as a day trader.
It allows me to play a larger position than my on hand cash would.

A quick Q regarding the margin accounts and day trading. I'm getting ready to place the needed funds into my trade account to have the 25K to become a daytrader .

I'm curious as to how they work this out if you only plan to trade using the cash in your account and not borrowing from the broker . Can you trade as much as you like in a days time after you buy ,.. then sell .. do they credit your account the profit immediately.. or do you still have to wait 3 days for the clear to take place before you buy and sell again. Or is it set up that you can trade as much as you wish as long as your account is in the green so to speak.

I'm sure the question has been asked before but if someone could clarify it into simple terms on what exactly your allowed to do using only the funds in your account and not borrowing from the broker.

Just a little confused on the rules

Posted by Bob Frey on :

Depends on your broker.

Posted by gimmikk on :

i use ameritrade.. does that help maybe..??

Posted by Bob Frey on :

I don't use them but you might try calling them and asking to be sure.

Posted by gimmikk on :

thansk Bob..

just read over the rules on their site a little bit more in detail and the SEC rules on margin.

OK from what I gather ... if you have lets say 25k in your account you have a buying power of 100k for the start of the day . Now you could purchase and sell as much as you desired in that days time , as long as you don't pass the 100k in any one purchase or combined purchases at the same time. But it allows you to buy and sell as much as needed and the funds from the profit are placed into your account as normal... but the buying power still would be at 100k . So I would assume that the funds would only be liquid after the normal 3 day waiting period , just that your account will reflect the gains made due to the margin account on the next day of trading to reflect the gains made from the prior day.. which in turn would increase your day trading buying power so to speak. But this would easily allow you to trade just on what your actual portfolio is worth without having the need to borrow from the broker i assume.

It's a little confusing to say the least . But the ability to buy and sell multiple times in a given day is all I really am concerned with . If what I wrote seems a little off please feel free to correct me. Don't want to post bad info. But will call them when I go to place the rest of the cash in my account. Hate to make an error after the fact

Posted by broker1107 on :

Day Trading Buying Power is fixed at the start of the trading day. It is calculated by multiplying the excess maintenance margin requirement by 4. For example, if you have $25,000 in cash, your day trading buying power for that day is $100,000. If you had let's say $30,000 worth of stock and $25,000 in cash, day trading buying power would be $25,000 x 4= $100,000 + Excess maintenance on the stock position x 4. (calculated as stock equity x 25%= maintenance. Stock equity-Maintenance=Excess equity) So, in this example, it would be $22,500 ($30,000-$7,500) x 4= $90,000 + $100,000 on the cash position for a total day trading buying power of $190,000.

The key to understanding day trading buying power is that it is fixed and closing transactions do not have any affect on it. It will only go back up the next trading day based on your account equity from the previous day. With that in mind, you can't go over the day trading buying power on aggregate opening positions. It sets an "absolute" limit on opening transactions. For example, in a cash account worth $25,000, if you made four opening trades worth $25,000 each, you have met the day trading buying power, regardless if you closed allof those positions and closed them before you opened the next trade. If you were to trade again, you would be hit with a day trading call.

With cash accounts, it's the same calculation and you can't use cash from a closing transaction on the same day. It will be made available the next trading day.

Seems more confusing than it needs to be. Hope this helps.

------------------
David C. Arena

[This message has been edited by Allstocks (edited March 16, 2004).]

Posted by gimmikk on :

Thanks Broker...

I think I got the basics of it . Confusing from outside the box.. pretty easy once explained in laymans terms.

The way I think I understand it is whatever u start with X's it times 4 . 25k = 100k . Then no more than 100k total worth of stocks purchased during the days plays period. I can't see me in the near future buying 100k worth of stocks in a days time , but I guess it's always nice to know you have that ability to do so if you are so inclined.

Now use the example above.. 25k = 100k . Do they charge you a daily intrest on the stocks you purchased past the original portfolio value.. the additional 75k they allow you. And if so.. is this fee reasonably small. I would assume it is. Not certain how they figure it out. Just thinking ahead .

thanks.

Posted by broker1107 on :

You will have to check with the brokerage firm, but there should not be any margin interest charged if you close the position that day. You should only be charged margin interest if you hold stocks on margin, thus creating a loan from the firm.

------------------
David C. Arena

Posted by usmcir0nfist on :

The margin interest rate is based on the nation prime margin rate, right now it is like 6.9% for less than 25k and ameritrade adds an additional 1% to that.

The rest depends on the brokerage firm.

Posted by gimmikk on :

once again thanks for the info.

pretty much covered all my questions .

I guess I'll get the exact details from Ameritrade before I put the rest of the cash into the account .

Just wanted to know a little better the workings before I stepped into it blind .

enjoy