We make this information available to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading
securities in a margin account.
It also refers to the amount of equity contributed by an investor as a percentage of the current market value of securities
held in a margin account.
To comply with regulations on margin investing, you must maintain a certain amount of
equity in your margin account at all times, depending on the securities held in the account.
Investing
money in a margin account means that you are borrowing money from your financial institution to invest in the capital markets.
So for instance stock brokers can make use of securities and
cash in margin accounts, for stock - lending and other purposes.
If there is sufficient margin
in the margin account where the stock has been sold, investor may carry on to immediately purchase other securities.
Due to the fact that buying stocks on margin can be a highly risky investment if the stock price decreases, all purchases must be
made in margin accounts.
A broker will only approve for a trader such an account if the broker is satisfied that there are adequate
funds in the margin account.
This is also the reason why settlement at maturity takes place at the final settlement price - all previous changes in price are already
reflected in your margin account.
The average investor will be better off investing for the long term in a cash account, rather than trading for the short -
term in a margin account.
The difference between the
ETF in a margin account and the 2x ETF is that the 2x ETF maintains constant leverage and the margin account does not.
Your buying power consists of your money available to trade in your account, plus the amount that can be borrowed against securities
held in your margin account.
Every time you perform a new trade, part of the account
balance in the margin account is put aside as the initial margin requirement of the trade.
Additionally, you're always required to maintain a minimum level of
equity in a margin account; usually about 30 % to 35 % for most stocks.
Invest in the same products as a Cash account, leverage borrowing opportunities
as in a Margin account, and hedge income opportunities using options.
The reason it's not automatic is that Questrade doesn't want to force you to convert
in margin accounts at the time of buying the stock.
As soon as the money
in the margin account starts going down and reaches the minimum margin level, the dreaded Margin Call is made to the trader by the broker.
If the equity
in a margin account falls below the maintenance margin, the broker will issue a margin call, which requires that the investor deposit more cash into the margin account to bring the level of funds up to the maintenance margin, or liquidate securities in order to fulfill the maintenance amount.
Any customer who executes four or more «day trades» within five business days, provided that the number of day trades represents more than 6 % of the customer's total trades
in the margin account for that same five business day period.
Margin Call is, therefore, the demand made by the broker to the trader to deposit additional cash or securities to his margin account so that the balance
in the margin account reaches back the minimum margin requirement.
When it come to the interest own on my margin, I already deposit a 149.50
$ in my margin account (my Quebec provincial tax cheque).