Etrade Marginable Securities
Marginable Securities question?
Does anyone have Etrade or Ameritrade online stock exchange? Anyways i just had a few questions about margin securities. When i purchase a margin security i heard that i only need to cover only a certain amount to pay for the security. For example if i want to buy 100 shares of so and so then i only need to cover the 50 shares? Do i later on need to cover the rest? Please help me understand. Thanks.
You have to put up 50% of the cost as margin. If the stock drops, all of the decline reduces your margin. There is a ‘maintenance’ margin which I believe is 30%, so if you buy $10,000 worth, put up $ 5000 and the stock goes down to $6000, you only have $ 1000 margin and you get a “margin call.” You either put up additional margin or the broker sells your stock and you have $ 1000 left out of your $ 5000.
If the stock goes up, it increases your margin. So if the stock goes up to $ 20000, you now have $10000 margin.
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