Stock Margin Questions from a Futures Trader

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Reggie Johnson
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Stock Margin Questions from a Futures Trader

Post by Reggie Johnson » Thu Jul 08, 2004 8:08 am

I noticed a discussion about margins in the Beta section that made me realize I have no idea how margins work for stock trading.

How do stock brokers account for your open positions?

Do they mark the positions to market each day like they do with futures?

If I have $100,000 and buy 1,000 shares or IBM stock at 100, do I have an extra $50,000 six months later if the price is at $150,000?

Is this money I can use or does it just sit there until I sell the position out? Can I use this $50,000 to buy more stock on margin?

Let's day I am on a 30% maintenance margin level. If I have $500,000 total equity and lose $340,000 on another bunch of trades does my $150,000 count as equity against the margin call giving me 32% so I don't get a margin call? Or does only the $100,000 cash I put into the trade count leaving me with $110,000 / $500,000 or 22% where I get a margin call or does the full $150,000 count leaving me with 32% and no margin call.

I know for futures trading the money in your account each day is there independent of your open positions.

Any brokers or back-office people know how this works?

-Reggie-

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