Margin Guidelines

Regulations dictate the amount of cash or equity that must be deposited and maintained as collateral against your margin loan. The amount you can borrow on margin toward the purchase of securities or for personal use is typically limited to 50% of the value of marginable securities in your account. However, the market price of the security must generally be above $3.00 per share and may not be a pink sheet or bulletin board stock.

Your buying power and cash available may fluctuate with the value of your securities from day to day. Margin is available, subject to approval, on most brokerage accounts with the exception of IRAs and Custodial accounts.

Equities

Minimum Equity Requirements to Use Margin
A combination of: Minimum:
Cash/Marginable Securities $2,000
Short Sales of Equities $2,000
Cash/Options/Stock $2,000
Margin/Options/Stock $2,000 in Marginable Securities or Cash

Note: Long option purchases have an initial and maintenance margin requirement of 100%. For spreads and uncovered options, please see Margin Minimum Equity Requirements below. To open an Investrade margin account, you must have at least $2,000 in cash or marginable securities in your account. Additional requirements may apply depending upon specific transactions and positions in your account.

Options

Minimum Equity Requirements to Trade Certain Option Strategies
A combination of cash and marginable securities: Minimum:
Spreads $2,000
Equity and Index Spreads $2,000
Spreads in an IRA $2,000, Cash Only
Uncovered Options:  
  Naked Puts $25,000
  Naked Calls $100,000
  Naked Index $500,000

Note: At this time, we do not allow margin borrowing on cash secured short puts, short calls, naked or spread positions.

 

Marginable Option Transactions
Option Type Initial Requirement Maintenance Requirement
Naked Puts 20% of current market value minus out-of-money amount or 10% of strike, whichever is greater times the multiplier times the quantity 20% of current market value minus out-of-money amount or 10% of strike, whichever is greater times the multiplier times the quantity plus the market value of the option
Naked Calls 20% of current market value minus out-of-money amount or 10% of current market value, whichever is greater times the multiplier times the quantity 20% of current market value minus out-of-money amount or 10% of current market value, whichever is greater times the multiplier times the quantity plus the market value of the option

Note:  Position limits are 2,000 contracts when going short and uncovered.  The long position limits are determined by the exchange. 2x Leveraged ETF naked options will be replaced with 40% or 20% and 3x Leveraged ETF naked options will be replaced with 60% and 30% in the above calculations. 

Option Expirations Policy

Expiring long and short option positions may be closed as early as 2:00 PM EST on the last trading day prior to expiration if you do not have the funds or buying power to buy or short the underlying security. Please note that you may still get assigned even if a short option is out of the money. Therefore, if there is risk to the account, short options may be closed out even if it is out of the money. The firm may close out your positions without prior notice. We may also elect not to exercise or close the resulting stock position in the aftermarket hours on Friday or pre-market hours on Monday.

Day Trade Buying Power Calculation

Money market funds and CIP are not applied towards calculating day trade buying power. Please contact us to have money market funds or CIP journaled to the margin type prior to the effective date if you would like to use all funds to calculate day trade buying power. Also, please note it is necessary to shut off sweeps to money market or CIP upon trade settlement in order to use all available funds to day trade without interruption. This request must be in writing with a signature.

Margin Account Maintenance and Initial Requirements

Stock Transactions
Stocks Initial Requirements Maintenance Requirement
$5.00 and above 50% 30%
$4.99 to $3.00 50% 50%
$2.99 and below 100% 100%

Short Stock Transactions
Stocks Initial Requirements Maintenance Requirement
Short stock sales below $3.00 per share Not allowed Greater of $2.50 a share or 100% of current market value
Short stock sales below $5.00 per share 50% of market value Greater of $2.50 a share or 100% of current market value
Short stock sales above $5.00 per share 50% of market value Greater of $5.00 a share or 30% of current market value

Leveraged Long ETF Transactions
Equities Initial Requirements Maintenance Requirement
Leveraged 2x    
   $5 and above minimum 50% minimum 50%
   $3.00-$4.99 minimum 75% mimim 75%
Leveraged 3x    
   $5 and above minimum 75% minimum 75%
   Below $5 100% 100%

Leveraged Short ETF Transactions
Equities Initial Requirements Maintenance Requirement
Leveraged 2x and above $5.00 Minimum 60% $5 a share or minimum of 60% of market value whichever is greater
Leveraged 3x and above $5.00 Mimimum 90% $5 a share or minimum of 90% of market value whichever is greater
Short sales below $5.00 Same as maintenance Greater of $2.50 a share 100% of current market value
Short sales below $3.00 No allowed Greater of $2.50 a share or 100% current market value
Other Securities
Securities Initial Requirements Maintenance Requirement
Unit Investment Trust 100% 25%
Municipal Bonds 25% 15%
Corp Non Convertible 25% 20%
Corp Convertible 50% 30%
High Yield Bonds (below $80) 50% 40%
Corp Reverse Convertible 50% 40%
CMOs 25% 20%
IO's, PO's and Inverse Floaters 40% 30%
US Government Issues based on years to maturity    
   0 to less than 1 year 4% 2%
   1 to less than 3 years 5% 3%
   3 to less than 5 years 6% 4%
   5 to less than 10 years 8% 5%
   10 to less than 20 years 9% 6%
   20 or more years 10% 7%

 

Concentrated positions on margin will hold the following requirements:

Margin accounts with any concentrated single equity position market value that exceeds the equity in the margin account will be charged 40% on the entire account.

Important Guidelines

European Style Option Spreads

To be considered a spread, the long and the short side must expire on the same day.  If the expiration dates are not the same the short side will be treated as naked. 

Covered LEAPS Requirements

Initial Requirement:  Proceeds from the sell of the LEAPS calls cannot be used to satisfy Reg-T requirements.  If an account purchases stock and sells short covered LEAPS calls, the account will be required to meet the 50% initial requirement on the long stock.

Maintenance Requirement: The short market value of the LEAPS will be deducted from the equity when figuring maintenance requirements for accounts holding these positions.  The value of the long stock will be valued at the price of the stock or the strike price of the option, whichever is greater.