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Technology Stocks : Brocade Communications Systems,Inc. (Nasdaq-BRCD)
BRCD 12.730.0%Nov 20 4:00 PM EST
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To: Jack Hartmann who wrote (803)3/10/2001 1:59:46 AM
From: ELH1006  Read Replies (2) of 1583
 
Jack, I had an interesting discussion with my Schwab account team. I have two Schwab accounts, including one that I will margin to a reasonable level. Two days ago I bought 500 shares od BRCD on margin. I assumed, which turned out to be wrong, that I would be able to margin 50% of BRCD in my calculation. I thought I had plenty of cushion in my account until I got a maintenance telephone call this morning. BRCD, because of its extreme volatality, requires 80% equity, not 50% as I expected. I discussed this point with my Schwab person at length and ended up selling my 500 shares for a disturbing loss and shifting the sales proceeds to QLGC where I only am required to have 50% equity. This was a rather expensive and embarrassing lesson.

Later in the day, I received a phone call from my Schwab person who conveyed to me that there have been an increasingly number of margin calls due not only to price erosion, but due to the higher equity requirements from stocks like BRCD. This has snowballed the impact beyond past declines.

My only point here is that stocks like BRCD,and subject to these higher margin requirements, are being beaten up severely. We all know who goes first when faced with margin calls.

Eddie
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