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Biotech / Medical : VD's Model Portfolio & Discussion Thread

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To: Cytokine1 who wrote (4290)	3/10/1998 6:08:00 AM
From: Rocketman	Read Replies (1) of 9719

If I have $100 equity, and $190 portfolio, with a $90 margin, I have a 100/190 x 100 = 52.63% equity maintenance (equity over debt as a %) and I have buying power for $10 more stock. Using this $10 increases my margin to $100, my portfolio to $200 and my equity stays at $100, or 50% of the portfolio value. Now let's say after I buy this $10 in stock, the market crashes and my portfolio value drops to $150, well, I still owe $100 margin debt, but now only have $50 equity. I'm then at 50/150 x 100 = 33.3% maintenance and I'm in a margin call and have to get above 35% by selling a few shares. I can't use buying power again until I get above 50% again. The easy way to figure buying power (assuming all the portfolio is marginable stocks) is to subtract the margin debt from the equity value. If it is positive that's how much buying power you have and you are over 50%. If it is negative, then you are under 50%. When you have non-marginable stocks ($4 and under), then you need to subtract their value from the equity number before you use it in the % formula. Hope this helps you. Rman

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