Melinda,
Since no one answered your question, I will.. 50% margin means you
can borrow 50% more of the value of your stock holdings from your
your broker.. on marginable stocks.. which are usually over 5.00/share
in value and I believe 30 days from the IPO date...
Say your AMZN is worth 10,000.. You can borrow 5,000 more to buy stocks with, buy a boat, or travel.. whatever. Usually people use it
to buy stocks that they hope will go up.. So you can buy more than
you actually have money for.. If they go up, it's fine.. If they go
DOWN, trouble,, You have to add more money to your account to
maintain that $5,000. loan.. A MARGIN CALL, if you don't answer it with cash, they the Broker, will sell enough of your holdings, to
maintain that 50% loan relationship.. You become leveraged.. both ways.
The discussion of raising margin requirements to say 75% is essentially a margin call to people fully invested and fully on
margin.. Put up more money or they sell out some of the holdings
to get into a 75% equilibrium.. Causes overall prices to go down
because of the resultant selling pressure..
Different brokers have different margin requirements.. Mine is still 50%.
It does take the air out of a market if applied to a great extent.. I'm NOT sure it is going to happen because they, the brokerage community and exchanges, are NOT going to KICK over the TABLE in the back room of the SALOON, when they have such a PROFITABLE game going on..
Just my thoughts.... Coug
EDIT : IMO, NEVER answer a margin call, It means you were on the
wrong side of the trade |
