Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Final Frontier - Online Remote Trading -- Ignore unavailable to you. Want to Upgrade?

To: Saita who wrote (3099)	2/20/1998 7:46:00 AM
From: steve goldman	Read Replies (1) \| Respond to of 12617

To keep it simple, without going into SMA and a bunch of other technical issues, Buying power = 2 x cash available. What does that mean, you might ask? Lets say you have a margin account....you plunk in 20,000. Regulation T is currently at 50% so you must pay 50% to own marginable securities. Thus free cash can actually buy 2x the amount of cash. 40, Thats cash and its available, you now have 40k buying power. Lets say you plunk in 20k in cash, and deliver in fully paid, 1000 shares of stock priced at 40, marginable. You now have 20k cash in account and 40,000 in stock. The stock, since marginable, has a loan value of 50% or 50%x40,000 = 20k. You could call the firm and ask for 20k and (assumingyou had spent the original 20kcash) they would margin the stock and give you 50% loanvalue x 40k (market value) or 20k Now this borrowed 20k in cash available and the 20k (ok, you didnt spend it) you originally deposited, gives you 40k in cash available. You took take this cash in the form of a check, go to vegas and play it there. BUT ifyou play it in CASINO WALL STREET, since you can buy marginable securities (that only require you pay 50% of their value) (inverse of the loan value calculation - that was finding out how muchyou could borrow against fully paid for stock, this is finding out how much, at minimum you have to pay to buy marginable stock), the 40K in cash available now gives you 80K in buying power, as long as you are buying marginable securities. Personally, I am quite glad I rarely have to deal with margin issues, and much rather enjoy my position as trader/broker. Hopefully I didnt confuse the hell out of you. Anyone see that great quote by Cramer... Something like "being a good trader is buying from a schmuck and selling to an idiot" . Regards, Steve@yamner.com yamner.com