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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: DKR who wrote (3888)	8/22/1998 4:56:00 PM
From: kolo55	Read Replies (1) \| Respond to of 27311

I wasn't pointing at you. I included your post so readers could see the responses from other thread participants in the proper light. As Fred pointed out, Schwab has moved to a sliding scale equity calculation system where $3.50 in equity is always required for all shares under $10, no matter the price. This means the maximum loan that can be carried on a $5.00 stock is about $1.00 per share without incurring a maintenance call. But a lot of brokers allow stocks at $5.00 to be included in equity calculations, then require a position to go completely to cash below $4.00. So at $5.00, their account holders could be holding a loan as high as $3.25 a share without getting a maintenance call. Below $4.00 they can't carry any loan against the shares. This results in a whopping maintenance call. For our hypothetical case of an investor owning 2000 shares at $5 for $10,000 having borrowed $5000. At $4.00, they could still carry their loan of $5000 and have an equity position of over 35%. As soon as the stock falls below 4.00, these unfortunate souls get a margin call for $5000. Other brokers have a similar rule, except the full cash requirement hits at $3.50 per share. I have seen this kind of price action in other low priced speculative small caps. Some of the long posters on this thread are very aware of this effect. Paul