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.

Non-Tech : MB TRADING -- Ignore unavailable to you. Want to Upgrade?

To: William W. Dwyer, Jr. who wrote (1457)	10/13/1998 3:01:00 AM
From: Tanner	Read Replies (2) \| Respond to of 7382

Ok Dwyer, here it is in a nutshell: CALCULATING MAINTENANCE REQUIREMENTS ------------------------------------ On the day that you buy or sell a stock, you must have 50% of the market value of that stock as free cash. So if you buy $100,000 worth of stock, you must have at least $50,000 in your account. This is an INITIAL Purchase/Sale requirement ONLY. Thereafter you are required to only have 25% of the market value of the stock as free cash for Long Positions, or 30% for Short Positions. So, while you needed 50% of the stock's market value on the day you initially purchased/sold it, every day thereafter, you only need 25% or 30% of the market value to hold it in your account. CALCULATING YOUR BUYING POWER ----------------------------- Next, to calculate your Buying Power, you must remember the following formulas: EQUITY - MAINTENANCE REQUIREMENT = MAINTENANCE EXCESS MAINTENANCE EXCESS x 2 = BUYING POWER ***Remember, Maintenance Requirements are 25% of the Market Value for stocks that you hold overnight LONG, and 30% for SHORTS that you hold overnight. EXAMPLES -------- DAY 1: You have 50K in your account and no positions. Buying Power = $100,000 formula --->[EQUITY ($50,000) - MAINTENANCE ($0) x 2 = $100,000] You short 1000 MSFT at $100 (You have 50% of the market value [$50K] so you are fine). DAY 2: You have $50K and a $100K position. Buying Power = $40,000 formula --->[EQUITY ($50,000) - MAINTENANCE ($30,000) x 2 = $40,000] You short 400 MSFT at 100. DAY 3: You have $50K and a $140K position Buying Power = $16,000 formula --->[EQUITY ($50,000) - MAINTENANCE ($42,000) x 2 = $16,000] You short 160 MSFT at 100 DAY 4: You have 50K and a 156K position Buying Power = $6,400 formula --->[EQUITY ($50,000) - MAINTENANCE ($46,800) x 2 = $6,400] It will keep going like that until you own $166,666.66 worth of MSFT (30% of $166,666.66 = $50,000) . Going long works exactly the same way, except you just use 25% instead of 30% to calculate the Maintenance Requirement. I hope this helps...let me know if you still don't understand....