What are the initial margins for stock positions in long and short margin accounts quizlet?

The best answer is A. The initial margin requirement for stock positions is set by Regulation T at 50% for both long and short stock positions.

What are initial and minimum maintenance margins for stock positions in a short margin account?

Initial margin for a short margin account is set by the Federal Reserve (FRB is the Federal Reserve Board) under Regulation T at 50%. Maintenance margin is set by FINRA at 30%. 24,000, The minimum maintenance margin requirement for short stock positions is 30% of the current market value = 30% of $80,000 = $24,000.

Do short positions require a higher initial margin deposit?

Types of Margin

Under Regulation T, the Federal Reserve Board requires all short sale accounts to have 150% of the value of the short sale at the time the sale is initiated. … The initial margin requirement is the proceeds of $10,000 (100%), along with an additional $5,000 (50%), for a total of $15,000.

How do you find initial margin?

Multiply the purchase price by the initial margin requirement percentage. Suppose you want to buy 500 shares of a stock at $40 per share. The purchase price comes to $20,000. If your margin requirement is 65 percent, multiply $20,000 by 65 percent to determine your initial margin requirement of $13,000.

What is initial margin?

Initial margin is the percentage of the purchase price of a security that must be covered by cash or collateral when using a margin account. The current initial margin requirement set by the Federal Reserve Board’s Regulation T is 50%.

What is initial margin and maintenance margin?

The initial margin is the amount a trader must deposit with their broker to initiate a trading position. The maintenance margin is the amount of money a trader must have on deposit in their account to continue holding their position, which is typically 50% to 75% of the initial margin.

What is regulatory initial margin?

To date, the firms subject to the regulatory obligation to exchange initial margin on uncleared over-the-counter (OTC) derivatives have been the heaviest users, predominantly on the sell-side.

Is initial margin per contract?

Initial Margin is the per-contract minimum amount required by the exchange that must be maintained in your account to hold a position overnight. This is sometimes referred to as overnight margin.

How many margins are needed for short selling?

The standard margin requirement is 150%, which means that you have to come up with 50% of the proceeds that would accrue to you from shorting a stock. 1 So if you want to short sell 100 shares of a stock trading at $10, you have to put in $500 as margin in your account.

What is initial margin example?

Initial Margin

If an investor wants to purchase 1,000 shares of a stock valued at $10 per share, for example, the total price would be $10,000. A margin account with a brokerage firm allows investors to acquire the 1,000 shares for as little as $5,000. The brokerage firm covers the remaining $5,000.

How often is initial margin calculated?

Risk glossary

In cleared trades, this period is set at anywhere from five to seven days – so initial margin on a large portfolio can become a very significant commitment. IM is posted when the trade is executed and then adjusted as necessary throughout the life of the trade.

Who monitors the collection of initial margin?

NSE Clearing collects initial margin up-front for all the open positions of a CM based on the margins computed by NSE Clearing-SPAN’.

Who sets the initial margin requirements on stocks?

The Security Exchange Act of 1934 gives the Board of Governors of the Federal Reserve the responsibility to set initial margin requirements, but individual brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by the exchange.

What is margin requirement for stocks?

Know the Margin Rules

Before trading on margin, FINRA, for example, requires you to deposit with your brokerage firm a minimum of $2,000 or 100 percent of the purchase price, whichever is less. This is known as the “minimum margin.” Some firms may require you to deposit more than $2,000.

How do you calculate initial and maintenance margin?

The general formula is: ​Margin Call Price = Initial Purchase Price * (1 – Initial Margin percentage) / (1 – Maintenance Margin percentage)​. In the provided maintenance margin example, the initial margin is ​50 percent​ (the federal minimum) and the maintenance margin is ​25 percent​ (the FINRA regulatory minimum).

What is initial margin collateral?

Initial margin (IM) is collateral collected and/or posted to reduce future exposure to a given counterparty as a result of non-cleared derivative activity. Whilst there is a recognised process within exchange traded and cleared derivatives, this is largely a new process for non-centrally cleared OTC derivatives.

What is the minimum margin requirement?

Understanding Minimum Margin

The minimum margin, which states that a broker can’t extend any credit to accounts with less than $2,000 in cash (or securities) is the first requirement. Second, an initial margin of 50% is required for a trade to be entered.

What is initial margin futures?

Initial margin is the amount required by the exchange to initiate a futures position. While the exchange sets the margin amount, your broker may be required to collect additional funds for deposit. Maintenance margin is the minimum amount that must be maintained at any given time in your account.

How does initial margin and variation margin work?

Initial Margin is the minimum balance you need to have in your account to open a position. Variation Margin is the unrealised profit (or loss) on open positions or transactions.

What is ISDA initial margin?

International Swaps and Derivatives Association

This table provides a summary of the IM documentation ISDA has prepared to allow parties to establish initial margin arrangements meeting regulatory requirements for non-cleared derivatives. They are all forms of bilateral document between the two trading counterparties.

What is the difference between margin trading and futures trading?

Margin trading involves borrowing assets from a lender to trade more than you normally could. … Futures involve an agreement to transact an asset on a specific date at a specific price and allows traders to bet on what they think the market will do in the future.

Why margin is needed for futures trading?

Margin tells traders how much capital may be needed to enter a position, and how much is needed to keep it open.