# Examples  - How to Calculate Margin on Reg T Margin Accounts

### Compare Rates

 Introduction to Margin Securities Margin Examples Real-Time Monitoring Portfolio Margin Margin Requirements

## Example: Securities Margin Calculations

### How do changes in my stock's price impact my margin account?

The following table shows an example of a typical sequence of trading events involving securities and how they would affect a Regulation T (Reg T) Margin Account.

Day 1: Deposit \$10,000.00 Cash in Margin Account.
After the deposit, account values look like this:
Cash = \$10,000.00
Securities Market Value = \$0.00 No positions held
Equity with Loan Value (ELV) = \$10,000.00 Total cash value + stock value + bond value + fund value + European & Asian options value
PT Initial Margin = \$0.00 IM = 25% * Stock Value
Maintenance Margin (MM) = \$0.00 MM = 25% * Stock Value
Available Funds = \$10,000.00 ELV - IM
Excess Liquidity \$10,000.00 ELV - MM

Day 1: End of Day SMA Calculation
Reg T Margin = \$0.00 Reg T Margin = 50% * Stock Value
SMA = \$10,000.00 (Prior Day SMA +/- Change in Day's Cash
+/- Today's Trades Reg T Initial Margin)
or
(Equity with Loan Value - Reg T Margin)
whichever is greater
SMA >= 0 SMA Requirement Satisfied, NO liquidation

 Day 2: Customer BUYS 500 shares of XYZ stock at \$40.00/share. Total Amount = \$20,000.00. After the trade, account values look like this: Cash = (\$10,000.00) Securities Market Value = \$20,000.00 Equity with Loan Value = \$10,000.00 PT Initial Margin = \$5,000.00 IM = 25% * Stock Value Maintenance Margin = \$5,000.00 MM = 25% * Stock Value Available Funds = \$5,000.00 ELV - IM       Available Funds were >=0 at the time of the trade, so the trade was submitted. Excess Liquidity \$5,000.00 ELV - MM

Day 2: End of Day SMA Calculation
Reg T Margin = \$10,000.00 Reg T Margin = 50% * Stock Value
SMA = \$0.00 (\$10,000.00 – \$0.00 – \$10,000.00)
or
(\$10,000.00 – \$10,000.00)
Whichever is greater
SMA > = 0   SMA Requirement Satisfied, NO liquidation

Day 3: First, the price of XYZ rises to 45.00/share. Account values now look like this:
Cash = (\$10,000.00)
Securities Market Value = \$22,500.00
Equity with Loan Value = \$12,500.00
PT Initial Margin = \$5,625.00 IM = 25% * Stock Value
Maintenance Margin = \$5,625.00 MM = 25% * Stock Value
Available Funds = \$6,875.00 ELV - IM
Excess Liquidity \$6,875.00 ELV - MM
Excess Liquidity >= 0, so NO LIQUIDATION occurs.

Day 3: Then the price of XYZ falls to \$35.00/share. Account values now look like this:
Cash = (\$10,000.00)
Securities Market Value = \$17,500.00
Equity with Loan Value = \$7,500.00
PT Initial Margin = \$4,375.00 IM = 25% * Stock Value
Maintenance Margin = \$4,375.00 MM = 25% * Stock Value
Available Funds = \$3,125.00 ELV - IM
Excess Liquidity \$3,125.00 ELV - MM

Day 3: End of Day SMA Calculation
Reg T Margin = \$8,750.00 Reg T Margin = 50% * Stock Value
SMA = \$0.00 (\$0.00 +/– \$0.00 + \$0.00)
or
(\$7,500.00 – \$8,750.00)
Whichever is greater
SMA > = 0  SMA Requirement Satisfied, NO liquidation

Day 4: Customer SELLS 500 shares of XYZ at \$45.00/share. Total Amount = \$22,500.00. After the trade, account values look like this:
Cash = \$12,500.00
Securities Market Value = \$0.00 Positions no longer held.
Equity with Loan Value = \$12,500.00
PT Initial Margin = \$0.00 IM = 25% * Stock Value
Maintenance Margin = \$0.00 MM = 25% * Stock Value
Available Funds = \$12,500.00 ELV - IM
Excess Liquidity \$12,500.00 ELV - MM

Day 4: End of Day SMA Calculation
Reg T Margin = \$0.00 Reg T Margin = 50% * Stock Value
SMA = \$12,500.00 (\$0.00 +/– \$0.00 + \$11,250.00)
or
(\$12,500.00 – \$0.00)
Whichever is greater
SMA > = 0  SMA Requirement Satisfied, NO liquidation

Day 5: Customer attempts to BUY 500 shares of ABC stock at \$101.00/share. Total Amount = \$50,500.00. Account values at the time of the attempted trade would look like this:
Cash = \$12,500.00
Securities Market Value = \$0.00
Equity with Loan Value = \$12,500.00
PT Initial Margin = \$12,625.00 IM = 25% * Stock Value
Maintenance Margin = \$12,625.00 MM = 25% * Stock Value
Available Funds = (\$125.00) ELV-  IM
Excess Liquidity (\$125.00) ELV - MM
Available Funds < = 0, so the trade is Rejected.

Day 5: Later on Day 5, the customer buys some stock.
Customer BUYS 300 shares of ABC stock at \$100.00/share. Total Amount = \$30,000.00. After the trade, account values look like this:
Cash = (\$17,500.00)
Securities Market Value = \$30,000.00
Equity with Loan Value = \$12,500.00
PT Initial Margin = \$7,500.00 IM = 25% * Stock Value
Maintenance Margin = \$7,500.00 MM = 25% * Stock Value
Available Funds = \$5,000.00 ELV - IM
Excess Liquidity \$5,000.00 ELV - MM

Day 5: End of Day SMA Calculation
Reg T Margin = \$15,000.00 Reg T Margin = 50% * Stock Value
SMA = -\$2,500.00 (\$12,500 +/– \$0.00 – \$15,000.00)
or
(\$12,500.00 – \$15,000.00)
Whichever is greater
SMA = (\$2,500.00) which is < 0 Shares are Liquidated.

Day 5: Consider an alternate Day 5 scenario in which the price of ABC stock drops.
Price of ABC stock drops to \$75.00/share. Account values would now look like this:
Cash = (\$17,500.00)
Securities Market Value = \$22,500.00
Equity with Loan Value = \$5,000.00
PT Initial Margin = \$5,625.00 IM = 25% * Stock Value
Maintenance Margin = \$5,625.00 MM = 25% * Stock Value
Available Funds = (\$625.00) ELV - IM
Excess Liquidity (\$625.00) ELV - MM
Excess Liquidity < 0, so shares will be Liquidated.

1. The example uses Initial and Maintenance Margins of 25%. These percentages are used for illustrative purposes only and do not necessarily reflect current Interactive Brokers margin rates.
2. Using a margin requirement of 25%, the account would become subject to liquidation at a price of (Cash Borrowed / # of Shares) / (1 – margin rate). Using the values in the above example, the account would become subject to liquidation when the price falls to (10,000 / 2,000) / (1 - .25), or \$6.6667. ## Example: How to Determine the Last Stock Price Before We Begin to Liquidate Positions

### What is the last stock price of my shares before you begin to sell out my position?

For example, suppose a customer buys 2,000 shares of ABC stock at \$10.00/share on margin. The loan amount, in this case, is \$10,000.00, so the calculations would be: (1)

1. Customer deposits \$10,000 in Reg T Margin account.
Cash = \$10,000.00
Securities Market Value = \$0.00
Equity with Loan Value = \$10,000.00
Maintenance Margin = \$0.00 MM = 25% * Stock Value
Excess Liquidity \$10,000.00 ELV - MM

2. Customer buys \$20,000.00 of ABC stock (2,000 shares at \$10.00/share)
Cash = (\$10,000.00)
Securities Market Value = \$20,000.00
Equity with Loan Value = \$10,000.00
Maintenance Margin = \$5,000.00 MM = 25% * Stock Value
Excess Liquidity \$5,000.00 ELV - MM

3. The price of ABC begins to drop.
Determine the last stock price of ABC before we begin to liquidate the position:
Cash = (\$10,000.00)
Securities Market Value = \$13,333.33
Equity with Loan Value = \$3,333.33
Maintenance Margin = \$3,333.33 MM = 25% * Stock Value
Excess Liquidity = \$0.00 ELV - MM
Price = (\$10,000 / 2,000) / (.75) = \$6.6667(2)

1. The example uses Initial and Maintenance Margins of 25%. These percentages are used for illustrative purposes only and do not necessarily reflect current Interactive Brokers margin rates.
2. Using a margin requirement of 25%, the account would become subject to liquidation at a price of (Cash Borrowed / # of Shares) / (1 – margin rate). Using the values in the above example, the account would become subject to liquidation when the price falls to (10,000 / 2,000) / (1 - .25), or \$6.6667.

## Example:  How Much Stock Do We Liquidate?

In the following example, a customer buys stock, but then the price of the stock drops enough to bring the Excess Liquidity balance below zero, prompting liquidation.

1. Customer deposits \$10,000 in Reg T Margin account.
Cash =  \$10,000.00
Securities Market Value =  \$0.00
Equity with Loan Value (ELV) =  \$10,000.00
Maintenance Margin (MM) =  \$0.00 MM = 25% * Stock Value
Excess Liquidity  \$10,000.00 ELV - MM

2. Customer buys \$20,000.00 of ABC stock (2,000 shares at \$10.00/share)
Cash =  (\$10,000.00)
Securities Market Value =  \$20,000.00
Equity with Loan Value =  \$10,000.00
Maintenance Margin =  \$5,000.00 MM = 25% * Stock Value
Excess Liquidity  \$5,000.00 ELV - MM

3. The price of ABC drops to \$6.00/share
Cash =  (\$10,000.00)
Securities Market Value =  \$12,000.00
Equity with Loan Value =  \$2,000.00
Maintenance Margin =  \$3,000.00 MM = 25% * Stock Value
Excess Liquidity  -\$1,000.00 ELV - MM
Excess Liquidity is now < 0, so positions will be liquidated to bring Excess Liquidity back to at least zero.

4. Determine the liquidation amount using the calculation listed above:
Liquidation Amount  = \$1,000.00 * 4
= \$4,000.00

5. After liquidation, the customer's account balances look like this:
Cash =  (\$6,000.00) Original \$10,000.00 loan – Liquidation Amount
Securities Market Value =  \$8,000.00 \$12,000.00 Market Value – Liquidation Amount
Equity with Loan Value =  \$2,000.00
Maintenance Margin =  \$2,000.00 MM = 25% * Stock Value
Excess Liquidity  \$0.00 ELV - MM

Please note that this ONLY brings the Excess Liquidity balance back to zero. Depositing more than this amount will provide the ability to open additional positions and/or a cushion to prevent further liquidation.

1. The example uses Initial and Maintenance Margins of 25%. These percentages are used for illustrative purposes only and do not necessarily reflect current Interactive Brokers margin rates.
2. Using a margin requirement of 25%, the account would become subject to liquidation at a price of (Cash Borrowed / # of Shares) / (1 – margin rate). Using the values in the above example, the account would become subject to liquidation when the price falls to (10,000 / 2,000) / (1 - .25), or \$6.6667. ### s5box

Roth IRA

SEP IRA

SIMPLE IRA

Qualified Plans

Rollover IRAs

Find out how Place Trade can help you get the most out of your college planning by visiting some of the links below:

529 College Savings Plans

UGMA/UTMA Accounts