I was looking at the broker's website since I just opened a margin account with them. On the requirements page, there is this:
Concentrated positions on margin will hold the following requirements:
Margin accounts with any concentrated single equity position comprising more than 50% of the long marginable market value will be charged 40% on the entire account.
1. What does this mean? Could someone give me an example with a hypothetical stock and a $50K bankroll with a pattern day trader designation?
While I'm thinking about this, I have some more questions.
2. How does a margin account tagged as PTD work? Suppose I have $50K in my account as cash. Can I buy $50K worth of shares, see the equity value go up to $60K in a few hours, and then sell it. On the same day, can I borrow against my unsettled funds of $60K? I know that I won't be able to to borrow the entire $60K(50K cash + 10K profit), but only 50K. Can I use the borrowed funds to buy and sell one more time?
3. If I can't borrow the same day in the previous question, the next day can I buy $60K worth of shares, see the value go up to $70K, and sell it?
4. How is the interest on margin charged if I don't use it for even one entire day? I hope to sell all my positions at the end of the day.
Sorry for some stupid questions, but I think it is very important to know what I'm dealing with before I would like to start trading.
Concentrated positions on margin will hold the following requirements:
Margin accounts with any concentrated single equity position comprising more than 50% of the long marginable market value will be charged 40% on the entire account.
1. What does this mean? Could someone give me an example with a hypothetical stock and a $50K bankroll with a pattern day trader designation?
While I'm thinking about this, I have some more questions.
2. How does a margin account tagged as PTD work? Suppose I have $50K in my account as cash. Can I buy $50K worth of shares, see the equity value go up to $60K in a few hours, and then sell it. On the same day, can I borrow against my unsettled funds of $60K? I know that I won't be able to to borrow the entire $60K(50K cash + 10K profit), but only 50K. Can I use the borrowed funds to buy and sell one more time?
3. If I can't borrow the same day in the previous question, the next day can I buy $60K worth of shares, see the value go up to $70K, and sell it?
4. How is the interest on margin charged if I don't use it for even one entire day? I hope to sell all my positions at the end of the day.
Sorry for some stupid questions, but I think it is very important to know what I'm dealing with before I would like to start trading.
Question about margin account and pattern day trader
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