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Options: Margin Requirements

In an equity account, margin is the amount of equity contributed by a customer (in the form of cash or margin-eligible securities) as a percentage of the current market value of the stocks or option positions held in the customer's margin account.

The margin balance in an account is the amount a customer has borrowed, using cash or margin-eligible securities as collateral, in his or her margin account.

A margin call occurs when a brokerage firm demands that a customer deposit additional equity in order to bring margin deposits up to a required minimum level. If the customer fails to meet a margin call, the customer's positions may be liquidated.

If you open a margin account, MB Trading allows customers to trade stocks with 4-to-1 intraday margin and 2-to-1 overnight margin.

PLEASE NOTE:

  • Pattern daytrading (PDT)) accounts require a $25,000 minimum balance. Pattern daytrading status is assigned to margin accounts which execute more than three (3) equity or options daytrades within five (5) consecutive business days.
  • Non pattern daytrading (NPDT) account is a margin account with account balance below $25,000. The account is given day trading buying power of a 4:1 basis as long as the account DOES NOT exceed Three (3) day trades in a rolling five (5) business day period.
  • Cash accounts do not have a minimum balance requirement.
  • Regular cash accounts and margin accounts are never charged account inactivity or maintenance fees.


NEW! Margin Account Restriction (Effective June 27, 2008)

Short Selling Rule Changes and Possible Buy ins:

As of October 17, 2008, The Securities and Exchange Commission is adopting an antifraud rule under the Securities Exchange Act of 1934 to address fails to deliver securities that have been associated with "naked" short selling. The rule will further evidence the liability of short sellers, including broker-dealers acting for their own accounts, who deceive specified persons about their intention or ability to deliver securities in time for settlement (including persons that deceive their broker-dealer about their locate source or ownership of shares) and that fail to deliver securities by settlement date.

What this means to you our client: MB Trading and our clearing firm Apex Clearing Corporation may be required to buy in "any and all short positions held past settlement date: trade date plus 3 days."

Since many of our clients, in fact "short" securities it would not be possible in most situations to contact you to alert you of the short position being bought in. Please monitor any short positions closely by logging into the MBT Desktop software or via our website: www.mbtrading.com. Please also keep this potential buy-in, in mind when considering buying back the "short" stock on the day after settlement. If the clearing firm also buys in, you will be long the stock. Both trades will stand as good trades. For more information on the rule please visit here www.sec.gov/news/press/2008/2008-211.htm

Margin Call Grid

This easy to read grid gives a brief explanation of margin calls, deadlines, how to meet the call, and the result.

NASD Rule 2520

A document from the NASD describing the rule change relating to daytrading margin requirements.