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Notice Regarding Financial Capacity: Less than 5% Above Current Margin Requirement

 


 

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Why did I received a notice says that the financial capacity in my account is less than 5% above the current margin requirement when my stock positions are fully-paid for?

 
 

Overview: 

 

PT will issue a warning message to any margin account approaching a maintenance margin deficiency (and therefore potential forced liquidation of positions).  This message is generated when the Equity With Loan Value (ELV for a stock account = Cash + Stock + Bond + Mutual Fund + Non-US Options) is less than or equal to the Maintenance Margin Requirement * 105%. 

 

The warning message reads as follows: 

ALERT: the financial capacity in this account is less than 5% above the current margin requirement.  To avoid a possible liquidation, please monitor the account to ensure that there is positive excess liquidity.

 

An account which hold stock positions that are fully-paid (i.e. no cash debit) remains susceptible to liquidation if the account falls into deficit and the loan value of the stock is insufficient to cover the debit.  This is often the case, for example, when a margin account holds positions subject to 100% margin and a cash balance of $0. 

In the event the account is charged a commission or assessed a fee (by our clearing firm), such as monthly minimum activity or market data subscription, a negative cash balance would result and PT would not be able to extend loan value against these securities to support the debit balance. The account would therefore be subject to a liquidation in an amount sufficient to cover any cash deficit.

Accordingly, the recipient of this warning message may wish to maintain a cash balance in an amount sufficient to cover any potential charges to the account and to avoid a forced liquidation.

 
     
 

Why doesn't Place Trade do margin like some other firms?

How does Place Trade offer such low margin rates?  In order to consistently offer some of the lowest rates in the country we do some things a little differently than other firms.  We offer our clients the choice of both Reg T Margin and Portfolio Margin accounts as well as a real-time margin system and a Risk Navigator trading tool to help manage risk and protect our clients from further loss.  We don't make margin calls and we don't send mail grams or extensions of time to bring in funds.  Please be sure to monitor your account and never play it to close to the edge because the system will automatically liquidate positions to bring your account into margin compliance and may sell in 100 share blocks even if you are only short a few dollars worth.

Before you open a margin account it is important that you understand the risks of trading on margin, the way that the type of margin account you choose works and the minimum requirements on the specific securities that you are trading in your account.

 

 

Get the scoop on Margin:

 

Introduction to Margin Margin Rates Compare Margin Rates Margin Rate Tiers How to Calculate Margin Risk Management & Control 
Portfolio Margin Margin Requirements Margin Disclosure Pattern Day Trading Account Types Available  Details for Specific Securities

 

For more information please call 1-800-50-PLACE or 1-919-719-7200

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