Cut off margin in Amigaguide

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Aug 6th, 2022
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How to cut off margin in Amigaguide

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in this video we are going to understand what triggers a margin call in a margin account so letamp;#39;s say you have a margin account with $25,000 in it and you want to buy $1,000 shares of ABC company at $50 uh per share by default you have a 50% uh margin requirement for these rules are set by the SEC the self-regulatory organization finra New York Stock Exchange and depending on what stock you buy the requirements are a little bit different and by default you have a 50% margin requirement uh when you are not under PDT the pattern day trading rule okay so in this table letamp;#39;s put the numbers 1,000 shares market value equal $50,000 how much did you you borrow from your broker 25k what is your Equity Equity equal market value minus the debit what you borrowed so itamp;#39;s 25k as well we have to calculate regulation T 50% you will understand why in a moment so regulation T in this case is 25k we donamp;#39;t need to calculate the special memorandum account and the minimum m

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Margin call Usually, a margin account goes low on funds due to a losing trade. Broker has the right to insist traders to deposit funds to maintain the minimum maintenance margin. If the trader is unable to do so, the broker can square off the order at the market price.
Cut Off Margin means the, percentage specified in the welcome letter as Cut off Margin i.e. the margin level at which ICICI Bank may, at its sole discretion, close out any outstanding or open positions of a Customer.
This percentage represents the amount of buying power you have to set aside when borrowing to trade. For example, if stock ABC has a 30% margin requirement you only have to pay 30% of the trade value, while the other 70% can be borrowed from Questrade.
Magnifies losses. Heres an illustration of how margin trading can magnify your losses. Lets say you buy $10,000 in stock in a margin account, half with borrowed money. If the value of the stock falls by 20% to $8,000, your account equity falls to $3,000 (remember, all the losses come out of your equity portion).
The biggest risk from buying on margin is that you can lose much more money than you initially invested. A decline of 50 percent or more from stocks that were half-funded using borrowed funds, equates to a loss of 100 percent or more in your portfolio, plus interest and commissions.
Understand How Margin Works For example, lets say the stock you bought for $50 falls to $15. If you fully paid for the stock, you would lose 70 percent of your money. However, if you bought on margin, you would lose more than 100 percent of your money.

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