Maintaining a Margin Account
- In This Section
- How Margin Trading Works
- 7 Benefits of Margin Loans
- Primary Margin Risks
- 4 Tips for Managing Margin Risk
- How To Open a Margin Account
- Maintaining a Margin Account
- 3 Strategies for Using Margin
- Day Trade Buying Power
- Regulation T FAQ
- Concentrated Accounts
- Margin Calls
- Margin Requirements
- Margin Requirements for Leveraged ETFs
As collateral on your margin loan, Scottrade requires you to keep a certain amount of equity readily available in your account. This amount is called the maintenance requirement. For most stocks, Scottrade's maintenance requirement is 30%, which means you need to have 30% of the current market value of the security you purchased on margin readily available in your account.
It's important to realize that the market value of securities can change quickly and your minimum equity requirement (or the dollar amount of funds or equity you need to have available in your account) will change as a result. Let's take a look at how this works.
As you can see in the image above, a decline in the market value of your positions will result in a decrease in your account equity. When your account equity decreases, the gap between your account equity and the minimum equity requirement for your account narrows. In contrast, an increase in market value (as seen in the fourth example) results in an increase in equity and expands the gap between your current account equity and the minimum equity requirement.
Although Scottrade's house margin requirement is typically 30%, we have higher requirements for certain stocks based on the stock's current trading price. Read “Margin Requirements” to learn more.
What Happens When You Fall Below the Minimum Equity Requirement?
When your account falls below the minimum equity requirement, Scottrade will issue a maintenance call. A maintenance call is a notification informing you that you have an equity deficit in your account. To meet a maintenance call you may deposit cash, or deposit other acceptable equities (such as stocks or bonds) to bring your account back up to the minimum equity requirement.
Read “Margin Calls” to learn more.