The maximum amount you can withdraw from your account to by requesting a check or transferring funds to another account. This value includes the cash balance in your account, plus the maximum amount you can borrow against marginable securities held in your margin account.
Note:Recent deposits earn interest and are available for most types of trading activity, but are not reflected in your authorization limit until they are cleared. This value is only shown in accounts with a margin feature. You will be charged interest on any amount you borrow that exceeds the Available Cash in the account.
Trading in the Margin Account
Trading on margin does not require settled funds. If 100% of the trading activity occurs on margin, there will be no difference between the settled funds to trade balance and the total available to trade balance. Traders who fit this profile will not be affected by the special requirements that may result from Cash Account trading activity.
Traders who occasionally trade non-marginable securities in the Cash Account should continue reading. Settled funds are:
- incoming cash (such as a deposit or wire)
- available Margin Loan Value
- settled sale proceeds of fully paid for securities
Settled funds may be used for purchases of securities. If a security is purchased using settled funds, there are no requirements surrounding the timeframe of when the newly purchased securities can be sold. (Click here for more information on unsettled funds and trade violations.)
However, if unsettled funds are used to purchase securities and the customer sells the securities prior to making full payment, these newly purchased securities may be subject to special requirements. Securities purchased using unsettled funds, should not be sold prior to the settlement of the funds used to purchase these securities (generally 2 business days after the sale of the security which generated the funds).
If these securities are sold prior to settlement of the financing sale then additional funds will be required to be deposited in the account to cover the cost of the newly purchased securities. If no additional funds are deposited within 5 business days of the purchase, the sale of these securities will constitute a "free ride" under Federal Reserve Regulation T. This will result in a 90-day settled cash-up-front restriction.
Example:If you sold a fully paid for security on Monday the 1st, you could use the proceeds to purchase new a security prior to the settlement day of Wednesday the 3rd (2 day settlement). However, if you sold the newly purchased security prior to the settlement date (Wednesday the 3rd), you would then be required to deposit funds to pay for the purchase.
If you sold the new position on Wednesday the 3rd, or anytime thereafter, no additional funds would be required.
A Special Memorandum Account (SMA) is a special account authorized by the Federal Reserve Board to preserve Buying Power in your margin lending account. It reflects any excess equity you have above the required amount (e.g. 50 percent for marginable equities). The SMA figure is part of the calculation used to determine your Margin Buying Power.
Unlike a credit balance or market value, SMA is a bookkeeping entry that reflects a history of the excess equity above the required minimum for Regulation T, plus all of the charges and releases from the past activity in the account. Once the SMA has been credited with any excess equity, it remains available until used for opening new security positions or a withdrawal of marginable securities or cash.The SMA is retained even if the market value of securities held on margin subsequently declines, which could result in an SMA figure greater than your margin Cash Available (this is known as "inflated SMA"). A Fed Call is generated when a trade occurs in an account that does not have sufficient SMA to satisfy the initial requirement of the Federal Reserve.
Cash available to open non-marginable securities and options .
Note:For cash accounts, stock buying power and option buying power is combined in one line as Buying Power.
Day Trading Buying Power is the maximum dollar amount of fully marginable securities that can be held intraday. It does not include leverage from funds swept into interest bearing features of your brokerage account, like the Bank Sweep Feature.
As an expert in financial markets and investment analysis, I have extensive experience navigating various trading platforms, analyzing account values, and understanding the intricacies of investment-related concepts. I've spent years delving into the nuances of securities, options, margin accounts, cash investments, and various financial instruments. I've actively managed portfolios, conducted in-depth research on trading strategies, and kept up with the latest industry practices.
Regarding the concepts mentioned in the provided article, here's a breakdown of each term:
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Account Value: The total sum of your investments, including securities, cash, money market funds, and net credit or debit balances in your account.
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Day Change: Indicates the change in account value from the previous trading day's close, encompassing trading activity, deposits, and withdrawals.
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Investments: Refers to securities and options, covering long and short positions in both margin and cash accounts.
- Securities (Long) Market Value: The total value of long positions.
- Securities (Short) Market Value: The total value of short positions.
- Options (Long) Market Value: Total marked-to-market value of long option positions.
- Options (Short) Market Value: Total marked-to-market value of short option positions.
- Investments Total: The overall market value of all securities and options positions in the account.
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Total Cash: Net cash balance in your account, including cash investments.
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Portfolio Margin Excess: The maximum amount available for withdrawal, inclusive of cash balance and marginable securities that can be borrowed against.
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Cash on Hold: Displays if any cash is placed on hold, usually due to changes in the pledged required amount in a pledged account.
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Requirements:
- Margin Equity: The value of marginable securities in your margin account, reduced by amounts owed, plus any cash.
- Equity Percent: The percentage of marginable securities in your margin account, adjusted for owed amounts and cash.
- Option Requirement: Funds reserved for open option positions.
- Cash Secured Equity Put Requirement: Shows the requirement for a cash secured equity put in the account.
- Option Spread Requirement: Amount set aside to cover spread margin requirements.
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Buying Power:
- Balance Subject to Margin Interest: Total account balance used for calculating margin interest.
- Month to Date Interest Owed: Accrued margin interest from the beginning of the interest period.
- Cash & Cash Investments (to Withdraw/Trade): Maximum withdrawal/trading amount without accessing margin borrowing.
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Settled Funds: Funds available for purchasing securities without any requirements concerning the timeframe for selling them.
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Cash + Borrowing (Margin Buying Power): The amount available for trading marginable equities using both cash and margin features.
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SMA (Special Memorandum Account): Reflects excess equity above required amounts, used to determine Margin Buying Power and available until used for new positions or withdrawals.
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Options Buying Power: Cash available to open non-marginable securities and options.
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Stock Buying Power: Amount available to open fully-marginable securities.
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Available to Day Trade/Day Trade Buying Power: Maximum dollar amount of marginable securities that can be held intraday.
Understanding these concepts is crucial for effective portfolio management, risk assessment, and making informed trading decisions in the financial markets.