I have a general understanding of how margin works and have historically just focused on my excess liquidity and SMA balances to make sure I am in the black. But can someone help me understand a couple of things? In the example below I have ~$20k in short box spreads and about half of my assets in mutual funds and half in ETFs. 1. Why is my initial and maintenance margin the same? I know Mutual Funds have 100% margin for the first 30 days, but ETFs don't and most of my Mutual Funds were bought >30 days ago. 2. Why is my Reg T margin different than my initial or maintenance margin? Reg T margin doesn't seem to affect my excess liquidity or SMA balances. 3. Is it safe to just focus on excess liquidity and SMA balances to avoid a margin call? Thank you!
1) Initial margin is normally higher than maintenance margin: typically 50% ("Reg T margin") for initial and 30% for maintenance. But brokers are free to have stricter requirements for maintenance margin when they deem the securities too risky or illiquid or for whatever reason. In your case, looks like the broker set both margins at the same level. 2)Reg T margin is set by the Fed at 50%, but brokers can choose to set it lower. That's the case here 3) Excess liquidity is Equity minus margin requirement. So as long as it stays positive, there is no margin call. But that can change quickly...
%% THAT could work short term\ NO, unless you think extremes never happen. But on a margin ed mutual fund that tracks the SPY or DOW,may avoid a margin call; i assumed a move that does not move against you like Oct 1987. May or may not be a correct assumption, so far so good[1987DEC-2022\ yesterdays close] Even a better or best broker may not have to notify you before it sells a margined position.....
It's like getting a loan (ie. a credit) from your broker. Take a look at https://en.wikipedia.org/wiki/Margin_(finance)
%% THAT link right below you + Sprout's read is a good read; i did a speed read on it. Main difference between margin in stock market+ bank loan for a home; a home foreclosure is a multi-month process. In margin the broker does not have to notify you of a stock sale[see agreement in writing you have to sign]. In any case\ any deficiency balance\ you can be sued for ; same way with an auto repo...................................................................... Dont need margin to profit from bear moves\ inverse ETFs do that without margin risk.