About This Chapter
Addressing Margin Issues - Chapter Summary
You'll begin this chapter by reviewing the different types of margin accounts, along with their requirements and characteristics. As you study margin account calculations, you'll dive deep into an understanding of initial margin account requirements and maintenance of such accounts. By the end of this chapter you will be able to:
- Calculate for short and long positions in margin accounts
- Explain the purpose of Regulation T and give an example
- Describe product-specific strategies for margin accounts
- Understand FINRA Rules 2264 and 4210
- List CBOE Rules pertaining to margin accounts
- Describe the characteristics and requirements of Special Memorandum Accounts
Spend some time reviewing the important terms that you'll find in bold-face lettering in each lesson. Our instructors have created these materials to be easy to follow so that your study time is efficient. When you use the self-assessments at the end of each lesson, you'll be able to track your preparedness for your exam.
1. Types of Margin Accounts: Requirements & Characteristics
In this lesson, we will take a tour through the world of margin accounts, exploring the types (portfolio and day trade), requirements, and the regulations governing them. We'll go over pattern-day traders and non patter-day traders as well.
2. Margin Account Calculations for Short & Long Positions
The lesson deals with long and short positions in margin trading. Learn how to calculate profit and loss on long and short positions and assess the price at which margin call is made.
3. Regulation T: Definition, Purpose & Example
One of the options for an investor buying securities through a broker-dealer is to set up a margin account and borrow money to pay for part of the securities. Margin accounts or using broker-dealer credit for purchases is regulated by Regulation T.
4. Understanding Initial Margin Requirements
This lesson deals with margin trading and the initial margin requirements. You'll learn about regulation T, long market value, short market value, debit balance, credit balance, excess equity, buying power of deposited securities, etc.
5. Understanding Margin Account Maintenance
This lesson deals with the maintenance position for margin accounts. You'll earn about initial margin, maintenance margin, margin call, liquidation, withdrawal of equity, etc.
6. Product-Specific Strategies for Margin Accounts
The lesson deals with the product-specific requirements and strategies for margin accounts. You'll learn about margin requirements for fixed income securities, equities, and mutual funds.
7. FINRA Rules 2264 & 4210: Margin Requirements & Disclosures
This lesson provides an overview of how margin accounts operate and then covers details of the required margins for these accounts. Examples are provided in order to put these rules into context and increase understanding.
8. CBOE Rules Related to Margin Accounts
Chapter 10 of the CBOE rule book deals with the rules related to margin accounts for options trading. Learn about margin requirements, prohibited trade activities, time rules related to margin requirements, and record retention.
9. Special Memorandum Accounts: Characteristics & Requirements
This lesson deals with the special memorandum account (SMA) and their characteristics and requirements. You'll learn about buying power, receipt of cash dividends and earned interest, margin call, liquidation of securities in the account, cash or securities withdrawals, etc.
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Other chapters within the Series 7 Exam: Study Guide & Practice course
- Advertising & Public Communication in the Securities Industry
- The New Issues Market
- New Issue Regulations in the Securities Industry
- Brokerage Account Types & Restrictions
- Retirement Plans & Tax-Advantaged Accounts
- Handling Customer Investment Information & Discretionary Accounts
- Obtaining Supervisory Approvals for Investment Accounts
- Analyzing Customer Investment Profiles
- Analyzing Customer Financial Statements
- Understanding Equity Securities
- Tax Treatment of Equity Securities Transactions
- Packaged Investment Products
- Variable Life Insurance & Annuities
- Real Estate Investment Trusts
- Direct Participation Programs
- Understanding Options in Investing
- Debt Securities
- Investing in Corporate Bonds
- Municipal Securities
- Municipal Securities Analysis & Regulations
- Registered Hedge Funds
- Asset-Backed Securities
- U.S. Government Agency Securities
- Investment Product Disclosures
- Customer Updates & Record Retention
- Customer Transactions & Confirmations
- Transactional Delivery Obligations & Settlement Procedures
- Investment Disputes & Customer Complaints