My apologies if this is a repeat - I thought about posting this previously and now I can't remember if I already did
I'm new to making use of margin in a taxable account. I've learned a few things the last couple of days that I assume might be valuable to others. I figure that if I have an ah-hah, then I just assume there is somebody else in the thread that will benefit from that ah-hah.
For buying options, or backing sold options with margin, the total amount that can be used is the House or SMA call amount derived from Margin Equity PLUS cash. I've been assuming all this time that the cash was wrapped up into the original margin size calculation and it isn't (or at least it isn't at Fidelity).
Oops - that account has had a LOT more ability to buy or sell than I thought.
At least at Fidelity the relevant numbers I'm starting to learn better and better what they mean:
- Non margin buying power. THIS is the margin + cash value that is the full amount that can be used.
Under Details:
- Margin Equity. This is the value of the shares and other marginable securities, and is used to calculate margin (next 2 elements)
- House call. The margin available to be used, using the House (Fidelity) call method of calculation.
- Federal or SMA call. The margin available using that calculation method.
-- At least for me the Federal call method yields the smaller available margin, so that's what I have to manage to.
With as much cash as I have in the account, the non-margin buying power is more from the cash than from the marginable shares, so I routinely have negative House and Federal call balances (which is to say, margin calls). Or at least I will after this - I finally figured it out this week.
At the bottom of the Balances page is a Margin Call Summary link. In that link are "Margin Calls Issued" where I am currently told that I have both a house and a federal call. And its a non-trivial amount. However those amounts ARE trivial compared to the cash level, and that same page has a blurb:
Note: Based on Previous Day's balances, you have
sufficient Cash (core) that may cover one or all of the
outstanding calls on your account (also known as a
Phantom Call).
A phantom call being a situation where you've got more on margin than your margin will support, but the cash is already on deposit that covers the call.
Also on that page is a Calls Due Today which is currently $0 for me. Next to that is a details link in which the details of the margin calls that have been issued are listed out. So 10/27 I had both a Federal and House margin call issued that were due 11/2 and their amount. They are also flagged as MET (on the spot, when they were issued) again because the cash was already present to handle that call.
Definitely NOT-ADVICE. There's all kinds of ways one can get themselves into trouble using margin, and I'm totally a n00b at this, so like really for sure don't look to me as anything more than a n00b playing around with small positions to learn more. I'm taking it v e r y slowly and conservatively. My initial efforts at using margin this week just barely pushes me beyond what I would need for the cash to cover everything.
And I'm definitely making use of the Margin Calculator to see what some stock price changes will do to my margin situation (thanks
@BornToFly).