For example, I tried to buy a stock with and for that particular company there are special margin requirements. When I click to see what this means, it gives margin % and concentration requirements. Does these only apply to people buying on margin or do they have anything to do with liquidity from a strictly long standpoint?
2007-03-27 14:23:08 · 2 answers · asked by Andrew D 1 in Business & Finance ➔ Investing
If you buy a stock, there is no margin if you pay for it now. If you borrow from the broker, you have a margin account and usually have to have at least 50% of the stock price you paid in your account. This means if they had to liquidate you would be able to pay for your stock and still have a bit of money left over, Because they sell the borrowed stock and have your 50% overage in the account.
If the stock price drops, you have to cover this drop by adding cash to your account. this is called a margin call, If you can't provide the cash top up, You are Liquidated. They sell the stock at a loss, and you have no choivce in it.
As well any stock bought on margin, you pay interest on the money advanced by the broker to buy the stock.
2007-03-27 15:33:40 · answer #1 · answered by bob shark 7 · 0⤊ 0⤋
That answer is only strictly true if an an account has no short positions and no margin balances. You receive margin credit (whether you use it or not) even if your account contains 100% of purchase funds. So there could still be no effect on the purchased stock per se, but an overall effect on the account margins.
Otherwise the supplied answer all holds.
2015-10-15 08:51:14 · answer #2 · answered by Biz W 2 · 0⤊ 0⤋