Understanding your account situation

Transcription

1 Understanding your account situation This guide helps you to understand your account situation on Penson s intranet web site The first section describes what we think are the most useful pages of Penson s intranet web site ( The second section answers the most frequently asked questions about a brokerage account. Section 1: Your account situation in Penson intranet web site Page Equity 02 Buying Power 03 Trade Activity 04 Cash History 05 P&L Report 06 Section 2: Frequently Asked Questions 1. What is a marginable security? The structure of your brokerage account The Cash account The Margin account What is the cost of using the margin account? The Short account What is the cost of using the short account? What do we mean by leverage? Overnight and intraday buying powers for a mini account Overnight and intraday buying powers for a standard account How long can I maintain my overnight positions in a mini account? How long can I maintain my overnight positions in a standard account? How do I deal with a call on my account? 11 1

2 EQUITY This page shows the value of your account and the composition of your portfolio. This is where you track the evolution of your portfolio s value also called total equity. Here are 2 important pieces of information: 1. Portfolio s value: $110, Margin equity*: $84, *Margin equity is a key generator of intraday buying power The portfolio is composed of Balances and Positions: Balances Positions -13, , , , , , , , Total Equity = 124, , = $110, The Position Detail shows all the stocks and options held overnight in the account 2

3 BUYING POWER This page shows intraday buying power and overnight buying power for standard accounts. For Mini accounts simply divide the intraday buying power by 2 (see below). Intraday buying power: Standard accounts: $20, Mini accounts: $10, Overnight buying power: Standard accounts: $10, Mini accounts: see Section 2 9 What buying powers are available on the trading platform? Go to the Buying Power tab in the portfolio window to view your buying powers in real-time: - Intraday buying power for stocks: $10, This only applies to NYSE, AMEX, NASDAQ stocks > $3 More about buying power in paragraph Intraday buying power for options: $5,

4 TRADE ACTIVITY This page lists all the trades with a detailed breakdown of the commissions charged. Trade 1 Trade 2 Commissions have a fixed and a variable component: Trade 1: Bought 300 N through ARCA Fixed commission = $17.00 Variable commission* = $0.004 x 300 = $1.20 Trade 2: Sold 400 UNFI through ARCA Fixed commission = $17.00 Variable commission = $0.004 x TAF fee** + SEC fee** TAF fee = $ x 400 = $0.03 SEC fee = $11,000 x $24.54 / $1,000,000 = $0.27 * ECN fees can be checked on our website. **TAF fee and SEC fee only apply to stock sells. 4

5 CASH HISTORY This page lists all the money entries and withdrawals on your account for a given period of time. This list details the most important operations on your account: Type of operation Description Mini account : incoming transfer TRANSFER from Standard account : incoming transfer W/T FR CUST Mini account : outgoing transfer TRANSFER to Standard account : outgoing transfer Wire Transfer Platform Fees JUNE 2004 Platform Fees Platform refund MAY 2004 Platform Rebate Dividend payment (INTC) INTEL CORP INTC Credit Interest (0.1% for June).100% 06/01-06/30 $13285 Debit Interest (4.7% for June) 4.700% 06/01-06/30 $33898 All other operations (i.e. Short Acct. Mark To Market) are transfers between your sub accounts (Cash, Margin and Short accounts): they have no influence on the total value of the account and can thus be neglected. 5

6 PROFIT and LOSS This page gives you a profit and loss report of all trades done in a given period. You can either view this report online or have it sent to you by in PDF format. To do this simply press the button Report and fill in your address. Example: 2 orders have been executed on APOL (Buy 100, Sell 100). The amount purchased is $8, and the amount sold is $9, Note that commissions are included in these amounts. This trade results in a profit of $ Thus profits and losses for all closed positions in a given period can be easily checked. 6

7 FREQUENTLY ASKED QUESTIONS 1. What are marginable securities? Marginable securities include options and all NYSE, AMEX and NASDAQ stocks > $3. 2. The structure of your brokerage account Your brokerage account consists of 3 sub accounts: Cash account, Margin account, Short account. The value of an account (or sub account) is called equity. The equity is split between balances and positions (Equity = Balances + Positions). Below is a typical representation of an account: Represents cash credits (+) or debits (-) in each sub account Represents the market value of positions held in each sub account. Total balances = $124, Total positions = -$14, Total equity represents the value of the account. Total Equity = Total Balances + Total Position = $110, ($124, $14,774.00) Margin equity is used for the calculation of intraday buying power. Margin equity = total equity positions in cash account = $84, ( $110, $25,585.00) 7

8 3. The Cash account The cash account is where all OTCBB/Pink sheet stocks as well as any other stocks < $3 must be bought. This account requires that each purchase be paid 100%. Example: In the cash account, within the same day, you buy $10,000 of IBM, sell them for $10,200 and buy them later for $10,000. You will need to have $20,000 to pay for the two buys. IMPORTANT: When you sell an overnight position in your cash account, the proceeds will be only added to your buying power on settlement day, 3 days later. 4. The Margin Account This account allows you to: borrow funds leverage your trades day trade on marginable stocks sell uncovered (or naked) options/spreads Stocks held in the margin account are used as collateral against borrowed funds and contribute to generate intraday buying power. The margin account is the account by default on the trading platform. Day trading must take place in the margin account or in the short account, not in the cash account. 5. Are there extra costs for using the margin account? Using the margin account does not generate any extra cost as long as you do not borrow any money overnight. This is a big advantage for the day trader. Margin interests are calculated daily and charged once per month: Daily interest charge = (Borrowed Amount * Interest Rate)/360 If you borrow $10,000 at a rate of 7%, it will cost you 10,000*0.07/360 = $1.95 per day. 6. The Short Account This account is where short positions are held. Only stocks mentioned in the short selling list may be shorted. This list can be found on the Clients page of our web site. 7. Are there extra costs for using the short account? Keeping an overnight short position prevents you from earning interest on the money that is used to cover the margin required by the short position. A short position worth $10,000 requires a maintenance margin of $3,000. Hence the interest not earned is: 3,000 * 0.01/360 = $0.08 per day. 8

9 8. What do we mean by leverage? The leverage effect allows you to trade positions whose size exceeds the money you have in your account. Below are the leverage effects authorized on our accounts. Intraday buying power Overnight buying power Mini account 2 2 Standard account 4 2 NOTE: The leverage effect is not available on the cash account. 9. Overnight and intraday buying powers for a mini account There are 2 types of buying power, intraday and overnight. Buying powers are fixed for the day. They are based on the account s situation at the close of the previous trading day. The table below compares intraday and overnight buying powers for a mini account. We assume that positions are made of marginable stocks only (see Section 2 1). Situation Cash and no positions [Low risk] No cash and positions [Medium risk] Debt and positions [High risk] Balances (A) Positions (B) Equity (A+B = C) BP Overnight (2*C-B) BP Day mini (75%B + A)*2 10, ,000 20,000 20, ,000 10,000 10,000 15,000-10,000 20,000 10, ,000 One big advantage of this brokerage account is that you can day trade even though you are partly or fully invested. IMPORTANT: The trading platform is set by default on the intraday buying Power and intraday buying power is always more than overnight buying power. Therefore traders must be careful not to keep overnight positions which are larger than overnight buying power. Failure to respect this will result in a margin call (see Section 2 13). 10. Overnight and intraday buying powers for a standard account For the standard account please check the Buying Power page on Penson Intranet before trading. 11. How long can I maintain my overnight positions in a mini account? You can maintain overnight positions as long as your account has sufficient margin equity to cover margin requirement. What does this mean? A margin is calculated for each security held in the margin account and in the short account. This margin depends on the security s risk. Margin requirement is the sum of these margins. 9

10 These are the margin requirements for securities held in mini accounts Type of position Margin required (in %) Long stock > $3 35% Long stock $3-$5 50% Long stock < $3 100% Short stock > $3 The bigger between $5/stock and 30% and $250 Short stock < $3 The bigger between $2.5/stock and 100% and $250 Long option 100% Short option naked Credit option spread Debit option spread 100% of option premium + the bigger between : [20% of stock s value the span out of the money ] and 10% of stock s value Minimum : $250/contract The smaller between the strike difference and the margin for naked short option Debit Example Margin equity ($84,471.77) > margin requirement ($18,528.40), thus the positions can be maintained. First the applicable margin percentage is determined, and then the amount is calculated (note that a short position has a positive margin requirement). 10

11 12. How long can I maintain my overnight positions in a standard account? Standard accounts can refer to the Buying Power page on Penson intranet. As long as you do not get a maintenance call or a concentrated call you can maintain your overnight positions. Every evening the WHS support team looks up for margin calls and inform standard account holders by . Penson lets clients know about margin calls by posting a big margin call sign on the client s page and by providing a Margin Call Summary page: 13. How do I deal with a call on my account? Please refer to the FAQ on Margin Call Resolution on the clients page of our web site. 11