margin account

[Kamek]

does anybody in here use margin? i just opened up a margin account with ameritrade. i know the risk,etc. i just want to hear peoples personal opinions.

[54regcab]

What kind of rate are you paying on the margin account?

[Kamek]

i don't know the base rate right now (i just have to fax in my transaction form to fund my margin account). i'm sure someone here has ameritrade margin account.

[cinderella]

I short stocks so I'm required to have a margin account, but I never use it. I buy with money in my account and always leave a balance to cover my short if it goes south, but I'm stopped out before it gets ugly and really don't need the balance.

 

I don't feel comfortable buyings stocks with money I can't afford to lose. If I have to borrow it, I won't do it.

 

Just my philosophy, people have their own risk tolerance, margin is something I'm personally not ok with.

 

Using margin accounts to buy stock can be a great thing to leverage yourself on a good trade. And it can be disasterous on a bad one.

 

Here are Ameritrades rates:

Above $999,999 - 1.50%

$250,000 - $999,999 - 0.75%

$100,000 - $249,999 - 0.50%

$ 50,000 - $ 99,999 - 0.25%

$ 25,000 - $ 49,999 + 0.75%

$ 10,000 - $ 24,999 + 1.00%

Under $10,000 + 1.25%

 

Plus, if you have a margin call, and they do a forced sell, a $25 fee applies.

Edited June 23, 2006 by cinderella

[54regcab]

So you can borrow @ 1.25% APR or less to buy stocks and funds with?

 

If that's the case gears are turning on how to sell my funds, use the money to pay down my 4.5% mortgage, then use 1% money to "repurchase" the funds I sold to pay down the mortgage.

 

$84K mortgage - $14K (non-retirment mutual fund) = $70K new mortgage. Interest saved on the $14K is $630 per year. Borrow the $14K in a margin account @ 1% to rebuy the fund costs $140 per year. Sounds like an easy way to make $490 per year if there are no other "catches"

 

Edited to add.

Wait a minute some of those numbers are NEGATIVE in the $50K + catagory, I'm guessing these numbers are not APR's but instead are plus/minus some index?

Edited June 23, 2006 by 54regcab

[df21084]

The catch is that it's base - 1.5% through base + 1.25%. Base is probably somewhere around prime. I have a margin account at Fidelity, but I never use it. I don't borrow money for stock either.

[54regcab]

In that case NO WAY would I even consider borrowing on margin. Risk is sky high when borrowing at a rather high varible APR to buy stocks..

[cinderella]

The catch is that it's base - 1.5% through base + 1.25%. Base is probably somewhere around prime. I have a margin account at Fidelity, but I never use it. I don't borrow money for stock either.

 

 

The base at Ameritrade, I think is at 9.25% or so. Maybe 9.5%, I'm not exact on it, I never use it so I don't pay attention to it.

[cinderella]

Pasted from Ameritrade:

Dollar Range Above/Below Base Rate*

Above $999,999 - 1.50%

$250,000 - $999,999 - 0.75%

$100,000 - $249,999 - 0.50%

$ 50,000 - $ 99,999 - 0.25%

$ 25,000 - $ 49,999 + 0.75%

$ 10,000 - $ 24,999 + 1.00%

Under $10,000 + 1.25%

 

 

 

*As of May 12, 2006 the current base rate is 9.50%

 

When setting the base rate, TD AMERITRADE considers indicators including, but not limited to, commercially recognized interest rates, industry conditions relating to the extension of credit, the availability of liquidity in the marketplace, the competitive marketplace and general market conditions.

[54regcab]

9.5%, OUCH, You better be damn sure that stock is gonna hit !!

I'd never be that sure on any market investment, you need to make 9.5% just to break even !!

Edited June 23, 2006 by 54regcab

[cinderella]

9.5%, OUCH, You better be damn sure that stock is gonna hit !!

I'd never be that sure on any market investment, you need to make 9.5% just to break even !!

 

Yep.

 

I love gambling, and that is what I do at the the BJ tables in Vegas.

 

But risking money I'm borrowing on an uncertain investment with interest probably going into the 10% range, no way. I'd feel more secure doubling down on my 14 against a dealers face card of ten.

[Kamek]

why would anybody use margin on a bad stock?

[Athena53]

why would anybody use margin on a bad stock?

 

Because they don't know it's a bad stock? Or they think it's a bad stock and they short it and it turns out to be a good stock.

 

I didn't realize the interest rates were so awful. One friend of mine, in her late 40s, told me her husband the doctor was trading on margin and didn't tell her till half their retirement fund were gone. (It was 2001-2002.) That's one treason I dont' trade on margin.

[df21084]

Yep.

 

I love gambling, and that is what I do at the the BJ tables in Vegas.

 

That's right. At least you can get free beer/drinks and have a blast in Vegas. Somebody hit me.

[rachel3511]

For DT it works fine, for long term trading the percentage would kill you.

[Soccer Nut]

Using a margin account takes someone who is very experienced and someone who has extra money available. Although they offer that account to you, you can decline. When I was a stock broker and did a margin call we often gave the customer til the end of business to cover the call but on a day that the market was volatile, we did not and started to sell stock in the account if there was no money available in the money market. Unfortunately for the customer, tax implications and such were not taken into account. We had customers who at the end of the day, had no stocks, had awful tax consequences, and still owed us money. Those rates are high. Good luck to you.

[Kamek]

margin will be used for and only 1 day trades...never overnight. that was the reason i got it.