Learn More About Margin

What is Margin?

Opening a margin account at Lime Brokerage LLC allows a trader or investor to borrow funds to trade securities in the secondary equity, options, and futures market. Margin accounts can be used to buy, sell, and short sell securities.

The amount of money that can be borrowed and the terms are governed by Federal Reserve, the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and Lime Brokerage LLC.

To be considered for a margin account, you must apply at account opening or complete the Margin Application and Agreement. The account must maintain at least $2,000 in equity through the deposit of cash or marginable securities.

Margin interest is charged based on the amount of money borrowed over your total equity. The interest rate is charged per day, annualized. The margin interest rates are subject to change without notice and can be found on our company website. Each account at Lime Brokerage LLC is self-directed and the margin loan is collateralized by the accounts equity.

Margin Account Types

Reg-T Margin Account: Governed by the Federal Reserve rules of Regulation-T, margin allows extension of credit to a trader when they don’t have enough cash to cover the purchase of a security. Under Regulation- T, you can borrow up to 50% of the total purchase price of a security. For example, if you buy $50,000 worth of stock and hold the position overnight, you must have $25,000 in available funds.

Portfolio Margin Account: SEC-approved portfolio margining rules allow margin requirements to reflect the actual risk of the entire portfolio in a specific brokerage account more accurately. This means that qualified customers may increase their leverage beyond the 4 to 1 intraday or 2 to 1 overnight margin available in a standard margin account.

*Portfolio margin requires a minimum deposit of $175,000 and must always maintain equity balance of $150,000 or else PM status will be removed. If PM status is removed, account would have to wait for 90 days before restoring PM status and meeting the PM minimum equity.

Pattern Day Trading

FINRA has instituted Pattern Day Trading rules that limit day trading in accounts under $25,000 in account equity.

If your account is Non- PDT your account is limited to 3 intraday trades in a 5-trading day rolling period. This is a rolling 5-day period and is NOT a week by week calculation. For example, if you log in to trade on Wed, the number of day trades will be calculated based on activity of the previous, Tues, Monday, Friday, and Thursday with the present day as the 5th day.

The number of day trades is based on opening transactions. For example, If you bought 100 shares, then bought another 100 shares one hour later and then one hour after that sold 200 shares, that is two day trades. If you bought 200 shares and then sold 100 shares one hour later and an hour after that sold another 100 shares, that is one-day trade.

Important Margin Definitions

Total Equity: The account value

Maintenance Requirement: The minimum amount of equity that the firm requires to support the various types of positions held in the account. This applies to long and short positions

Maintenance Excess: The total equity in the account minus the maintenance requirement to hold any overnight positions

Special Memorandum Account (SMA): The account where excess margin generated from a client’s margin account is deposited.

Overnight Buying Power: The max market value of a position you are permitted to hold overnight calculated as 2 times the maintenance excess or SMA, the lesser of the 2

Day Trade Buying Power: The max market value of a position you are permitted to hold intraday calculated as 4 times the maintenance excess, a $25,000 equity minimum threshold and account approval is required. Day trade buying power is based on the maintenance requirement of the security being traded and varies by product type and price per share

Portfolio Margin Excess: The total equity in the account minus the PM requirement to hold any overnight positions

Trade Date: The day in which a trade is placed

Settlement Date: The date by which an executed security trade must be settled. That is, the date by which a buyer must pay for the securities delivered by the seller

Mark to market: The fair value of each position in an account. Equity positions are marked to prior days’ closing price and option positions are marked to the midpoint of the bid/ask spread at prior days’ close. Your cost basis never changes, mark to market accounting allows a genuine representation of each position by calculating its true appreciation or depreciation day by day.

Adverse market movements: Refers only to losses on positions held coming into the day in which there is no trade activity. If there is trading in any symbol, losses will not be considered due to adverse markets movements.

Margin Calls

Reg-T Fed (Initial) Call: Incurred by insufficient overnight buying power (ONBP) to satisfy initial requirement on opening transactions held overnight. Under Federal Reserve Board Regulation-T, you can borrow up to 50 percent of the total purchase price of a stock for initial opening transactions.

Due Date: Reg T calls are due T+5

This call can be met by:

  1. Deposit of cash in the entire amount of the call
  2. Deposit of Margin eligible security(ies) valued at 1 1/3 the call amount
  3. Liquidation of Margin eligible securities valued at 2X the call amount

Please Note: Liquidation can be used to meet the call but can only be used twice during a rolling year to meet an Initial (Reg- T) call. On the 3rd instance your account will be in restriction, and limited to cash on hand for a period of 90 days.

Other Info: If the call is not met, positions will be liquidated to satisfy the initial call.

Maintenance Call: Incurred by having account equity below minimum maintenance requirements for open positions.

Due Date: Maintenance calls are due T+3

This call can be met by:

  1. Deposit of cash in the entire amount of the call
  2. Liquidation of margin eligible security(ies) valued at 4X amount of call
  3. Liquidation of non-margin eligible security(ies) equal to amount of call
  4. Market appreciation

Accounts with less than 20% margin equity are due in 1 business day. Calculations mentioned above for meeting calls are based on zero account depreciation and will have to be increased if account subsequently loses value.

Maintenance calls are generally subject to liquidation on T+4. However, the broker can use its discretion to liquidate securities any time after the issuance of the margin call to protect its financial interest, without notice to the customer.

Other Info: If the call is not met, positions will be liquidated to satisfy the maintenance call.

Day Trade Call: Incurred by exceeding your Day Trading Buying Power to satisfy initial requirement on Day Trading transaction

Due Date: Day trade calls are due T+5, buying power will not be restored until call is met

This call can be met by:

  1. Deposit of Cash in the entire amount of the call
  2. Deposit of margin eligible securities valued at (1.33 * the entire amount of the call)

Other Info: Money deposited to pay for this call must remain in the account for two days before being withdrawn. This type of call cannot be met by liquidation.

Equity Maintenance Call: Incurred by having Pattern Daytrade account equity fall below $25,000 minimum. You will be restricted to closing transactions only until account equity reaches $25,000.

Due date: At any time

This call can be met by:

  1. Deposit of cash in the entire amount of the call
  2. Deposit of security(ies) equal to the entire amount of the call
  3. Market appreciation

Other Info: Thirty days after the last day trade you can request your account be coded as a Non-Pattern Day Trading account as a one-time exception. As a NPDT, your account is limited to 3-day trades (based on opening transactions) in a 5-business day rolling period. If at any point after requesting this status you make more than 3-day trades in a rolling 5 business day period in the account, the account will automatically be re-coded as a Pattern Day Trader and subject to a minimum equity balance of $25,000.

Cash Call: Incurred by exceeding accounts cash available on an opening transaction

Due Date: Cash calls are due T+5

This call can be met by:

  1. Deposit of cash in the entire amount of the call
  2. Deposit of security(ies) equal to the entire amount of the call

Other Notes: Account will be limited to closing transactions if another violation occurs within 90 day restriction period

Portfolio Margin Maintenance Call: Incurred by having account equity below house maintenance requirement for open positions.

Due date: T+2

This call can be met by:

  1. Deposit of cash in the entire amount of the call
  2. Liquidation – Liquidation to meet these calls can only be done twice per year unless the negative excess amount is attributed to adverse market movements. On the third instance of liquidating to meet a portion or all a call not attributed to adverse market movements, the account will be restricted to cash on hand for a period of 90 days.
  3. Appreciation

Portfolio Margin Minimum Equity Call: Incurred by having Portfolio margin account equity fall below $150,000 minimum.

Due Date: T+1

  1. Deposit of cash in the entire amount of the call
  2. Deposit of security(ies) equal to the entire amount of the call
  3. Market appreciation

Other info: PM accounts must always maintain equity balance of $150,000 or else PM status will be removed. If PM status is removed, account would have to wait for 90 days before restoring PM status and meeting the PM minimum equity.

Portfolio Margin Leverage Call: Incurred by total market value of positions exceeding approved multiple.

Due Date: T+2

This call can be met by:

  1. Any combination of deposit, appreciation or liquidation which reduces the ratio of equity to market value below your approved multiple.

Other Info: Liquidation can only be used twice per 90-day period to meet this call. On the third instance of using liquidation to meet this call, the account will lose PM status.

Portfolio Margin Maintenance Regulatory Call: Incurred by Account equity being below regulatory maintenance requirement for open positions.

Due Date: T+1

This call can be met by:

  1. Deposit of cash in the entire amount of the call
  2. Liquidation – Liquidation to meet these calls can only be done twice per year unless the negative excess amount is attributed to adverse market movements. On the third instance of liquidating to meet a portion of, or all a call not attributed to adverse market movements, the account will be restricted to cash on hand for a period of 90 days.
  3. Appreciation

Other Info: Deposits or liquidation amounts to meet calls must be increased if the account subsequently loses value. Strikes caused by liquidations out of PM house or regulatory calls will remain on the account for a period of 90 days.

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