Margin account

[codemonkey]

Does anyone know what kind of requirements banks have for opening margin accounts - e.g., the income level and the kind of net worth they want to see?

my income is pretty decent, however my net worth is negative. and I want to open a margin account. any tips/advice/inside knowledge from someone who works in opening margin accounts? for guys who have tried getting margin accounts - successfully or unsuccessfully - please share your experiences.

thanks guys. much appreciated.

[controlyar]

Does anyone know what kind of requirements banks have for opening margin accounts - e.g., the income level and the kind of net worth they want to see?

my income is pretty decent, however my net worth is negative. and I want to open a margin account. any tips/advice/inside knowledge from someone who works in opening margin accounts? for guys who have tried getting margin accounts - successfully or unsuccessfully - please share your experiences.

thanks guys. much appreciated.

A negative net worth and a margin account...
Is this a joke?

The inexperience in these forums is ridiculous.
So without even having a decent portfolio established, you plan on establishing a margin account? Why don't you think about this for a second..

[codemonkey]

A negative net worth and a margin account...
Is this a joke?

The inexperience in these forums is ridiculous.
So without even having a decent portfolio established, you plan on establishing a margin account? Why don't you think about this for a second..

please, calm down. I have a negative net worth due to some temporary personal reasons.

I'm just trying to find out what kind of net worth they look for. is 2k good enough, or do you need 20k. do you need 5k or 50k. all I want to find out is what is enough.

so, if you have a constructive response, then please post it. otherwise don't be be condescending especially when it is quite likely that I'm probably a more sophisticated investor than you. I work with hedge funds on a daily basis and lets just say that I'm not looking to build a portfolio, I'm doing something that is an arbitrage strategy (or as close to arbitrage an individual investor can get to) and I want as much leverage as I can get for that. either way, I don't want to toot my own horn.

if you have a constructive response, kindly post it otherwise please don't bother with this thread. thanks.

[pitz]

Does anyone know what kind of requirements banks have for opening margin accounts - e.g., the income level and the kind of net worth they want to see?


When I was a student in 2000, and applied for a margin account, I was rejected on the basis of not having income > $10,000/year at a major Canadian bank-brokerage.

And yeah, thanks heavens I was rejected. Young, dumb, and naive. I would've lost every cent on the tech stocks.


my income is pretty decent, however my net worth is negative. and I want to open a margin account. any tips/advice/inside knowledge from someone who works in opening margin accounts? for guys who have tried getting margin accounts - successfully or unsuccessfully - please share your experiences.


Its collateralized borrowing. If you can't get a margin account, then just use an options account, and buy in-the-money calls. You achieve similar amounts of leverage, and the actual cost of borrowing is usually less than that of borrowing on margin to buy the underlying.

[codemonkey]

If you can't get a margin account, then just use an options account, and buy in-the-money calls.

at the brokerage where I have my account, you need a margin account before you'll be allowed to trade options. plus the stuff I want to buy doesn't have options listed for them.

thanks for your post.

[controlyar]

it is quite likely that I'm probably a more sophisticated investor than you.

Statement of the year! :lol:

Do not be offended.
I just find it amusing how you are even considering a margin account in your situation. No investment is guaranteed and the situation you are in does not merit a margin account. It does not matter how sophisticated you are. From a financial planning perspective, it is complete nonsense. The type of investments you are involved with should reflect your current situation. Too many individuals focus on the BIG GAINS and lose sight of basic fundamental investing principles.

Listen, you may be book smart...But back it up with practical experience and analysis and it is plain to see this is not suitable for you. If you want, go for it. Pitz' suggestion is valid.

I hope you are not investing in any kind of merger arbitrage. :lol:

Like Pitz said......and I am sure this applies to you (from your post).
Young, dumb, and naive.

[codemonkey]

Too many individuals focus on the BIG GAINS and lose sight of basic fundamental investing principles.

it isn't big gains. it is lots of sure, small gains. hence, the usage of the word arb. you know what arb is, right?

I hope you are not investing in any kind of merger arbitrage.

are you joking? there is plenty of other types of arbs apart from risk arb. but if you get all your investment expertise from Cramer's TV razzmatazz, then I probably shouldn't expect any better.

Like Pitz said......and I am sure this applies to you (from your post).
Young, dumb, and naive.

I could say that you're arrogant, pompous and needlessly full of yourself. and you need to turn to the internet to talk down to others (some of who might be a lot better informed about the markets than you) to make yourself feel better.

there are others on this forum too who're both well informed and nice about it - Hellfire for example. he has a lot of knowledge but you don't see him foaming at the mouth like you. he'll even answer a "stupid" question without giving a lecture.

either way, even if I go bankrupt, it's not your problem. I didn't ask you for a financial plan. like I said, if you can answer my question, fantastic. otherwise please spare this thread from your expert financial planning advice. thanks.

[monty613]

Most brokerages require you to have a margin account to trade options because uncovered positions require a % of the underlying interest in the case of an assignment.

As for requirements - I changed my cash account to a margin account a few years ago when I graduated. The brokerage looked at my credit score, annual income, net worth, and investment experience. I don't know what thresholds they use but I imagine if you have a low income/net worth combined with little investment experience they might decline your application.

[codemonkey]

As for requirements - I changed my cash account to a margin account a few years ago when I graduated. The brokerage looked at my credit score, annual income, net worth, and investment experience. I don't know what thresholds they use but I imagine if you have a low income/net worth combined with little investment experience they might decline your application.

thanks Monty.

[notanexpert]

Don't know what the requirements are, but I've had no problems opening a margin account, back in 1996, one year out of university, with income less than $30k and net worth less than $10k, I was depositing $6k to start. This was at BMO Investorline and things could have changed since then. I also applied for options trading about a year later and was accepted with no problems.
Making profitable arbs as an amateur investor is very hard. You are up against professionals that have access to way more capital and virtually zero trading costs.
Martin

[codemonkey]

Don't know what the requirements are, but I've had no problems opening a margin account, back in 1996, one year out of university, with income less than $30k and net worth less than $10k, I was depositing $6k to start.

thanks for the post... exactly the kind of info I was looking for.

[controlyar]

Here is some information:

Most banks do not have set "concrete" rules for margin accounts.
There is always an application in which you must answer some questions.
These questions help determine if you are eligible to qualify. Some of the questions involve knowledge of investments and income. Once the application is submitted, it is reviewed and a decision is made.

Keep in mind, the different securities you plan on having in your margin account will all have different margin requirements.

For example, typical stocks will be about 30%. Foregin equities will be higher.
Short selling usually has a 100% margin requirement.

Anyways, good luck. My previous post was to open your eyes and not in any way intended to insult you. Individuals tend to make decisions they later regret with regards to investing. I want you to be aware of the potential risks, and especially with a negative net worth. Margin accounts are not child's play.

[pitz]

Long positions in call options or put options typically do not require margin accounts.

Deep-in-the-money positions in call options or put options can provide long and short exposure at usually a lower implied interest expense than available through most brokers in Canada on margin.

[codemonkey]

Keep in mind, the different securities you plan on having in your margin account will all have different margin requirements.

For example, typical stocks will be about 30%. Foregin equities will be higher.
Short selling usually has a 100% margin requirement.

I'm well aware of these rules.

I want you to be aware of the potential risks, and especially with a negative net worth. Margin accounts are not child's play.

the only thing I've picked up here is that one shouldn't be modest when posting here. either way, I've had enough of defending myself to a stranger.

thanks for your concern and your posts.

[codemonkey]

Deep-in-the-money positions in call options or put options can provide long and short exposure at usually a lower implied interest expense than available through most brokers in Canada on margin.

if I could use options, I would have used deep itm LEAPs. but as I said, there are no options available on my area of interest.

either way, thanks for your help.

[dragan69]

Don't know about most discount brokerages, but the Waterhouse application will ask for basic bank info, as well as income and net worth estimates, but will not ask for confirmation of these amounts. They will look at the credit history of applicant though, and a poor credit score could lead to a decline (don't know what min score is required). I have heard of people being declined for option trading or short accounts based on the fact that they listed their investment experience as none or limited.

The margin provided to you will be based on the value/equity in your trading accounts as well as the stock you are looking at purchasing (I do not believe penny stocks are marginable).

Hope that helps