Margin Trading Account¹

Long Stock

Short Stock

Purchase 1,000 shares of a stock with margin rate of 50% at $50. The margin requirement would be:

1,000 share x $50 x 50% margin rate = $25,000

This amount must be in the account before a purchase order is placed. Since 50% is the margin requirement, TD Direct Investing is lending the account holder 50% of the trade value.

Maximum loan value is -1,000 shares x $50 x 50% = $25,000

Short sell 500 shares of a 30% marginable stock priced at $10.00. The margin requirement to accept the trade is calculated the same as if you were purchasing the stock: 500 shares x $10.00 x 30% = $1,500.

The total margin requirement to hold the position includes 100% of the proceeds of the short sell and is calculated as follows:

500 share x 10.00 x 130% = $6,500.

Scenario one

The market value of the stock increases to $60.

The maximum loan value is now: 1,000 shares x $60 x 50% = $30,000

Since the loan balance is $25,000 the account now has available margin of $5,000 which gives the account holder additional purchasing power.

Scenario one

The market value of the stock increases to $20.

The total margin requirement of the short position is:

The account would need a deposit of cash or margin-eligible securities the same day or as otherwise directed by TD Direct Investing.

Scenario two

The market value of the stock decreases to $40

The maximum loan value is now:

1,000 shares x $40 x 50% = $20,000

Since the loan balance is $25,000 the account now has a margin requirement of $5,000 which must be immediately resolved.

The account requires a deposit of cash or margin-eligible securities by close of business that same day.

Maintenance: For every dollar the stock decreases, in this example the client would have to put up an additional $0.50/share in margin.

Scenario Two

The market value of the stock decreases to $5.

The total margin requirement of the short position is:

This available margin is available for additional trading.

Maintenance: For every dollar the stock increases, in this example, the client would have to put up an additional $1.30/share in margin.

Long Stock

Short Stock

Purchase 1,000 shares of a stock at $50 with margin rate of 30%. The margin requirement would be:

1,000 shares x $50 x 30% margin rate = $15,000

This is the minimum required amount + margin that must be in the account before a buy order can be entered.

Since 30% is the margin rate, TD Direct Investing is lending the account holder 70% of the trade value.

Maximum loan value is 1,000 shares x $50 x 70% = $35,000

Short sell 500 shares of a 50% marginable stock priced at $10.00. The margin requirement is 150%. Note: 100% of the margin requirement is generated from the sale of the security. Therefore, the additional initial margin requirement is 50%, the same amount required in order to accept the trade if you were purchasing the stock.

500 shares x $10.00 x 50% = $2,500

The total margin requirement to hold the position, including the 100% of the proceeds from the short sell, is calculated as follows:

500 shares x 10.00 x 150% = $7,500

(Note: TD Direct Investing does not pay interest on the cash amount that a client receives as a result of a short sale.)