Can the entire value of stock be margined?

[amdforever2]

I have $5500 worth of BAC stock. I'd like to use it as security and get cash for it. I understand this is margining?

Can I take those 82 shares and "cash them out" then pay the institution that gave me the cash so much per month to regain my rights to the stock slowly?

 

[glenn1]

SEC Reg T regulates the marginability of securities. For most equity instruments (i.e. common stock), the maximum margin-equity position you can take is 50%, subject to change depending on the whims of the Federal Reserve (although they have rarely changed the limits). For other financial instruments, the limits are higher (Treasury debt normally allows 90% for example, IIRC), or lower if your broker determines they are too risky. If your stock decreases in value, once your % of equity (the balance of your margin loan as an inverse fraction of your equity value) reaches 25%, you're subject to a "fed call." You'll then have 24-48 hours to put up more cash or equity or you'll be sold out. Various brokerage houses may have higher equity requirements, say 30%, in which case you'll get a "house call," which follows the same rules as a fed call.

 

[Peetoeng]

Originally posted by: amdforever2
I have $5500 worth of BAC stock. I'd like to use it as security and get cash for it. I understand this is margining?

Can I take those 82 shares and "cash them out" then pay the institution that gave me the cash so much per month to regain my rights to the stock slowly?

No. Margin call is typically at least 40%, meaning the total cash worth in your equity must be at least 40%. That means you may withdraw cash 60% of your total equity, thus putting 60% of your equity on margin. You'll be paying interest on the 60%.

 

[Maetryx]

Sell them and buy a call option contract (although that is for 100 shares).

 

[amdforever2]

No way to get 100%?

 

[glenn1]

No way to get 100%?

Nope. In addition, you have to have a minimum equity position of at least $2,000 before your account will release any margin availablity at all. So if you have $5,500 of ABC, the amount of margin you'll have access to is at most 5500-2000 = 3500 x 50% = $1,750.