MARGIN TRADING AND SMA ACCOUNTS

Question

A customer has $10,000 in unrealized gains in their SMA account, what is the customer's buying power?

Answer 1

SMA balance has 2 times purchasing power, so $10,000 SMA balance can be used as the Reg T required deposit to purchase $20,000 worth of securities.

Answer 2

Assuming Regulation T requirements of 50%, buying power is double the SMA. The SMA is the amount of money an investor can borrow and buying power is the amount of securities that can be purchased by using the SMA without depositing any additional cash. Since the SMA increases by $10,000, the investor is able to buy an additional $20,000 in securities.