7.2.1.2.1. Long Positions in Margin Accounts
When a customer buys 1,000 shares on margin, we say that the customer is “long” 1,000 shares.
Suppose a customer purchases 1,000 shares at $60/share on margin. The long market value (LMV) of the stock is $60,000. Regulation T requires the customer to put down at least 50% of this amount ($30,000) to buy the securities. The following equation is useful for understanding margin:
|
LMV |
– |
debit balance |
= |
equity |
|
$60,000 |
– |
$30,000 |
= |
$30,000 |