15.2. Long Positions in Margin Accounts

When a customer buys 1,000 shares on margin, we say that the customer is “long 1,000 shares.” This conveys the customer’s ownership of those shares. If she were to purchase another 1,000 shares, she would now be “long” or have a “long position” of 2,000 shares. She owns the shares because she bought them, even though they are not yet fully paid for.

Suppose a customer purchases 1,000 shares at $60 per share on margin. The long market value (LMV) of the stock is $60,000. Regulation T requires the customer to pay at least 50% of this amount ($30,000) with her own money to buy the securities. The following equation is useful for understanding margin:

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