The amount of Buying Power available for a given trade depends upon a number of factors including the product traded and the account type (e.g., Cash, Reg. T, Portfolio Margin). It is estimated by dividing the Equity with Loan Value in the account by the margin percentage. Assuming an account with a balance consisting solely of USD 100,000 cash, purchasing stock as an example:
Cash – in a Cash type account borrowing is not permitted and the margin requirement for any stock purchase is 100%. The Buying Power for a Cash account with a USD 100,000 cash balance is USD 100,000 (100,000/100%).
Reg. T – in a Reg. T margin account the default overnight Initial Margin Requirement is 50% which, for a USD 100,000 cash balance, translates to Buying Power of USD 200,000 (100,000/50%). For day trading accounts, the intraday Initial Margin Requirement is 25% which, for a USD 100,000 cash balance, translates to Buying Power of USD 400,000 (100,000/25%).
Portfolio Margin Account – In a Portfolio Margin account, the margin requirement can be as low as 15% which, for a USD 100,000 cash balance, translates to Buying Power of USD 666,667 (100,000/15%).
As capital is used to place trades, the available buying power in the account will decline.
For additional information, please visit the MEXEM Short Video on how to keep track of the real time margin as well as the MEXEM Knowledge Base.