Example
A customer purchases 1,000 shares of stock 'ABC' on margin at $50 per share. If ABC is currently trading at $70 per share, what is the excess equity or SMA? A purchase of $50,000 worth of securities (1,000 shares × $50 per share) requires depositing the Regulation T amount (50 percent) of the purchase. Thus, the customer equity (EQ) is originally $25,000 (50% × $50,000) and $25,000 was borrowed on margin. The long market value (LMV) has now increased to $70,000 ($70 × 1,000 shares), but the margin amount ($25,000) remains the same. Thus the EQ ($70,000 - $25,000) has increased to $45,000 and the new Reg T margin requirement would be $35,000 ($70,000 × 50%). We calculate SMA as follows: Current Margin requirement = 50% × $70,000 SMA = EQ – Current Margin Requirement SMA = $45,000 – $35,000 = $10,000 == References ==