Chapter 1: Introduction to Margin Accounts

Flashcards covering key concepts related to margin accounts and annuities as discussed in the lecture.

Debits Balance

The amount of money borrowed from a broker to purchase securities.

Equity

The difference between the current market value of the securities and the amount borrowed.

Excess Equity

The amount by which your equity exceeds the regulation T requirement.

SMA (Special Memorandum Account)

An account that allows a trader to borrow additional funds from their broker based on excess equity.

Reg T (Regulation T)

The Federal Reserve regulation that governs the amount of credit that may be extended to customers for the purchase of securities.

Hypothecation Agreement

A document that allows a broker to use a client's securities as collateral for a loan.

Consent to Loan Agreement

An optional document allowing the broker to lend a client's securities to short sellers.

Risk Disclosure Document

A mandatory document outlining the risks associated with margin accounts that must be signed by the customer.

Restricted Account

An account where the excess equity is negative; selling from a restricted account requires paying down the debit.

House Maintenance

A higher minimum maintenance requirement set by brokerage firms that can be above FINRA's 25%.

Long Margin Account

An account that allows an investor to purchase securities by borrowing money from a broker.

Short Margin Account

An account used to sell securities short, where an investor borrows shares to sell with the expectation that the price will decrease.

Rehypothecation

The practice of a broker using a client's pledged securities to secure a loan.

Margin Call

A demand by a broker that an investor deposit additional money or securities to cover losses.

Market Order

An order to buy or sell a security immediately at the current market price.

Limit Order

An order to buy or sell a security at a specific price or better.

Stop Order

An order that becomes a market order once a specified trigger price is reached.

Life Income Option

An option in an annuity that provides payments for the rest of the annuitant's life.

Immediate Annuity

An annuity that begins payments almost immediately after the initial investment.

Deferred Annuity

An annuity that allows the investment to grow tax-deferred until withdrawals begin.

Fixed Annuity

An annuity that provides a fixed interest rate and guaranteed return.

Variable Annuity

An annuity that has an investment component and returns varying amounts based on the performance of chosen investments.

Index Annuity

An annuity linked to a stock market index that offers potential higher returns based on market performance.

Tax Deferred Growth

The benefit of not paying taxes on earnings until they are withdrawn from the account.

Surrender Charges

Fees charged to an annuity holder for early withdrawal.

Life with Period Certain

An annuity option that guarantees payments for a specified period or until death, whichever comes first.

Joint and Survivor Annuity

An annuity that guarantees payments for the lives of two individuals.