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Margin Account Approval
Eligible accounts, except for retirement
accounts (such as RSP's), may usually be opened as margin accounts if
they meet certain criteria.
If trading from a trust account, the trust
agreement must specifically state that margin trading is approved.
Once your margin account application is approved,
all of your subsequent orders for marginable securities will be filled
from the margin account. To cover a transaction, usually all available
cash is used. Any remaining balance will be charged margin interest.
Remember that you don't have to put in any
special orders to trade on margin. If you have a margin account and place
an order that exceeds the amount of cash you have (and is within your
margin buying power), the order will automatically go on margin. Here's
an example of how this works. If you have $2000 of cash in your account,
and you purchase $3000 of a marginable security, you have automatically
taken out a margin loan for $1000. Your debit balance is $1,000 plus margin
When changing a dollar cash account to a
margin account, the account number changes from ending in "A"
to ending in "E". Please be sure to note this for your
correspondence and references to your account.
Recommended further reading:
Power and Excess Margin
Debit Balance and Margin
Margin account - diversified
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