Table of Contents
Preface xi
About the Author xv
CHAPTER 1 Cash Accounts 1
Sale of Securities 3
Paying for Securities by the Sale of Other Securities 3
Delivery against Payment 4
Employee Stock Options 6
Chapter One Questions 7
CHAPTER 2 Initial Federal Margin Requirements 9
Purchases 9
Sales 16
Meeting a Margin Call 17
Chapter Two Questions 19
CHAPTER 3 Initial and Minimum Maintenance Requirements 21
Initial Requirements 21
House Requirements 23
NYSE Minimum Maintenance Requirements 23
Chapter Three Questions 29
CHAPTER 4 The Special Memorandum Account 31
Customer's Account 35
Chapter Four Questions 42
CHAPTER 5 Short Sales 45
Covering Short Sales 51
NYSE Minimum Maintenance Requirements 52
Sample Transactions 53
Short Sale versus the Box or Short against the Box 55
Prime Broker 59
Chapter Five Questions 62
CHAPTER 6 Bonds 65
U.S. Government Securities 67
Zero-Coupon Government Obligations 67
Municipals 69
Nonconvertible Corporate Bonds 72
Chapter Six Questions 74
CHAPTER 7 Miscellaneous Categories 77
When-Issued and When-Distributed Transactions 77
Customer’s Accounts 78
Marks to the Market 80
When-Distributed Securities 80
Segregation of Customers' Securities 80
Review of Customers' Accounts 81
Interest Charges 83
Margin on New Issues 85
Day Trades 85
Requirements for a Pattern Day Trader 86
Time and Tick 87
Chapter Seven Questions 89
CHAPTER 8 Options 91
Definitions 92
Additional Definitions Related to the Types of Options 93
Examples 95
Requirements for the Purchase and/or Sale of Options 100
Long-Term Equity Anticipation Securities 101
LEAPS 101
LEAPS Example 102
Bull Spread Call Debit 106
Bear Spread Call Credit 107
Bull Spread Put Credit 107
Bear Spread Put Debit 108
The American Style 108
The European Style 108
Other Types of Options 108
Index Options 108
Interest Rate Options 109
Additional Details Concerning Options 113
Chapter Eight Questions 114
CHAPTER 9 Portfolio Margining 121
Margin Deficiencies 125
Chapter 9 Questions 126
Eligible/Hedged/Unhedged Positions 126
Account Set-up 126
Unlisted Derivatives 126
Liquidations 127
APPENDIX A The Federal Reserve 129
APPENDIX B Customer Margin Account and SMA Sheets 137
APPENDIX C Answers to Chapter Questions 139
APPENDIX D Final Examination Questions 151
APPENDIX E Final Examination Answers 161
Glossary of Terms 169
Index 177
