How is Day Trading Buying Power computed?
Margin Maintenance Excess or SRO Value is used to compute Day Trading Buying Power. To get to Margin Maintenance Excess or SRO Value one brokerage that I interviewed takes your Marginable Net Equity and subtracts 25% of the value of marginable long positions priced over $1.00 and subtracts 100% of the value of marginable long positions priced under $1.01. The resulting amount, the Margin Maintenance Excess or SRO Value, is then multiplied by 2 for PDT account values under $25,000 or is multiplied by 4 for PDT account values over $25,000. Example: $100,000 market value of IBM stock and $30,000 cash for a total account value of $130,000. Day Trading Buying Power = ($100,000 * 75% + $30,000) * 4 = ($75,000 + $30,000) * 4 = $105,000 * 4 = $420,000. Trick: Since available cash that is swept into an outside, overnight, money market fund is no longer “cash” nor marginable by these definitions, this sweep action can drastically lower your Day Trading Buying Power. To maintain higher Day Tradin
