Margin Handbook

Margin can be an important part of your investment strategy.

The Margin Handbook is designed to help you understand what margin
accounts are and how they work. For specific questions about your margin
account, we encourage you to contact a Client Services representative.

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Contents What Is Margin?
A margin account permits investors to borrow funds from their
What Is Margin?................................................................................2
brokerage firm to purchase marginable securities on credit and to
How Does Margin Work?...................................................................3 borrow against marginable securities already in the account. The terms
of a margin loan require that the qualifying securities or cash that you
Primary Uses, Advantages, and Disadvantages...............................4
have in your account be used as collateral to secure the loan. Interest
Responsibilities of Trading on Margin...............................................4 is charged on the borrowed funds for the period of time that the loan is
outstanding. Both the amount of money that a brokerage firm may loan
Margin Requirements........................................................................4
an investor and the terms of the loan agreement are subject to change
Day Trading Margin Requirements....................................................5 and regulated by the following: the Board of Governors of the Federal
Reserve System, the Securities and Exchange Commission (SEC), the
Margin Calls.......................................................................................6
Financial Industry Regulatory Authority, Inc. (FINRA), and our clearing
Portfolio Margin ................................................................................7 firm, TD Ameritrade Clearing, Inc.
Initial Public Offerings........................................................................8 Investors opening a margin account must make a deposit of cash
or eligible securities totaling at least $2,000 in equity. This serves
Selling Stock......................................................................................8 as collateral for the loan. Thereafter, based upon Regulation T
Withdrawals.......................................................................................8 promulgated by the Federal Reserve Board, which is currently 50%,
you can double the amount you invest in qualified securities as long
Substitutions......................................................................................8 as you maintain the minimum value in your account and conduct
Short Selling......................................................................................9 all trades within your margin account. As an example, if you were
buying $10,000 worth of marginable securities, you could make the
Bonds and Debt Securities................................................................9 purchase using $5,000 of your money and $5,000 of your brokerage
Options............................................................................................ 10 firm’s money. Investors who buy on margin pay interest on the loan
portion of their purchase (in this example, $5,000), but normally do
Buying Equity Options..................................................................... 10 not have to repay the loan itself until the stock is sold. After repaying
Equity Spreads................................................................................. 11 the margin loan, any profit or loss belongs to the individual investor.

Equity Straddles.............................................................................. 12 Since the value of the marginable securities in your account serves as
collateral for the loan, margin accounts require that your equity meet or
Index Options.................................................................................. 13 exceed certain minimum levels. If it should drop too low, your brokerage
Special Statement for Writing Uncovered Options.......................... 14 firm will ask you to increase the value of your account by trading assets
held in your portfolio, such as selling securities, buying to cover short
Options Exercise and Assignment................................................... 14 positions, or closing options positions. Or you may deposit marginable
Substitute Payments........................................................................ 14 securities or cash into the account. This maintenance of minimum
value will be described in greater detail in the sections that follow.
Margin Impact on Voting Rights....................................................... 15
Securities that can be purchased on margin or used as collateral for
Glossary.......................................................................................... 15 a margin account include:
•  Most securities listed on the New York Stock Exchange (NYSE)
•  The majority of NASDAQ/AMEX securities
•  Most mutual funds, after you have owned them for 30 days or more
•  Over-the-counter stocks approved by the Federal Reserve Board
•  Certain corporate, municipal, and government bonds
There are several accounts ineligible for margin privileges, including
the following:
•  Coverdell Accounts
•  Minor Individual Retirement Account (IRA)
•  Uniform Gifts to Minors Act (UGMA)
•  Uniform Transfers to Minors Act (UTMA)
Please note:
An Individual Retirement Account or Qualified Plan Account
approved for margin:
•  Will not be permitted to borrow funds
•  Will not have the ability to have a debit balance
•  May not short stock or sell uncovered options
Carefully review the Margin Disclosure Document for additional details.
Borrowing on margin may not be appropriate for every investor.
An investment strategy that includes trading on margin exposes
investors to additional costs, increased risks, and potential
losses in excess of the amount deposited. Carefully review your
investment objectives, financial resources, and risk tolerance
to determine whether it is right for you. No one should buy on
margin without the temperament to accept the price fluctuations
that are intrinsic to the marketplace, and the financial resources
to meet margin calls and absorb trading losses. Please review
the Client Agreement pertaining to margin accounts.

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How Does Margin Work? be $15,000. After you repay your brokerage firm the $10,000
you borrowed, you put $5,000 in your pocket (minus interest,
When you buy securities on margin, you pay only a portion of the
commissions and Regulatory fees). That’s a net loss of $5,000—
total cost, and a brokerage firm extends credit to you on the balance.
a 50% loss on your original investment. If you had used all of your
An interest charge is made monthly to your account on the amount
own money and purchased $10,000 worth of stock, you would
you borrow. From then on, the price of your security may go up or
have experienced a 25% loss of $2,500 on a $10,000 investment.
down, but the amount you owe your brokerage firm should remain
relatively unchanged, varying only with the interest charges. As you see from the example, buying on margin can potentially
double your return on investments, or double your losses, depending
The following is based upon current Regulation T requirements of 50%,
on stock price. When the stock you bought on margin drops in value
and is an example of how the leverage in a margin account works:
so much that your maintenance requirement exceeds the equity in
• You open a margin account with $10,000 of your money and a your account, we would issue a margin call. That means you must
$10,000 margin loan from your brokerage firm. You purchase increase your equity by trading assets held in your portfolio, such as
1,000 shares of a marginable stock at $20 per share. If the stock selling securities, buying to cover short positions, or closing options
price rises to $25 and you decide to sell, the proceeds amount to positions. Or you may deposit marginable securities or cash to
$25,000. You repay the $10,000 you borrowed and put $15,000 in increase your equity.1 If you do not take action to meet the margin
your pocket (minus interest, commissions and Regulatory fees). call, stocks may be sold with or without prior notice to increase your
That’s a net profit of $5,000—almost a 50% profit on your original equity percentage to satisfy the margin call requirement.2 Any loss
investment. If you had used all of your own money and purchased suffered by the investor when selling securities to meet a margin call
$10,000 worth of stock, you would have made a 25% profit— is the responsibility of the investor. Please consult a Client Services
a $2,500 return on a $10,000 investment. representative when you are making deposits or selling securities to
• Following the same example, let’s assume that the stock priced meet margin requirements.
originally at $20 a share should go down 25% to $15 a share, See below how the price fluctuations of a stock originally purchased
and you sell the stock to cut your losses. The proceeds would at $20 per share affect the status of a margin account:*

Margin Excess/
Deficiency
Maintenance (equity –
Current Equity Equity % Requirement maintenance
Stock # of Shares Price Value Loan (value – loan) (equity/value) (30% x value) requirement)
ABCD 1,000 $50 $50,000 $10,000 $40,000 80% $15,000 $25,000
ABCD 1,000 $40 $40,000 $10,000 $30,000 75% $12,000 $18,000
ABCD 1,000 $30 $30,000 $10,000 $20,000 67% $9,000 $11,000
ABCD 1,000 $20 $20,000 $10,000 $10,000 50% $6,000 $4,000
ABCD 1,000 $15 $15,000 $10,000 $5,000 33% $4,500 $500
ABCD 1,000 $10 $10,000 $10,000  –0– 0% $3,000 -$3,000

Deficiency in boldface indicates a maintenance call.

*These calculations do not include commissions, interest charges, or fees, and assume a 30% maintenance requirement. Equity balances in your account are based
off the previous day’s closing price. The market value of securities is obtained, if available, from quotations services or other independent sources. Values are based
on the closing price, the mean between the bid and asking price, or other methods. In the event that no pricing is available your security may be priced as “ No Price or
NP”, and may affect your balance and totals.

1. Equity equals marginable stock minus margin loans.

2. Please refer to your Client Agreement for more information.
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Primary Uses, Advantages, and Disadvantages Responsibilities of Trading on Margin
People open a margin account and borrow against their eligible The following is a list of some, but not all, of the responsibilities
assets for a variety of reasons. of account owners and TD Ameritrade, Inc. in the management of
margin accounts.
Primary uses for margin borrowing:
• To increase buying power and capitalize on potential market Margin account owner’s responsibilities:
opportunities by leveraging an investment. • To deposit into your margin account the necessary funds, in cash
or acceptable securities, to establish the account or to satisfy
• To purchase additional marginable securities.
any commitments.
• To consolidate high-interest loans.
• To meet all margin calls immediately, should they occur.
• To use as an alternative to traditional borrowing sources.
• All securities used as collateral to finance your extension of credit
• To take advantage of a short-term cash-flow solution. must be left with us, in your account, and in our custody.
• To use as overdraft protection. • All options orders should be placed by the following methods:
You may find that margin borrowing is a sensible and cost-effective the website, interactive phone system, or with a broker. Options
way to take advantage of investment opportunities and market exercise requests must be placed online or with a broker. Written
conditions without affecting your cash flow. Since you can buy more orders or options exercise requests submitted by U.S. postal mail,
shares of marginable stock with the additional funds you borrow, you email, and fax will not be accepted.
could increase the size of the profit you may realize. The responsibility of TD Ameritrade, Inc.:
Primary advantages of margin borrowing: • To abide by the rules and regulations of various regulatory bodies
• Potential capital appreciation. in the extension of margin loans and routing of clients’ equity and
options orders.
• An increase in current income from cash dividends.
• To extend credit for any cash balances in a margin account as
• Competitive interest rates. provided in the Client Agreement. 
• An alternative source of financing to meet business or personal • To charge interest on margin loans as provided in the Client
needs without additional paperwork or application fees. Agreement.6
• Margin interest may be tax-deductible. Please consult your • To liquidate all or part of your account, at any time with or without
tax advisor. notice, in order to protect your interests and the interests of
Just as the lever adds more power when used to perform a task, TD Ameritrade, Inc. and our clearing firm.
leverage lets you exert increased financial power with a relatively
small amount of your cash. Just as you may realize higher Margin Requirements
profitability if the price of the stock you buy on margin goes up, Initial equity requirements
you risk increased losses if the stock price should decline. If the
Regulations require a client to establish a minimum equity on initial
market value of your margined securities—less the debit balance of
transactions in a margin account. For purchases, the minimum
your margin account—drops below our maintenance requirements,
required deposit is $2,000, or 100% of the purchase price, whichever
a maintenance call is issued, and you are required to bring your
is less. If the deposit required by Regulation T meets the $2,000
account equity up to the required maintenance level immediately.
requirement, the client would have to meet the Federal Reserve
This is accomplished by depositing cash, adding marginable
Board requirement of 50%. Equity requirements:
securities to your account, selling securities, or by transferring
funds from another account. Although leverage is a useful tool for • A minimum of $2,000 is required to open a position on margin.
investors, it is not without risk.
• A minimum of $2,000 is required to maintain a short stock position.
Primary disadvantages of margin borrowing: • A minimum of $5,000 is required to maintain an uncovered equity
• Risk of increased loss.3  options position.7
• Potential maintenance call or liquidation of securities.4  • A minimum of $5,000 is required to maintain an uncovered index
options position.
• Vigilant account monitoring.5 

3. Margin investors may lose more than the amount they deposited in their account.
4. TD Ameritrade, Inc. is authorized, at its discretion and without prior notice to you, to liquidate any or all securities or other assets held in the account (a) to satisfy an
outstanding margin call for which you have failed to provide additional collateral, or (b) to prevent or limit unsecured losses when the margin loan exceeds the value
of the marginable securities. The liquidation of securities or assets is transacted regardless of the amount of time you have owned the asset, your intention to satisfy
the call or secure the loan, or any profit or loss you may incur by such transactions. The investor is not entitled to an extension of time to satisfy the call, to choose
which securities TD Ameritrade, Inc. may liquidate, and is responsible for losses resulting from the liquidation of an asset(s) to satisfy a margin call and for any
remaining deficiency in the account.
5. There are few investors who can prudently afford the increased costs of, and the risks involved in, trading on margin. Investors who choose to do so must assume
the responsibility to frequently monitor their assets, the markets, and the balance of their margin loan, and must continually reassess their investment objectives in
light of their financial obligations.
6. Daily interest charges shall be calculated by multiplying the margin loan by the interest rate and dividing the result by 360. Please refer to the Client
Agreement or contact an account representative for more information.
7. The maintenance requirement for puts on naked equity options is capped at the max loss.

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Maintenance requirements would issue a margin call for $1,000. (Equity of $1,000 minus $2,000
Like most brokerage firms, our clearing firm sets the minimum requirement = $1,000 maintenance deficiency). An investor would
maintenance requirement higher than the 25% currently required be required to deposit $1,000 in cash or $1,428.57 in marginable
by FINRA. Although certain securities are subject to more stringent securities (stocks priced over $4 per share), into their margin
requirements imposed by our clearing firm, the general margin account, or sell any non-marginable assets held in the account, to
maintenance requirements are as follows:8 sufficiently satisfy the margin call.

• A 30% maintenance requirement is applicable for most stocks Our clearing firm may change the margin maintenance requirements
that the Board of Governors of the Federal Reserve System has at any time, without prior notice to margin account owners and
determined are eligible for margin and that are priced at more than for any reason. Factors that may cause this change include: the
$4 per share. presence of a concentrated equity position held within an account,
the current trading pattern of a security, volatility within a stock
• A maintenance requirement of $2 per share applies to marginable sector, or overall market conditions. The more stringent maintenance
stock valued from $2 to $4 per share. requirements may be set between 35% and 100% equity. In addition,
• A maintenance requirement of 100% is needed for all long stocks initial public offerings (IPOs) may have a 100% maintenance
trading at $2 and below. requirement for up to 30 days following the commencement of
trading within the secondary market. Please log on to your account
• A maintenance requirement of $5 per share applies to marginable
or call a Client Services representative for the latest list of stocks
stock valued from $5.01 to $16.67 per share that are sold short.9
affected by these higher requirements.
• A maintenance requirement of 100% is needed for all short stocks
trading from $2.50 to $5 per share.10 Day Trading Margin Requirements
• A maintenance requirement of $2.50 per share is needed for all Day trading is the practice of purchasing and selling, or selling and
short stocks trading below $2.50 per share. purchasing, the same security in the same trading day.
• A 40% maintenance requirement may be needed if a position Examples which WOULD be considered day trading:
represents 70% - 100% of the total marginable long value and • Buying a security long and selling to close in the same trading day.
short value.
• Shorting a security and buying to cover in the same trading day.
Examples of these maintenance requirements follow:
• Buying a security long and selling the same security short in the
# of Stock Value Maintenance same trading day.
Shares Price Requirement
• Shorting a security and buying the same security long in the same
1,000 $1.50 $1,500  1,500 (less than $2,
$ trading day.
100% required)
Examples which would NOT be considered day trading:
1,000 $3 $3,000  2,000 (less than $4,
$
• A long security held overnight and sold the next day prior to any
$2/share min. required)
new purchase of the same security.
1,000 $15 $15,000 $4,500 (normal 30%
• A short security held overnight and purchased the next day prior to
house requirements)
any new sale of the same security.

Pattern day traders

Please note that margin maintenance requirements are based on
A pattern day trader is defined as an account that makes four or
the market value of a stock, not on the purchase price. Therefore, a
more round-trip day trades within any rolling five-business-day
decline in the price of a marginable security may result in a higher
period, provided the number of day trades represents at least 6% of
margin maintenance requirement for the stock, and a margin call in
the total trading activity during the same five-business-day period.
the account. If this happens, you are responsible to promptly deposit
the necessary cash or securities, or to liquidate sufficient positions in Pattern day trading on margin
the account to satisfy the margin call. Minimum equity of $25,000 is required in an account at the start of
Example: any day in which day trading occurs. Once identified as a pattern
Assuming there are no other marginable securities in the account, day trader, you may be provided with two buying power calculations:
an investor with a $4,000 credit balance purchased 1,000 shares of • Buying power—Buying power is the amount available for opening
a marginable stock when it was trading at $5 per share, creating a a position in one or more fully marginable securities. Buying power
$1,000 debit. Based upon the general maintenance requirements is calculated as the lesser of maintenance excess/.30 or your
given above, the margin maintenance requirement would be 30% Special Memorandum Account (SMA)11 balance times two, never
or $1,500. If the stock price fell to $2, the margin maintenance to exceed twice the SMA balance.
requirement would be 100% or $2,000, and TD Ameritrade, Inc.

8. To learn which securities currently have a higher maintenance requirement, please log on to your account or contact a Client Services representative.
9. Short sell transactions require a minimum of $2,000 equity.
10. If the price of a security that has been sold short falls below $5 per share, the maintenance requirement is 100% of the market value with a minimum requirement
of $2.50 per share.
11. SMA is a separate margin account maintained by the brokerage firm. Please see the SMA definition in the Glossary for more information.

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• Day trade buying power—Day trade buying power is equal You place two day trades:
to the equity in your account at the close of business on the
• A $150,000 buy and sell of ABCD, followed by a $200,000 buy and
previous day, less the Self-Regulatory Organization (SRO)
sell of WXYZ.
requirements, multiplied by up to four. Each security will have an
SRO requirement, which is based on the exchange minimums • The ABCD day trade is within your day trade buying power and
allowed. These are 25% for long marginable equities priced over will not create a call because the initial buy of the ABCD did not
$1, and as low as 30% for short equities, depending on the equity’s exceed your day trade buying power of $160,000. However, the
price.12 Accounts that are engaged in day trading activities should initial buy of WXYZ was $200,000, which exceeds your day trade
consider being limited to day trade buying power.13 Day trade buying power by $40,000 ($200,000 - $160,000 = $40,000).
buying power is calculated with the intent that it is used in When you exceed your day trade buying power, you are subject to a
conjunction with day trading activities.14 Example: day trade buying power call based on the FINRA day trading margin
An account that has a cash balance of $40,000 and no positions requirements. The FINRA day trading margin requirement is equal to
in the account could have access to $160,000 in day trade buying 25% of the highest open position during the day. In this example, the
power ($40,000 x 4 = $160,000). largest position of $200,000 exceeded the day trade buying power
Be aware that accounts that have been flagged as pattern day traders will have by $40,000. The day trade buying power call would be calculated as
access to the greater of either buying power or day trade buying power. Our follows: $40,000 x .25 = $10,000 day trade buying power call.
systems will accept orders based on the higher of the two amounts. Since we
have no way of determining whether or not you will hold the position overnight Regulation T restricted accounts
or just for the day, it is your responsibility to enter orders that remain within
the buying power for the type of trade that you are placing. House and federal Pattern day trader accounts that are under a Regulation T restriction
requirements apply to positions held overnight. will have their day trade buying power limited in the following manner:

Day trading minimum equity call • If the account meets the $25,000 minimum equity requirement,
they will receive the lesser of the SMA requirement times two or
If your account has less than $25,000 day trading equity and is the SRO requirement times four. Closing day trade transactions will
identified as a pattern day trading account, a day trading minimum still replenish day trade buying power.
equity call will be issued. Pattern day trader accounts that fall below
• Pattern day trader accounts that fall below the $25,000 minimum
the $25,000 minimum equity requirement will not be allowed to day
equity requirement will not be allowed to day trade. If a day trade
trade. If a day trade is executed when the equity is below $25,000,
is executed when the equity is below $25,000, your account will
your account will be restricted to closing transactions only for 90
be restricted to closing transactions only for 90 days, or until the
days, or until the equity is brought back up to $25,000.15 Funds
equity is brought back up to $25,000.
deposited in an account to satisfy a day trading minimum equity
call are subject to a six-business-day hold for checks and three- Prohibition on liquidating to meet a Regulation T call
business-day hold for ACHs.
Clients may not make a practice of meeting Regulation T calls by
Note: IRA accounts approved for margin and flagged as a Day Trading account liquidating securities. TD Ameritrade, Inc. defines a practice, for this
may not be permitted to deposit additional funds to avoid an excess contribution. purpose, as three times in a 12-month period. This prohibition on
Day trade buying power call liquidations shall only apply to those accounts that are also below
the minimum maintenance margin required by the exchange (SRO
If your account meets the minimum equity requirements for day trading Requirement) for the securities held.
and exceeds the day trade buying power on executed day trades, a
day trade buying power call may be issued. Once a day trade buying Margin Calls
power call is issued, the day trade buying power is restricted to two
TD Ameritrade, Inc. may issue one of the following types of margin
times the SRO excess for five business days unless the call is met
calls in your account under the circumstances described below:
earlier. If the day trade buying power call is not met within five business
days, the account will only be permitted to execute transactions on • Regulation T call—Issued when the initial equity provided for
a cash-available basis for 90 days or until the call is met. Multiple the purchase of a security is below that required by the Federal
day trade buying power violations may result in a restriction limiting Reserve Board.
transactions to a cash-available basis as well. Day trading calls can • Maintenance call—Takes place when the market value of
only be met by depositing cash or fully paid-for securities, or by selling your margined securities plus any cash balance in your account,
non-marginable securities. Funds deposited in an account to satisfy a less the debit balance of your account, drops below our
day trading minimum equity call are subject to a six-business-day hold maintenance requirements.
for checks and three-business-day hold for ACHs.
• Minimum equity call—A minimum equity call will be issued when
Example: a trade reduces a client's account equity to less than $2,000 or if
Your account has a cash balance of $40,000 and no positions. The a client's account falls below one of the initial requirements listed
day trade buying power, for purposes of this example, is $160,000 on Page 4 of the handbook. For short positions, a minimum equity
($40,000 x 4 = $160,000). call will be issued any time an account's equity is less than $2,000,
even if the account is not holding a debit balance. The client will be
required to deposit the lesser of the debit balance, or an amount
necessary to bring the equity to $2,000 or greater.

12. If an account is SMA-deficient, day trade buying power will be zero regardless of SRO balance.
13. Non-marginable securities, equities trading under $2.50, and options may have day trade buying power decremented by as much as four times the cost of the trade.
14. Multiplier of four assumes your account has more than $25,000 equity, and has no outstanding day trade buying power calls. Purchases and sales of securities held
at a higher requirement may increment/decrement day trade buying power by a factor related to their requirement. To learn which securities currently have a higher
maintenance requirement, please log on to your account. Note: IRA accounts approved for margin and flagged as Day Trading accounts will only receive 1X the Day
Trading Buying Power.
15. Purchases made while in a day trading call will decrease buying power, but sales will not increase day trade buying power.

Page 6 of 17
If a margin call is issued, you are required to promptly bring your Margin calls are due sooner in Portfolio Margin accounts (T+2) and
account to the required maintenance level. You may do this by are strictly adhered to with no exceptions. Portfolio Margin privileges
depositing cash or marginable stock, closing long or short equity may be removed at any time. Reasons Portfolio Margin may be
or options positions, or transferring funds or marginable stock removed include, but are not limited to: if account is unable to
from another TD Ameritrade, Inc. account. TD Ameritrade, Inc. maintain the minimum equity requirement, using liquidations to meet
may forcibly liquidate all or part of your account without prior margin calls resulting from trade activity three times within a rolling
notice, regardless of your intent to satisfy a margin call, in year (calls due to depreciation may be liquidated without penalty),
order to protect your interests or ours. or otherwise establishing practices deemed unsuitable for a higher
Because it involves the extension of credit, borrowing leveraged account.
on margin may not be appropriate for every investor. An There are two call types issued to Portfolio Margin accounts.
investment strategy which includes trading on margin exposes Deficiency Calls and Net Liquidating Value Calls.
the investor to additional costs, increased risks, and potential
losses in excess of the amount deposited. Because your • Deficiency calls are issued when the margin requirements for the
account with TD Ameritrade, Inc. is self-directed, you must positions in the account exceed the net liquidation value of the
carefully review your investment objectives, financial resources, account. Upon issuance of the call, a client may only place trades
and risk tolerance to determine whether it is right for you. No that reduce risk within the account until the call has been satisfied.
one should buy on margin without the temperament to accept Deficiency calls are due two days (T+2) after the account closes
the price fluctuations intrinsic to the marketplace, and the deficient. At the open of the third day, the call is considered past
financial resources to meet margin calls and absorb losses due and liquidated.
resulting from a drop in stock prices. Please review the Client • Net Liquidating Value calls are issued when an account’s net
Agreement pertaining to margin accounts. liquidating value ends the day below $100,000. Upon issuance of
the call, a client may only place trades that reduce risk within the
Portfolio Margin account until the call has been satisfied. Net Liquidating Value
Portfolio Margin (PM) is a risk based methodology that sets margin calls are due two days (T+2) after the account closes below
requirements for an account based on the largest projected net loss $100,000. At the end of the third day, the call is past due and the
of all positions in a product group using a theoretical option pricing account will have the Portfolio Margin eligibility reviewed.
model. This is in contrast to the traditional Reg T methodology, which
Portfolio Margin requirements are calculated by examining all the
uses fixed requirements for individual positions and strategies. Time
positions of a single underlying stock or within a single class group
frame for calculating theoretical loss is one trading day. Additional
at 10 equidistant stress steps, and determining the largest projected
requirements are applied for volatility and concentration.
loss. The minimum stress parameters are as follows: Equities are
Clients must have $125,000 initial equity and must maintain $100,000 stressed up and down 15%. Small Cap or Non-High-Cap Broad-
equity at all times. Additionally, clients must have full option approval, based indices are stressed up and down 10%. Broad-based indices
three years of option experience, pass a Portfolio Margin Test, pass are stressed up 8% and down 6%. Wider stress parameters that
a client risk review, and currently have no outstanding margin calls. result in larger margin requirements may be enforced at any time.
Entity accounts may be required to supply a personal guarantee.
The below diagram shows a hypothetical equity position with a
15% stress and illustrates how Portfolio Margin requirements are
calculated. The positions are 100 shares of ABC stock at $100 per
share and one long Jan 100 put at $1.

+/-15% Dn5 Dn4 Dn3 Dn2 Dn1 Up1 Up2 Up3 Up4 Up5
Stock Price $85.00 $88.00 $91.00 $94.00 $97.00 $103.00 $106.00 $109.00 $112.00 $115.00
Stock -$1,500 -$1,200 -$900 -$600 -$300 $300 $600 $900 $1,200 $1,500
Put $1,400 $1,100 $801 $509 $248 -$48 -$87 -$98 -$99 -$100
Net Total -$100 -$100 -$99 -$91 -$52 $252 $513 $802 $1,101 $1,400

The first grey row shows the steps of the stress model, while the second grey row shows the underlying equity price at those steps.
The first white row shows the profit or loss of 100 shares of that stock at the corresponding stress. So, if ABC stock drops 15% (to $85 a share)
the loss on the 100 shares will equal $1,500. On the Up5 side of the array, we see the stock rising to $115, resulting in a $1,500 profit.
The second white row shows the theoretical losses and gains of the long Jan 100 put. Because the put is only worth one dollar, and is held long,
when the stock increases to $115 the put loses $100, or the full value (the price of the put is zero). When the stock drops to $85, the put value
goes up and is used to off-set the declining value of the stock. In this example, the total requirement to hold this position would be $100. This is
because the worst theoretical loss at the defined steps illustrated above is $100, as seen in the Dn5 and Dn4 steps. If at any point, the margin
requirement as calculated above is lower than the ‘minimum requirement,’ the minimum requirement is used.
The minimum requirement is $.375 (multiplied by the deliverable, so $37.50 for a standard option) per short option contract held and the lesser
of $.375 or the premium for long option contracts held. These minimum requirements are aggregated together (they do not offset) and compared
with the projected loss model described above. The larger requirement is then used.
Furthermore, accounts that are considered concentrated in a single security (or combination of securities) will have larger requirements to account
for the increased risk that the concentrated position may pose to the account. Each position and its underlying derivatives are evaluated to
determine the point at which the entire account's value is consumed. This point is called ‘the point of no return’ (PNR). For example: if an account
holds 10,000 shares of ABC stock at $50 per share ($500,000 position value) and has $100,000 net liquidating value, the ‘point of no return’ is -20%,
because the value of ABC stock would need to drop 20%, to $40 per share, for the net liquidating value of $100,000 to become zero.

Page 7 of 17
Once the PNR is determined, it is compared to the expected price would have a credit balance in your account of approximately $7,000
range (EPR) of the underlying product. The expected price range —or $2,000 more than you originally deposited.
represents the Firm’s current best estimate of the volatility of a
If the price of the stock goes down. Typically, in a margin
given security over a one-day period. For example, after reviewing
account, you pay only a portion of the purchase price of the stock,
various risk metrics of ABC stock, including but not limited to the
but you take 100% of the loss. As in the example cited above, you
historical returns, implied volatility, and upcoming announcements,
buy $10,000 worth of marginable stock when Regulation T is 50%.
it is determined that a 25% move within a single day is possible. A
You would deposit $5,000 in your margin account and the broker
more volatile stock may have a wider range, like 50%, while a less
would loan you $5,000. Your account would have a market value of
volatile stock might have a narrower range, like 17%.
$10,000, a debit balance of $5,000, and equity of $5,000. If your
When an account’s total value can be consumed by the movement stock is worth $8,000 when you sell it, you receive the proceeds
of a single position within what is considered an expected move, the from the sale of the stock less the margin loan, accrued interest,
account is concentrated and will have a higher margin requirement commissions, and Regulatory fees, or $8,000 minus $5,000. You
calculated by widening the risk array to the underlying securities would have a credit balance in your account of approximately
EPR until the PNR is outside of the expected price range. $3,000—or $2,000 less than your original investment.
For example: the PNR of an account’s ABC stock position is -20%
(as shown above) with an EPR of -25%, then the ‘point of no return’
Withdrawals
is within the ‘expected price range.' When this occurs, the account You may withdraw either the cash or the available funds from
is considered to be concentrated in the ABC position. When this your margin account. The cash may be withdrawn from your
condition occurs (PNR within EPR) then the margin requirement margin account at any time, subject to the availability of any newly
of that position is calculated using the stress points (risk array) deposited funds.17 
determined by the EPR, +/-25%. If the EPR of ABC stock has been The available funds in your margin account are composed of the
set to 17%, then the ‘point of no return’ is outside the ‘expected price cash balance in the account, if there is one, plus the amount of
range,' and would not be considered concentrated. money available from a margin loan on your marginable securities.
As stated above, you may withdraw the available funds from the
Initial Public Offerings account. The amount available for withdrawal is subject to the
When a company needs to raise capital, it may offer for sale shares preservation of $2,000 equity and the lesser of the SMA balance
of stock that represent an ownership interest in the corporation. A (see Glossary) or maintenance excess in the account.
company’s first sale of stock to the public is called its initial public
For example, assume you open an account with $20,000 in cash
offering (IPO).16 The shares are offered by an underwriter or
and purchase $30,000 worth of a marginable security priced at
investment bank at a predetermined offering price. IPO shares that
$20 per share. The SMA balance is $5,000 and the maintenance
are purchased from the underwriter’s selling group at the offering
excess is $11,000. The amount you could have withdrawn at this time
price are not marginable and must be fully paid at the time of
is $5,000. However, if you did not place any further trades and the
purchase. TD Ameritrade, Inc. will not use these shares purchased
stock fell to $10 per share, the SMA balance would remain at $5,000
through the IPO as collateral for margin loans during the first 30
and the maintenance excess would now be $500, thus you could
days following the day on which the shares start trading in the
only withdraw $500.
secondary market. The same restriction applies to shares purchased
from the underwriter for a secondary offering or follow-on offering. The same rules apply to the withdrawal of stock from your
margin account.
The Board of Governors of the Federal Reserve System may
immediately determine that IPO shares are eligible for margin once
Substitutions
they start trading in the secondary market; however, our clearing firm
may impose stricter margin requirements. Substitution is the buying and selling of marginable securities in a
margin account on the same trading day. Since the stocks will settle
on the same business day, for each dollar value of securities sold,
Selling Stock
an equal dollar amount of marginable securities can be purchased,
When you sell stock originally purchased on margin, your profit or assuming that the securities are both marginable and have the same
loss is determined by the sale proceeds less the amount you owe maintenance requirements. Please refer to our website or consult
your broker for the margin loan. You receive all the net profit or a Client Services representative to determine if a security has a
assume all the loss depending on the profitability of the sale. special, more stringent margin requirement.
If the price of the stock goes up. Typically, in a margin account, If your purchase exceeds the amount of the sale, you are required
you pay only a portion of the purchase price of the stock, but you to deposit the initial requirement of the Federal Reserve Board
receive 100% of the net profit. For example, you buy $10,000 worth of (FRB)—currently 50%—on the difference between the funds
marginable stock when the federal margin requirement is 50%. You received and the funds needed to purchase the new security. The
would deposit $5,000 in your margin account, and the broker would funds available in your margin account will be used to reduce part
loan you $5,000. Your account would have a market value of $10,000, or all of the federal requirement. To see how this works, review the
a debit balance of $5,000, and equity of $5,000. If your stock is following example:
worth $12,000 when you sell it, you would receive the proceeds from (Assume that the initial FRB requirement is 50%, the equity in
the sale of the stock less the margin loan (plus any accrued interest, your margin account is 30%, and you have no additional funds in
commissions, and Regulatory fees) or $12,000 minus $5,000. You your account.)

16. Investing in initial public offerings is speculative and risky and is only appropriate for certain clients. TD Ameritrade, Inc. strongly encourages you to obtain a copy of
the IPO prospectus, and read it carefully before you invest or send money.

Page 8 of 17
 Certain circumstances may prevent TD Ameritrade, Inc. from
Action # of Price Value
placing an order to establish, or from continuing to maintain, your
Shares
short position. A short sale will not be placed if the stock cannot be
Sold XYZ 100 $45 $4,500 borrowed. TD Ameritrade, Inc. must ask the lending brokerage firm
Bought ABCD 100 $75 $7,500 to locate the shares requested for your order.19 All orders to short
sell a security are subject to SEC and FINRA execution rules.
The difference is $3,000. Since $3,000 x 50% = $1,500, the amount
you need to deposit is $1,500. If the lending brokerage firm requests that the borrowed shares
be returned, your brokerage firm must buy in the shares which you
If the amount of the sale exceeds the amount of the purchase,
are short, close out your short position, and deliver those borrowed
you may not be required to deposit additional funds to meet the
shares back to the lending brokerage firm regardless of the profit or
initial margin requirement for the security that is purchased. The
loss to you. There can be no guarantee that the brokerage firm can
funds received from the sale will be credited to the account and
continue to maintain a short position for an unlimited duration of time.
will be available to purchase the new security. Therefore, the initial
margin requirement for the new security will be satisfied from the When you short sell a stock, TD Ameritrade, Inc. retains the proceeds
sale proceeds, assuming that both marginable securities have the of the sale, and the Federal Reserve Board requires that you make
same maintenance requirement. an initial deposit based on the net proceeds of that sale. The initial
margin is usually the same as the percentage of the total amount
Please remember that maintenance requirements will apply at all
you would deposit in your account for a long margin purchase.
times. Any portfolio change may increase the maintenance required
and result in a margin call. For example:
Different margin requirements apply to day trades. Please contact a # of
Credit Risk analyst for more information. Action Shares Price Value Margin % Deposit
Sell short JKL 100 $100 $10,000 50% $5,000
Short Selling
If you think that a stock will fall in price, you may be able to make a In addition to the initial federal requirements, established maintenance
profit by short selling. Short selling is borrowing a stock from your requirements apply to short sales. Marginable stocks priced at more
brokerage firm and immediately selling it. You are speculating that than $16.67 per share have a 30% margin maintenance requirement
you will be able to purchase the stock back at a lower price and when sold short. Marginable stocks priced between $5.01 and $16.67
replace the borrowed shares, pocketing the difference between will have a $5-per-share requirement when sold short. Please review
the higher selling price and the lower repurchase price (less any the “Margin Requirements” section or consult with a Client Services
commissions, interest charges, or Regulatory fees). Short selling is a representative to determine if a stock will have a 30%, $5-per-share
trading strategy that attempts to take advantage of a falling market. or other maintenance requirement. In addition, for all short sale
The following should be considered when short selling a stock: transactions, TD Ameritrade, Inc. requires a minimum equity in the
account of $2,000 in cash or marginable securities. s
•  Historically, stock prices rise over time.
• The risk of loss on a short sale is potentially unlimited since there Bonds and Debt Securities
is no limit to the price increase of a security.
Collateralized debt obligations (CDOs)
• You are liable for any dividends, stock splits, or spin-offs paid on Generally, CDOs are held as non-marginable.
the borrowed stock.
Convertible bonds
• 
Your short position will be updated for any Mandatory Reorganizations.
Because convertible bonds give investors the choice to convert them
• 
You may be held liable for the terms of any Voluntary Reorganizations. into company stock instead of receiving a cash payment, the initial
• You may be required to cover the short position at an unfavorable price. margin requirements are the same as for marginable stock, 50% of
the market value. In addition, a maintenance equity of 30% of the
•  You do not earn interest on the proceeds from short selling a security.
market value must be maintained at all times.
Short selling can occur only in an account that has margin privileges
and meets the minimum equity requirement of $2,000.18 Registered nonconvertible bonds
Note that if you hold a security long and sell more than you Listed bonds are eligible to be purchased on margin. The initial
currently hold at TD Ameritrade in your margin account, the margin requirements on listed bonds are the greater of 30% of
amount you oversell may result in a short sale for that amount. the market value or 7% of face value. In addition, a maintenance
For example, if you hold 100 shares of XYZ common stock in equity of 25% of the market value or 7% of face value, whichever
your margin account and submit a sell order for 200 shares of is greater, must be maintained at all times.
XYZ, depending on the system used by you (ex., website, Trade Municipal bonds
Architect Platform, mobile or tablet apps), such a sale may result
The initial and maintenance requirement for municipal bonds is the
in a long sale of 100 shares and a short sale for 100 shares. Please
greater of 20% of market value or 7% of face value.
contact Client Services representative to better understand how
to operate TD Ameritrade's various trading systems.

17. A six-business-day hold is placed on any funds deposited into your account via check. A three-business-day hold is placed on any funds deposited electronically via
Automated Clearing House (ACH). Additionally, funds deposited via ACH can only be withdrawn to the originating account in the first 60 days after the account is
opened. There is no hold on funds deposited via wire transfer. You will be authorized to trade certain securities with these funds; however, no withdrawals of these
funds can be made during the three- or six-business-day hold period.
18. Equity is determined by the market value of your marginable stocks minus the amount loaned to you by your brokerage firm, but is computed differently when a short
position is maintained in the account. The equity is computed by adding the cash balance in the account to the market value of the “long” security positions, and then
subtracting the current market value of the “short” security positions and the margin loan balance. For more information, please see the “Margin Requirements” section
or consult with a Client Services representative.
19. This may necessarily delay the processing of your order. Please refer to the Client Agreement for more information.

Page 9 of 17
Federal government securities price, if assigned on the contracts.23 Depending upon the style
The principal and interest of these securities is a direct obligation of option, the options writer may be subject to assignment at any
guaranteed by the U.S. government. Initial requirements and time during the options contract period. A call option obligates the
maintenance on U.S. Treasury notes, bonds, and bills will depend on the options writer to sell an asset. A put option obligates the options
length of time until maturity. One to 20 years to maturity requires 5% of writer to buy an asset. The options seller may buy and close the
market value, and 10% is required when maturity exceeds 20 years.20 options position before assignment or expiration.24
Equity options are available on most listed and NASDAQ securities.
Government agency securities
Normally, stock options have a deliverable of 100 shares of the
The initial requirement for government agency securities—notes and underlying security per contract. By contrast, index options have a
bonds—is 25% of the market value. Also, a maintenance equity of cash settlement and typically a multiplier of $100 per contract. The
25% of the market value is required at all times. deliverable for an equity or index option may change as the result
of a stock split, reverse stock split, stock dividend, merger, or other
Options action. Please contact a Credit Risk analyst with any questions
The last portion of this Margin Handbook is devoted to a discussion regarding the multiplier or deliverable on your options contracts.
of options. In particular, we will address the margin requirements
Again, the “strike price” is the fixed dollar amount at which the
applicable to the most common options transactions. This discussion
options investors agree to trade the asset or index value.
is intended for general reference and education only. TD Ameritrade,
Inc. does not recommend any investment product nor recommend The options owner has the right to exercise his/her options contracts
that you include options trading in your investment strategy. Due and to purchase or sell the underlying security or index value. The
to the inherent risks involved, and the complexities of certain style of option determines when the contracts may be exercised.
options transactions, options are not suitable for all investors. “American-style” options can be exercised at any time prior to
expiration. Most equity options are American-styled. “European-
To learn more about options, you may contact the Chicago Board
style” options can only be exercised during a specified exercise
Options Exchange, 400 South LaSalle Street, Chicago, IL 60605
period before expiration. Typically the exercise period coincides with
(cboe.com) or The Options Clearing Corporation, One North Wacker
the expiration date. Index options may be European-styled.
Dr., Suite 500, Chicago, IL 60606 (optionsclearing.com). And for
a detailed description of options transactions and their risks, As with any contract, the rights and obligations expire after a
please refer to “Characteristics and Risks of Standardized specified time—the options expiration date. It is important that
Options,” a disclosure document published by The Options options owners and holders recognize the distinction in the style
Clearing Corporation. of options. The rights granted by the options contracts will be
forfeited if the options owner fails to exercise his/her rights in the
You may contact a Client Services representative to receive a
appropriate manner. The options writer will be obligated to deliver
copy of this document or by mailing your request to 200 S 108th
shares of stock or funds if assigned on the options contracts. Please
Ave, Omaha, NE 68154-2631
review the "Options Exercise and Assignment" on Page 14 for more
Options are a contract specifying the terms by which an asset may information or contact a Client Services representative.25 
be traded. The terms of an options contract provide:
• The rights and obligations assumed by the investors, Buying Equity Options
The buyer of long options must pay 100% of the purchase price.
• The security to be traded and the number of shares or value to be
Cash or equity is required to be in the account at the time the order is
delivered for each options contract,
placed. Regulation T and maintenance requirements are also 100%.
• The price at which the owner of an option can purchase (call) or
Writing a covered call means selling the right to another party to
sell (put) the underlying stock, known as the “strike price,”
buy a security from you at a specific price until the expiration date. By
• The manner by which the contract’s rights can be exercised, and establishing a short call position, the writer of the call option assumes
• The date on which the options expire. an obligation to sell a security if assigned on the options contract. If
the call-options writer owns the underlying deliverable shares, they’re
The investor who purchases an options contract is known as the “covered.” If assigned, you can deliver your shares of the security
options “owner” or “holder.” By purchasing an option, the owner is instead of purchasing them on the open market. Therefore, the writer
granted the right to buy or sell a specific security or index value of a covered call is not required to come up with additional funds.26
at the strike price by the expiration date. A call option grants the The backing for the call is the stock. The underlying security for the
right to buy an asset. A put option grants the right to sell an asset. covered call can never be valued higher for margin-requirement
Depending upon the options owner’s strategy and the price of the purposes than the strike price of the short call.
underlying security, the options owner may sell and close the options
position,21 exercise the options contracts, or let the options expire.22 Writing a cash-secured put means you are creating an obligation
The options transactions permitted in an IRA are the writing of to purchase the underlying security at the strike price until the
covered calls, the writing of cash secured puts, if qualified, the expiration date. The writer of the put options assumes the obligation
purchase of a call or put, as well as creating spreads. to purchase the underlying security if the options contracts are
assigned. If the put-options writer maintains a cash balance equal to
The investor who sells an options contract is known as the options the total exercise value of the contracts, the put contracts are “cash-
“seller” or “writer.” By selling and establishing a short options secured.” If the option is assigned, the put-options writer purchases
position, the options writer is obligated to trade an asset at the strike the security with the cash that had been held to cover the put.

20. Treasuries that have a maturity of more than five years will require a minimum of 3% of face value.
21. If a secondary market in the options becomes unavailable, the options owner could not engage in closing transactions.
22. The options owner may lose his/her entire investment if, during the options contract period, the price of the underlying security trades in an opposite direction than
what the options owner anticipated, and the options contracts lose all or a significant portion of their value.
23. An uncovered options writer may be exposed to potentially unlimited losses.
24. If a secondary market in the options becomes unavailable, the options seller could not engage in closing transactions, and would remain obligated until expiration
or assignment.

Page 10 of 17
Writing a covered put means you are creating an obligation In the first example, the 20% maintenance requirement
to purchase the underlying security at the strike price until the would be used.
expiration date. The writer of the put options assumes the obligation
to purchase the underlying security if the options contracts are Example 2
assigned. If the put-options writer has sold short the underlying Action: Sell six uncovered puts on PQR Corp.
deliverable shares, the put contracts are “covered.” If the option is Deliverable Per Contract: 100 Shares of PQR
assigned, the put-options writer purchases the security and delivers Price of Security: $81.25
it to the lending brokerage firm to “cover” the short equity position. Market Strike Price: $70
The short stock can never be valued lower, for margin requirement Options Premium: $0.75
purposes, than the strike price of the short put.
20% Calculation
Uncovered equity options
Percentage of Stock Value:
Because writing uncovered—or naked—options represents greater 20% x [$81.25 x (6 x 100)] = $9,750
risk of loss, the margin account requirements are higher. The
Out-of-the-Money Amount:
writing of uncovered puts and calls requires an initial deposit and
($70 - $81.25) x 600 = - $6,750
maintenance of the greatest of the following three formulas:
Current Market Value of the Option:
a) 20% of the underlying stock27 less the out-of-the-money amount,
$0.75 x 600 = $450
if any, plus 100% of the current market value of the option(s).
Total Requirement $3,450
b) For calls, 10% of the market value of the underlying stock PLUS
the premium value. For puts, 10% of the exercise value of the 10% Calculation
underlying stock PLUS the premium value.
Percentage of Exercise Value:
or 10% x [$70 x (6 x 100)] = $4,200
c) $50 per contract plus 100% of the premium. Current Market Value of the Option:
For example: $0.75 x 600 = $450
Total Requirement $4,650
Example 1
Action: Sell six uncovered puts on PQR Corp. $50 plus premium Calculation
Deliverable Per Contract: 100 Shares of PQR
Price of Security: $81.25 $50 x 6 contracts = $300
Market Strike Price: $80 Current Market Value of the Option:
Options Premium: $2.50 $0.75 x 600 = $450
Total Requirement $750
20% Calculation
Percentage of Stock Value:
20% x [$81.25 x (6 x 100)] = $9,750 In this second example, the 10% maintenance requirement would
be used.
Out-of-the-Money Amount:
($80 – $81.25) x 600 = -$750 Minimum Equity Requirements
Current Market Value of the Option: For uncovered equity call options, the minimum equity required is
$2.50 x 600 = $1,500 $5,000 in marginable securities or cash. For uncovered equity put
Total Requirement $10,500 options, the minimum equity required is the maximum potential loss
for all uncovered equity puts in the account. The minimum equity
10% Calculation required to write uncovered index options is $5,000.

Percentage of Exercise Value:

Equity Spreads
10% x [$80 x (6 x 100)] = $4,800
A “spread” is a position taken in two or more options contracts with
Current Market Value of the Option: the intent of profiting from or reducing the risk of loss from a sudden
$2.50 x 600 = $1,500 market shift in the underlying security or index. A spread position is
Total Requirement $6,300 created by buying and selling options of the same type (calls or puts)
for the underlying security or index, which have different exercise
$50 plus premium Calculation prices and/or expiration dates. A “call spread” is a long call and a
$50 x 6 contracts = $300 different short call on the same security or index. A “put spread” is a
long put and a different short put on the same underlying security. In
Current Market Value of the Option: either case, the short options must expire before, or at the same time
$2.50 x 600 = $1,500 as, the long options contract.
Total Requirement $1,800

25. Please review the Client Agreement.

26. TD Ameritrade, Inc. reserves the right to impose a maintenance requirement on covered LEAPS® (Long-Term Equity AnticiPation Securities). Before engaging in an
investment strategy involving a covered LEAPS position, please consult your Credit Risk analyst for more details.
27. Our clearing firm may impose more stringent margin requirements on the underlying security. The higher maintenance requirement on the security may increase the
requirement on the uncovered equity option. To learn which securities currently have a higher maintenance requirement, please log in to your account.

Page 11 of 17
This is an example of a debit spread: Action: Buy five calls STUE Corp.
Date: March
Action: Buy eight calls PQR Corp.
Price/Share: $39.25
Date: October
Market Strike Price: $40
Price/Share: $58.50
Options Premium: $1.75
Market Strike Price: $60
Options Premium: $4.50 Since this is a long straddle, the margin requirements are 100% on
each position.
Action: Sell eight calls PQR Corp.
Date: October Long Put Requirement
Price/Share: $58.50
$2.50 x (5 x 100) = $1,250
Market Strike Price: $70
Options Premium: $1.25 Long Call Requirement
$1.75 x (5 x 100) = $875
Requirement $2,125
The investor paid more in premiums than was received in premiums
from the simultaneous sale of the options contracts. The short call Short straddles
options have a strike price which is higher than the long side. The For short straddles, the potential for risk is unlimited. The total
initial requirement is calculated by multiplying the difference between margin requirement is the greater of the uncovered requirement
the premium paid for the long contracts and the premium received for the calls or puts, plus the value of the premium received on the
by selling the short contracts by the number of shares deliverable for other, non-holding side of the straddle.
the options contracts:
Example of a short straddle:
($4.50 – $1.25) x 800 = $2,600
Action: Sell 10 calls VWX Corp.
Date: April
This is an example of a credit spread: Price/Share: $72.25
Market Strike Price: $70
Action: Buy eight calls PQR Corp. Options Premium: $5
Date: October
Price/Share: $58.50 Action: Sell 10 puts VWX Corp.
Market Strike Price: $70 Date: April
Options Premium: $1.25 Price/Share: $72.25
Market Strike Price: $70
Action: Sell eight calls PQR Corp. Options Premium: $1.50
Date: October
Price/Share: $58.50 Since this is a short straddle, the uncovered margin requirement on
Market Strike Price: $60 each side of the straddle is computed separately.
Options Premium: $4.50
Short calls
Percentage of Stock Value:
The simultaneous sale of the contracts results in a credit to the 20% x ($72.25 x 100) x 10 = $14,450
investor’s account, since more money is received from the options’
Out-of-the-Money Amount: = -0-
premiums than is paid for them. Since the short side on these
calls has a strike price which is less than the long side, initial and Short Call Side: Current Market Value
maintenance requirements are computed as the difference between of the Option: = $5,000
the strike price of the long and short options multiplied by the ($5 x 1,000)
number of shares deliverable: Total Requirement $19,450
($70 – $60) x 800 = $8,000
For this spread position, the total requirement is $8,000. Since
Short puts
proceeds of $2,600 are received in the transaction, an additional
deposit of $5,400 is required to satisfy the margin requirement. Percentage of Stock Value:
20% x ($72.25 x 100) x 10 = $14,450
Equity Straddles Out-of-the-Money Amount:
A straddle generally involves purchasing or writing both a call and ($70 – $72.25) x 1,000 = -$2,250
a put on the same stock or index with options that have the same
Current Market Value of the Option:
expiration date.
($1.50 x 1,000) = $1,500
Long straddles Total Requirement $13,700
Margin requirements for purchasing long straddles are the same as
for buying any other long options contracts: 100% of the purchase The total margin requirement on this straddle is computed
price for each side of the straddle. as follows:
Example of a long straddle: Greater Requirement (calls) = $19,450
Action: Buy five puts STUE Corp. Value of Non-Holding Side (puts) = $1,500
Date: March Total Requirement $20,950
Price/Share: $39.25
Market Strike Price: $40
Options Premium: $2.50

Page 12 of 17
Index Options value minus the out-of-the-money amount, if any, plus the premium
amount received. This amount must meet or exceed a minimum
A “stock index” is a method of reflecting—in a single number—the
amount equal to 10% of the current index value times the index
relative market values of many different stocks in comparison to
multiplier, plus the option’s market value.
themselves over time. Stock indices are compiled and published by
various sources, including securities exchanges. An index may be For example:
designed to be representative of the stock market as a whole, a broad Action: Write 10 uncovered broad-based index call options
market sector (such as industrials), or a particular narrow industry Index Multiplier: 100
(such as electronics). An index may be based on the prices of all—or Index Value: $257.14
only a sample—of the stocks whose value it is intended to represent. Strike Price: $260
Like a cost-of-living index, a stock index is ordinarily expressed in Premium: $4.25
relation to a base established when the index originated.
Exchange-traded options on stock indices—index options—are 20% Calculation
based on the same principles as listed stock options and may Percentage of Index Value:
be used for similar purposes. They settle on a cash basis, and 20% x ($257.14 x 1,000) = $51,428
the multiplier per contract is normally $100. The main difference,
Out-of-the-Money Amount:
from the investment standpoint, is that index options are designed
($257.14 – $260) x 1,000 = -$2,860
to permit investors to profit from—or protect against—price
movements in the stock market in general (or in particular market Contract Value:
segments) rather than in individual stocks. By providing a means ($4.25 x 1,000) = $4,250
of hedging against the risk of adverse developments in the stock Total Requirement $52,818
market as a whole, or in particular market segments, index options
offer investors an enhanced opportunity to “fine tune” the risk- 10% Calculation
reward characteristics of their portfolios.
Minimum Percentage of Index Value:
These differences, and others such as the high strike prices, the 10% x ($257.14 x 1,000) = $25,714
cash deliverable, the volatility of the index, the exercise style of
Contract Value:
the options contracts, and the complexities of options strategies,
($4.25 x 1,000) = $4,250
create an inherently risky investment vehicle. Index options should
be traded only by the most experienced and knowledgeable Total Tentative Requirement $29,964
investors who are prepared to closely monitor market conditions,
and who are financially prepared to assume potentially substantial An example of deep out-of-the-money index options:
losses. Investors should read completely and understand the
Action: Write 20 uncovered broad-based index put options
options disclosure document, titled "Characteristics and Risks of
Index Multiplier: 100
Standardized Options" before incorporating trading index options
Index Value: $321.30
into their investment strategy.
Strike Price: $280
Margin requirements on index options Premium: $1
There are two classes of index options. An index within a particular
20% Calculation
industry is an industry index (narrow-based), while a market index
(broad-based) covers a series of industries. Percentage of Index Exercise Value:
($321.30 x 2,000) x 20% = $128,520
A minimum equity of $5,000 is required to maintain a short index
straddle or an uncovered index options position.28 To purchase an Out-of-the-Money Amount:
options position, either the cash or the equity requirement must be in ($321.30 – $280) x 2,000 = -$82,600
the account at the time the order is placed. Contract Value:
Buying long index options ($1 x 2,000) = $2,000
The buyer of a long index option must pay 100% of the purchase price Total Tentative Requirement $47,920
of the options contract. Regulation T and maintenance requirements
are both 100%. Since the option is well out-of-the-money, the 10% minimum must
Index spreads and straddles be tested:
The margin requirements to create spreads and straddles are
computed in the same manner as those for equity options.29 10% Calculation

For detailed information, please refer to the “Equity Spreads” Minimum Percentage of Index Exercise
and “Equity Straddles” discussions, which begin on Page 12 of = $56,000
Value: 10% x ($280 x 2,000)
this handbook.
Contract Value:
Uncovered index options ($1 x 2,000) = $2,000
For index options, whether calls or puts, broad-based or narrow- Total Tentative Requirement $58,000
based, carried as short uncovered positions in the account, the
maintenance requirements are calculated using the same formula
The margin requirement for this naked options position will be
as used for uncovered equity options.29 The initial deposit and
$58,000, the greater of the 10% and 20% calculations.
maintenance requirements must equal 20% of the current index

28. Short index straddle transactions require a minimum of $5,000 equity.

29. Please see “Uncovered equity options” on Page 11. Remember, uncovered index options transactions require a minimum of $5,000 equity.

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Special Statement for Writing Uncovered Options corporate actions may have on the value of an option, and whether
you would be better off not exercising an option. In the event that
There are special risks associated with writing uncovered options
you fail to provide proper and timely exercise instructions, you agree
which expose the investor to a potentially serious risk of loss.
to waive and to release TD Ameritrade, Inc., its current and former
Therefore, this type of strategy may not be suitable for all investors
parent companies, subsidiaries, affiliates, shareholders, directors,
who have options privileges in their account.
officers, employees, representatives, agents, successors, and assigns,
1.  The potential loss of uncovered call writing is unlimited. The from any and all claims of damage or loss, then or at a later time
writer of an uncovered call is in an extremely risky position, and sustained, as a result of the exercise or non-exercise of an option
may incur large losses if the value of the underlying instrument contract.
increases above the exercise price.
It is your responsibility to have sufficient buying power in your
2. The risk of writing uncovered put options is substantial. The account to exercise a long call options contract, and to have the
writer of an uncovered put option bears a risk of loss if the stock in the account to exercise long put options. TD Ameritrade,
value of the underlying instrument declines below the exercise Inc. reserves the right to close out options positions that pose risk
price. Such loss could be substantial if there is a significant if exercised or assigned. If you do not have sufficient buying power
decline in the value of the underlying instrument. to cover any possible exercises or assignments, you must deposit
3. Uncovered options writing may be suitable for only the most funds or close out your position before the close of market prior
knowledgeable investor who understands the risks, has the to expiration. You should contact a broker or refer to the account’s
financial capacity and willingness to incur potentially substantial position page to confirm options assignments for your account.
losses, and has sufficient liquid assets to meet applicable margin TD Ameritrade, Inc. receives assignment instructions from the
requirements. In this regard, if the value of the underlying Options Clearing Corporation (OCC) and uses a lottery system to
instrument moves against the writer’s uncovered options position, randomly assign individual brokerage accounts that are short the
the investor’s brokerage firm may request significant additional options position. A more detailed description of the random allocation
margin payments. If the investor does not make such margin procedure is available on request or online in the Help Center.
payments, the brokerage firm may forcibly liquidate stock or
options positions in the investor’s account, with or without prior Substitute Payments
notice, in accordance with the investor’s margin agreement. In May 2003, the Jobs and Growth Tax Relief Reconciliation Act of
4. For straddle and strangle writing, where the investor writes both a 2003 was signed into law. The new act includes a reduced tax rate
put and a call on the same underlying instrument, the potential for on “qualified dividends” paid by corporate issuers. Qualified dividend
loss is unlimited. income will be taxed at the long-term capital gains rate (generally
20%) rather than the ordinary rate (39.6% maximum) as long as you
5. If a secondary market in options were to become unavailable,
satisfy a 60-day holding period.
investors could not engage in closing transactions, and an options
writer would remain obligated until expiration or assignment. On February 19, 2004, the IRS announced the acceptance of the
Technical Corrections Bill. To qualify for the lower tax rates, the
6. The writer of American-style options is subject to being assigned
taxpayer must now hold the dividend-paying stock for at least 61
an exercise at any time after he has written the option until the
days during the 121-day period beginning 60 days before the ex-
option expires. By contrast, the writer of a European-style option
dividend date—the first date the buyer will not be entitled to receive
is subject to assignment only during the exercise period, normally
that dividend.
the expiration date.
There are also situations where investors receive “payments in
It is expected that you will read the booklet, "Characteristics and
lieu” of dividends on stocks a broker has borrowed as part of its
Risks of Standardized Options," available from your Credit Risk
securities lending practices, that do not qualify for the reduced rate.
analyst.30 In particular, your attention is directed to the chapter
As TD Ameritrade, Inc. may borrow your dividend-paying stock
titled, “Principal Risks of Options Positions.” This statement is not
in the normal course of business, you may receive a “payment
intended to enumerate all of the risks entailed in writing uncovered
in lieu” of dividends instead of a qualifying dividend. Should this
options. You should also read your Client Agreement.
occur, TD Ameritrade, Inc. will compensate your account, at its
discretion, the difference between the long-term capital gains rate
Options Exercise and Assignment of 20% and the maximum 39.6% ordinary rate. We will also include
To exercise options or to decline the exercise of options, you the additional tax due on the difference (or a “gross-up”). We will
must notify TD Ameritrade, Inc. of such exercise instructions by 4 calculate the gross-up as the difference between the 39.6% ordinary
p.m. ET on the last trading day for the options contracts. Any “Do rate and the 20% capital gains rate divided by 60.4%—resulting in a
Not Exercise” or “Exercise requests” submitted 30 to 60 minutes premium payment of 32.4503% on the "payment in lieu."
after market close on normal trading days will be accepted on a
reasonable efforts basis. On early market close days, any “Do Not Since individual tax situations may differ, TD Ameritrade, Inc. cannot
Exercise” or “Exercise requests” submitted 60 minutes or more precisely calculate the additional tax costs you may incur. Therefore,
after market close will be processed on a reasonable efforts basis. this payment may not be an exact reimbursement of your potential
Expiration and expiration processing will be moved to the preceding tax liabilities incurred as a result of the “payment in lieu.”
market/business day if on an exchange holiday. As your account is self-directed, we’re not allowed to give you tax
TD Ameritrade, Inc. has no obligation to exercise any option advice. Please contact your tax advisor with any questions about the
absent specific instructions from you, in accordance with the prior effects this tax law change may have on your account.
paragraph. In the absence of such instructions, TD Ameritrade, Our firm reserves the right to change these requirements in total,
Inc., in its sole discretion and without prior notice to you, may or with respect to specific securities, without prior notice. (In all
exercise any in-the-money options that remain in the account on cases, the firm’s requirements will equal or exceed requirements
their expiration day, as long as they are in-the-money by $0.01 mandated by the regulatory bodies.) Please see the Client
or greater. You are responsible for understanding the impact that Agreement for more information.

30. To obtain a copy of the options disclosure document, call a Client Services representative or request one by mail at 200 S 108th Ave, Omaha, NE 68154-2631

Page 14 of 17
Margin Impact on Voting Rights Call Spread—the simultaneous buy and sell of a call-options contract
on the same underlying security, but with different expiration dates,
You should be aware that when you buy shares on margin or borrow
different exercise prices or both. The short option must expire before
against your margin account, there is a possibility, under certain
or on same date as the long option to be matched up as a spread.
circumstances, that you may lose proxy voting rights for securities
held in your margin account. There is also a possibility that you may Cash Account—an account in which all securities purchased must
lose certain tax benefits for dividends paid on those securities. be paid for in full.
Pursuant to your margin agreement with us, when you have a debit Cash-Secured Put—a put options position in which the options
balance in your margin account (whether it is as the result of margin writer holds cash equal to the amount of money that would be
purchases or through a loan for other purposes), TD Ameritrade, Inc. needed to satisfy the obligation should the option(s) be assigned.
may lend your shares to other clients or other broker/dealers, subject Cash Transaction—a settlement on the same day as the trade date.
to certain limitations. We may also hypothecate, which means we
can pledge shares in your account as collateral for a loan at a bank. Class—options of the same type—all calls or all puts—on the
TD Ameritrade, Inc. reserves the right to determine which of your same security.
shares may be lent or pledged. Class group—comprised of all products with the same underlying
When your shares are lent, the right to vote those shares goes with instrument. One hundred percent of a position’s gain at any one
them. Therefore, if a corporate vote in a company in which you own valuation point is allowed to offset another position’s loss at the
shares takes place while those shares are on loan, you may be same valuation point.
unable to vote on them. Closing Transaction—the transaction executed to close an options
In addition, when your shares are lent past the ex-dividend date contract. The holder would sell to close, while the writer would buy
(the time between the announcement of the next dividend and the to close.
payment of it), you may be at risk of receiving "payments in lieu" Collateral—assets pledged to guarantee a loan, and which may be
of dividends. This means that the person borrowing the shares collected in case of default. Homes and cars are common examples
receives the dividend, and you receive a cash payment from of assets that can serve as collateral.
TD Ameritrade, Inc. in an amount identical to the dividend. However,
this cash payment to you is not considered a dividend for tax Common Stock—a security, issued in shares, that represents
purposes. We must report it on your year-end statement as ordinary ownership of a corporation. Common stock owners may vote and
income, which may cause you to lose the benefit of the preferential receive dividends (after all other obligations of the corporation
tax rates on dividends. are satisfied).

Repaying the outstanding margin balance prior to a scheduled vote Concentration Portfolio Margin—A concentrated position exists
or payment of a dividend may resolve the problem. when that position’s PNR is within that security's EPR.

If you have questions about this, please contact a Client Covered Call—a short call-options position in which the writer owns
Services representative. G the number of shares of the underlying stock represented by the
options contract.
Glossary Covered Put—a put-options position in which the options writer is
Available Funds—the maximum amount of money that could also short in the corresponding stock.
be withdrawn from a margin account without putting the margin Credit Balance—(1) the funds available to a client in a cash
account below minimum equity. account; (2) the positive cash balance in a margin account; (3) the
Bond—(1) a debt instrument; a security that represents the debt of client’s liability in a short account.
a corporation, a municipality, the federal government, or any other Day Trade—the purchasing and selling, or the short-selling and
entity. A bond is usually long term in nature (10 to 30 years) and is purchasing, to cover the same security in the same trading day
to be repaid to the investor on a specified date; (2) an investment within a margin account.
in a government or corporation that is structured very much like a
Debit Balance—the amount of loan in a margin account.
loan, except that the payment is to individual bondholders rather
than to a lending institution. Most bonds offer a regular, scheduled Deliverable—the predetermined quantity of a security or asset
income, making them attractive to retirees and others living on an which is the subject of an options contract.
investment income. Equity—the portion in an account that reflects the client’s
Broker—(1) an individual who buys or sells securities for clients (a ownership interest.
stockbroker); (2) on an exchange, one who executes public orders on Excess Equity—equity in a margin account above that which is
an agency basis (a floor broker or commission-house broker); (3) as a required by Regulation T.
slang term, a firm that executes orders for others (a brokerage firm).
Exercise Price—the price per share that the holder of a call option
Brokerage Firm—a partnership or corporation that is in business to would pay to buy the stock from the writer; or the price the holder
provide securities services for a general marketplace. would receive should he sell the stock to the writer when exercising
Business Day—a day on which the exchanges are open for business. an option. See also “Strike Price.”
Buying Power—in a margin account, the maximum dollar amount Expected Price Range (EPR)—The EPR represents the Firm’s
of marginable securities that the client can purchase or sell short current best estimate of the volatility of a given security over a one-
without having to deposit additional funds. day period. We estimate a security's EPR based on historical returns
and current market developments (implied volatility, upcoming
Call (Option)—an options contract that gives the holder of the option announcements, etc…)
the right (but not the obligation) to purchase, and obligates the writer
to sell, a specified number of shares of the underlying asset at the Expiration—the day on which an options contract becomes void.
given strike price on or before the expiration date of the contract. Expiration Month—the month in which an options or futures
contract ceases to exist (expires).

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Federal Reserve Board—the government agency that Margin Call—a demand upon a client to deposit money or securities
regulates credit. with the brokerage firm when the value of the securities purchased
on margin falls below the allowable level.
Federal Reserve System—the nation’s central monetary authority,
and the Treasury Department’s agent for selling new issues of Margin Department—the department of a clearing brokerage
Treasury bills, notes, and bonds. firm that computes the balance that clients must maintain to avoid
maintenance and margin calls.
Government Bond—debt security issued by the U.S. government.
Margin Requirement—the percentage of equity that must be
Hedge—to reduce the risk in one security by taking an offsetting
deposited or maintained to purchase or hold a position on margin.
position in a related security.
Minimum Maintenance—established by the exchange's margin
Holder—the buyer of an options contract when opening a new
rules, the level to which the equity in an account may fall before the
options position.
client must deposit additional equity. It is expressed as a percentage
Hypothecation—a brokerage firm’s pledging of margin securities relationship between market value and equity.
at a bank to secure the funds necessary to carry an account’s
Municipal Bond—a long-term debt instrument issued by a state or
debit balance.
local government. It usually carries a fixed rate of interest, which is
In-the-Money—a term used to describe options that the holder paid semiannually.
would profit from exercising. A “call” option is in-the-money if the
Mutual Fund—a pooling of many investors’ money for specific
strike price is less than the market price of the underlying security.
investment purposes. A management company manages the fund,
A “put” option is in-the-money if the strike price is greater than the
and is responsible for adhering to the purpose of the fund.
market price of the underlying security. For example, an XYZ “call”
option with a strike price of $52 is in-the-money when XYZ trades Naked Call—occurs when an investor sells a call(s) without owning
at $52.01 or higher. An XYZ “put” option with a strike price of $52 is the underlying securities and is not selling to close out a position.
in-the-money when XYZ is trading at $51.99 or lower.
NASDAQ (National Association of Securities Dealers Automated
Index Options—a way designed to permit investors to profit from— Quotations (System))—a communication network used to store and
or protect against—price movements in the stock market in general, access quotations for qualified over-the-counter securities.
or in particular market segments, rather than in individual stocks.
New York Stock Exchange (NYSE)—a primary market for buying
IRA (Individual Retirement Account)—a retirement savings plan and selling securities.
whereby individuals with earned income may contribute a specified
Opening Transaction—refers to a client either buying or selling an
amount per year, based on their age and the IRA limits for that
options contract to open a new position.
particular year. Contributions may be tax-deductible.
Option—a contract that entitles the holder to buy (call) or sell (put) a
LEAPS® (Long-Term Equity AnticiPation Securities)—long-term
predetermined quantity of an underlying security for a specific period
stock or index options with expiration dates up to three years in
of time at a pre-established price.
the future.
Options Class—the group of options, put or call, with the same
Liquidation—(1) closing out a position; (2) an action taken by the
underlying security.
Margin Department when a client hasn’t paid for a purchase.
Options Series—the group of options having the same strike price,
Liquidity—(1) the degree of ease with which an investor can convert
expiration date, and unit of trading on the same underlying stock.
an asset into cash; (2) the characteristic of a market that enables
investors to buy and sell securities easily. Options Clearing Corporation (OCC)—a clearing corporation
owned jointly by the exchanges dealing in listed options. OCC is the
Listed Options—an option that trades on a national options exchange.
central or main clearing corporation for listed options. Options traded
Listed Securities—securities that trade on a national exchange. on any SEC-regulated exchange can be settled through OCC.
Listed Stock—stock that has qualified for trading on an exchange. Out-of-the-Money—a “call” option is out-of-the-money if the strike
Loan Value—the amount of money, expressed as a percentage of price is greater than the market price of the underlying security. A
market value, that the client may borrow from the firm. “put” option is out-of-the-money if the strike price is less than the
market price of the underlying security.
Long Market Value—the value of securities in a client’s account.
Point of No Return (PNR)—the percentage change in an
Long Position—occurs when an individual owns securities. An underlying security where the theoretical loss of that position equals
owner of 100 shares of stock is said to be “long the stock.” the liquidation value of the account.
Long-Term Bonds—bonds that mature in more than 10 years. Portfolio—(1) an individual’s or institution’s combined investment
Maintenance Call—demand from the brokerage firm to the client for holdings, including cash, stocks, bonds, mutual funds, and real
additional funds because the equity in the margin account has fallen estate; (2) a group of investments held by a single person or entity.
below the minimum amount allowed by the firm. Portfolios may include any number of types of investments, from
real-estate holdings to high-tech stocks.
Maintenance Requirement—the minimum amount of equity a
brokerage firm requires margin clients to maintain in the account. Product group—comprised of the class groups of closely related
broad-based indices and sector indices.
Margin—purchasing Treasury and agency securities with money
borrowed from a bank or brokerage firm. Put (Option)—an options contract that gives the holder the right to
sell (or “put”), and places upon the writer the obligation to purchase
Marginable Securities—securities able to be purchased on margin
a specified number of shares of the underlying security at the given
or used as collateral for a margin account.
strike price on or before the expiration date of the contract.
Margin Account (Stocks)—a leveraged account where the brokerage
Quotation—the current bid price and the current ask price of
firm lends the account owner a portion of the purchase price for
a security.
certain securities. The loan in the margin account is collateralized
by the stock; and if the value of the stock drops, the owner will be
asked to either put in more cash or sell a portion of the stock.

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Regulation T Call—a federal margin call for the deposit of the initial Straddle—simultaneous long or short positions of puts and calls
equity required under Regulation T promulgated by the Federal having the same underlying security and same strike price.
Reserve Board.
Strangle—an options strategy that refers to writing a call and a put,
Regulation T Excess—in a margin account, the amount by which with different strike prices, on the same underlying security.
the equity exceeds the current initial margin requirements of the
Strike (Exercise) Price—the stated price per share for which the
positions held.
underlying asset may be purchased (in the case of a call) or sold (in
Regulation T (Reg T)—a Federal Reserve Board regulation that the case of a put) upon exercise of an options contract.
governs the lending of money by brokerage firms to clients.
Trade Date—the day a trade occurs. Trades generally settle (are
Restricted Account—as defined by Regulation T, a margin account paid for) one to five business days after the trade date.
in which the debit balance exceeds the loan value. TD Ameritrade,
Treasury Bills—obligations issued by the Department of the
Inc. may restrict an account for 90 days when a Regulation T call
Treasury maturing in 13, 26, or 52 weeks.
has not been satisfied by the due date.
Treasury Bond—long-term (10 to 30 years), fixed-interest
Risk Array—a set of stress testing price points for an underlying
government debt security.
security that is used to determine the theoretical max loss which will
be used as the maintenance requirement for that position. Typically Treasury Note—medium-term (one to 10 years), fixed-interest
the stressed price points are equidistant. government debt security.
Securities—a general term used to describe any kind of investment Uncovered Call—a short call-options position in which the writer
product, though it can also refer specifically to stocks and bonds. does not own shares of the underlying stock represented by his
options contracts. Also called a “naked” call, it is much riskier for
Securities and Exchange Commission (SEC)—the federal
the writer than a covered call, where the writer owns the underlying
agency responsible for the enforcement of laws governing the
stock. If the holder of this call option exercises the option to call, the
securities industry.
writer would be forced to buy the stock at market price. The nature
Sell/Write—an advanced options order that combines the short of uncovered call options means that the writer’s risk is unlimited.
selling of an equity and the selling of a put option on the same
Uncovered Put—a short put-options position in which the writer
underlying stock.
either does not have a corresponding short stock position or has
Series—all options contracts of the same class that also have the not deposited cash or cash equivalents equal to the exercise value
same unit of trade, expiration date, and exercise price. of the put. Also called “naked” puts, the writer has pledged to buy
the stock at a certain price if the holder of the option chooses to
Short Account—account in which the client has short sold securities.
exercise it. The risk of writing uncovered put options is substantial.
Before a client may sell short, a margin account must be opened.
Volatility—relative measure of a security’s price movement during a
Short Position—a position in a client’s account in which the client
specific time. It is measured mathematically by the annual standard
either owes securities to the firm or has some other obligation to meet.
deviation of daily stock-price changes.
Short Sale—the sale of securities that are not owned or that are not
Writer—the seller of an options contract when opening a new
intended for delivery. The short seller “borrows” the stock to make
options position.
delivery, with the intent to buy it back at a later date at a lower price.
SMA (Special Memorandum Account)—SMA is a separate margin
account maintained by the brokerage firm. The SMA is the most
misunderstood account in the brokerage industry. The main purpose
of the SMA is to preserve the client’s buying power. When the equity
in an account exceeds the required 50% (for Regulation T), excess
equity is created. This excess equity is known as SMA. When
excess equity exists in a margin account, an entry is made to SMA.
Once this entry is credited to the SMA, it remains there until used. It
does not disappear even if the account loses the excess equity that
created the SMA in the first place. Stocks held in a margin account
that go up in price create SMA, but a later decrease in the price of
the same stocks doesn’t decrease the SMA.
Spread—the difference between the bid and offer sides of a quote.
Spread Order—an advanced options order that combines
the purchase and sale of either puts or calls on the same
underlying security.
Stock—(1) a share in the ownership of a company; (2) an
investment product that represents part ownership in a corporation.

Investment Products: Not FDIC Insured * No Bank Guarantee * May Lose Value

TD Ameritrade Inc. and TD Ameritrade Clearing, Inc., members FINRA/SIPC. TD Ameritrade is a trademark jointly owned by
TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

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