If I have a certain amount of cash equity in my account and only wanted to buy stocks on margin above the amount, is it possible to buy stocks on margin with only the equity above the amount being used). For example, say I had 30K USD in my account, and I wanted to set aside 25K (for PDT reasons for example). Could I submit a 20K order (at 4X margin on the 5K) without it using any of my remaining 25K equity?
The short answer is no. You cannot specify “I want to borrow this much”. If you could, however, it would cost you more in margin fees but result in the same net effect.
Using the example above, assume one buys $20K of stock on 4x margin.
initial cash balance: $30,000 bought stock 4X margin: $20,000 cash: $25,000 borrow margin: -$15,000 NET BALANCE: $30,000
Now, the stock goes up 1% over night and sold it for $20,200. Assume a 3% annual margin rate which is about $1.21/day on $15K.
cash: $25,000 + $20,200 payoff margin: -$15,000 margin fee: -$1.21 NET BALANCE: $30,198.79
However, in practice, one would never use margin. Like this
initial cash balance: $30,000 bought stock: $20,000 cash: $10,000 NET BALANCE: $30,000
Now, the stock goes up 1% over night and sold it for $20,200. No margin fees this time.
cash: $10,000 + $20,200 NET BALANCE: $30,200
The broker only margins as much as needed to cover the sale which saves one from ‘over borrowing’.
What is the reason you are wanting to do this?