Tradeking Almost Gives me a Heart Attack with an Erroneous Margin Call

Tradeking Almost Gives me a Heart Attack with an Erroneous Margin Call

I haven’t really talked about it too much on here, but I have an account with TradeKing. The reason I don’t talk about it is because I have moved away from the original purpose of the account, so the account just sort of sits there dormant with a few holdings fluctuating between $1,500 and $1,800.

Well I received the following two emails while in Philadelphia for the Sister in Law’s Wedding

Dear null:

This message is to inform you that there are (Fed and/or House) call(s) in your
account:

Account ending with XXXX House Call $2,906.03 Due Date 10/05/2010

A margin call may be satisfied by the prompt deposit of cash or additional acceptable securities. While most call notices are delivered with a three-day response time, TradeKing retains the right to require additional margin in any amount and in any time frame considered prudent. TradeKing’s determinations are based on market conditions, concentration in one or more securities and other relevant factors. If you do not meet a margin call, TradeKing may liquidate securities in the account to the extent necessary to satisfy the call. TradeKing can sell your securities or other assets without contacting you. TradeKing may attempt to notify you of margin calls but is not required to do so. However, even if TradeKing has contacted you and provided a specific date by which you must meet a margin call, TradeKing can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to you. You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold by TradeKing to meet a margin call. TradeKing can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice. You are not entitled to an extension of time on a margin call.

Please read TradeKing’s Margin Agreement and Disclosure on the website under

Disclosures – Margin Accounts – Margin Account Agreement and Disclosure.

If you have any questions please contact us at 877-495-5464.

Regards

TradeKing

AND

Dear null:

This message is to inform you that there are (Fed and/or House) call(s) in your account:

Account ending with XXXX House Call $2,894.03 Due Date 10/04/2010

A margin call may be satisfied by the prompt deposit of cash or additional acceptable securities. While most call notices are delivered with a three-day response time, TradeKing retains the right to require additional margin in any amount and in any time frame considered prudent. TradeKing’s determinations are based on market conditions, concentration in one or more securities and other relevant factors. If you do not meet a margin call, TradeKing may liquidate securities in the account to the extent necessary to satisfy the call. TradeKing can sell your securities or other assets without contacting you. TradeKing may attempt to notify you of margin calls but is not required to do so. However, even if TradeKing has contacted you and provided a specific date by which you must meet a margin call, TradeKing can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to you. You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold by TradeKing to meet a margin call. TradeKing can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice. You are not entitled to an extension of time on a margin call

Please read TradeKing’s Margin Agreement and Disclosure on the website under Disclosures – Margin Accounts – Margin Account Agreement and Disclosure.

If you have any questions please contact us at 877-495-5464.

Regards

TradeKing

WOAH! I owe nearly $6,000 from a margin trade?  and who the hell is Null?

What is a Margin Call? What are the Requirements to Buy on Margin?

According to the Securities and Exchange Commission,

“Margin” is borrowing money from your broker to buy a stock and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. But margin exposes investors to the potential for higher losses. Here’s what you need to know about margin.

I am not saying buying on margin is good or bad, but I know I have never done it! So I know there is a mistake in there somewhere, but whose mistake is it? Mine or theirs…and are they going to act without trying to figure it out?

I quickly checked the margin requirements,

Before trading on margin, FINRA, for example, requires you to deposit with your brokerage firm a minimum of $2,000 or 100 percent of the purchase price, whichever is less. This is known as the “minimum margin.” Some firms may require you to deposit more than $2,000.

Amount You Can Borrow – Initial Margin

According to Regulation T of the Federal Reserve Board, you may borrow up to 50 percent of the purchase price of securities that can be purchased on margin. This is known as the “initial margin.” Some firms require you to deposit more than 50 percent of the purchase price. Also be aware that not all securities can be purchased on margin.

I didn’t even meet the minimum requirements!  Turns out TradeKing figured out it was a computer accounting issue that I’ll explain this week – and everything is all good! I am shocked how great TradeKing’s customer service was during all this.

Do you ever buy on margin?

10 Responses to Tradeking Almost Gives me a Heart Attack with an Erroneous Margin Call

  1. I’m not an active trader but one thing I do know is that if you trade on margin you’d better be prepared for the worst to happen. It can be highly profitable but with that potential comes a lot of risk.

  2. As soon as I see ‘null’ I think that this is a mistake email. Still, I’d pick up the phone immediately and make sure everything was ok, mistakes like these shouldn’t happen with large companies.

    This reminds me of the thousands of college kids who got mistake ‘You’ve been accepted’ emails only to have the offer retracted later.

  3. During college, a good friend of mine had a legit margin call and he nearly crapped his pants during class. Yeah, he is the risky type but it worked out well for him. This happened near the bottom of the recent recession so he is glad he used margin and was able to cover the loss (by using some of his siblings’ money hah).

  4. Yikes, I am glad I am not ‘null’ either, but what a ridiculous mistake. I would have panicked too, even though I knew I hadn’t traded on margin.

    I have bought some stocks on margin, but that was ages ago and it all went well. Was not a common occurrence by any means.

  5. I’ve bought on margin, several times. But my margin use is very limited, I make sure I am able to cover by selling a winner or simply with cash in a worst case scenario. I buy with a very limited holding period in mind and with robust fundamentals.

  6. That’s pretty scary…yeah, from what I’ve heard, margin can be extremely risky and you need to be ultra confident in the trades (not just a “feels good” trade), or you can get really burned. I’ll be curious to hear exactly what was up with TradeKing. They really should be apologizing and even giving some sort of credit to your account for such an erroneous email.

  7. That’s can really cause you a big problem if it’s a right report from them. LOL Just be thankful that it’s just an error on their part, at least you won’t really need to have that huge amount of money.

  8. I have just received the same messages from them! I have no traded on margin with their site or any site for that matter. I presented the problem to customer service and am still awaiting a response from the supervisor. Hopefully i receive the same result as you.

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