Maintenance excess is the amount of excess cash and/or equity outside of your maintenance margin requirements. This tells you how close you are to a maintenance margin call (when it is positive) or the real-time amount of a maintenance margin call (when it is negative).
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Maintenance excess is calculated with the following formula:
maintenance_excess = cash + stock_value – maintenance_ requirements
For example, if you deposit $10,000 into a margin account your maintenance excess would look like this.
maintenance_excess = 10,000 (cash) + 0 (stock) – 0 (maintenance) = 10,000
After depositing $10,000, you can buy up to $20,000 worth of stock with the typical 50%/25% (initial/maintenance) requirement rates. Let’s say you buy $18,000 worth of XYZ. You would need to spend all $10,000 in addition to borrowing $8,000 to make this trade. Your maintenance margin requirements would be $4,500 (25%).
maintenance_excess = -8,000 (cash) + 18,000 (stock) – 4,500 (maintenance) = 5,500
If the stock were to drop in value, your maintenance excess would start to decrease. Let’s say the stock value drops to $10,000. The new maintenance requirement would be $2,500 (25%). This would put the account into a $500 maintenance margin call.
maintenance_excess = -8,000 (cash) + 10,000 (stock) – 2,500 (maintenance) = -500