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-----Original Message-----
From: Scott Hoffman <trader20@xxxxxxxxxxxxxx>
To: watters@xxxxxxxxxxxxxxxxxxxx <watters@xxxxxxxxxxxxxxxxxxxx>;
omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Wednesday, November 11, 1998 2:04 PM
Subject: Re: Account Cash Balance
>Thank you (I've kept the name private).
>
>So really, "cash" in my account *is* in fact updated every day. As you say,
>ACB, OTE, and LV are just accounting terms. LV is really the cash balance
>after marking to market.
>
>Here's another question. I don't want to look the gift-horse in mouth, but
>my broker has confirmed that TBills will be allowed to mature without
>breaking them even with a negative LV. As long as the M/E is positive. This
>is in effect lending the customer interest free money (if LV is negative).
>Here's an example:
>
>1)Open account with $20,000.
>
>2)Buy 20,000 TBill (cost = $19750, let's say), leaving ~$250 cash in the
>account. Available margin: $19,000 from TBill haircut + $250 cash. LV:$250
>
>3)Buy 1 US contract. Margin: $2500. M/E: $16,750.
>
>4)Close open position with an $8,000 loss. (Bad trade!) New LV: -$7,750.
>However, since M/E: $11,250 is still positive, the FCM doesn't require you
>to break the TBill. At this point, the FCM is "carrying" you loss while
you,
>the customer, is earning interest on that $20K TBill. Not bad (loss on the
>trade notwithstanding)
>
>Isn't this interesting?
>
>Scott Hoffman
>
>
>
>>Scott,
>>I saw your question on the Omega List about ACB and thought that I could
>>provide a little insight. ACB is not marked to the market everyday, but
>>Open Trade Equity (OTE) is. Adding the ACB and OTE equals LV.
>>I've asked the same question before. From my understanding, the reason
>>that the accounting is done this way is so that you have a basis point
>>to go from. With the ACB you can see where your account stood before
>>you entered positions, see what your trades are doing for you with the
>>OTE and determine where your account stands now with the LV.
>>I hope that this helps answer your question. I know that it seems
>>contrary to what marking to the market means, but ACB, OTE, LV, and all
>>the other acronyms on your statement are just accounting terms. Your
>>bottom line remains the same. Feel free to let me know if I can help
>>with any other questions.
>>
>
>
>
Scott: Although some brokers may not be alert all the time, no brokerage
firm that I'm familiar with would allow this to continue. It's known as
being "cash debit" and the t-bill would be broken absent any cash deposit.
Regards, Jack.
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