My Personal Finance Journey

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Margin! Margin!

Contributed by mm | December 16, 2003 7:40 AM PST

As I blogged days before, I need to enable margin and option trading in my AmeriTrade account in order to take some profit of the recent RJR frenzy without incurring short-term capital gains. I sent out the application last week, but unfortunately AmeriTrade rejected my application today:

"In order to comply with industry regulations, Ameritrade is unable to upgrade this account to trade on margin. Our review of your Account Modification Form revealed that you already have a margin account with the same registration and account owner(s). Clients may not maintain multiple, identically titled margin accounts. You are allowed to maintain separate trading accounts, however, margin approval will only be allowed on one of the accounts.

In order to allow an upgrade to your accounts, you have the following options:
1. Consolidate your accounts into one margin account.
2. Maintain this account as a cash-only trading account.
3. Add or remove a co-account owner."

It's true that I already have a margin-enabled account inherited from Datek (which is now part of AmeriTrade) and I opened this AmeriTrade account back in March to take profit of the $75 promotional bonus. The strategy seems to backfire now :-)

Now I'm facing the choice as of whether to consolidate the two accounts, or just wait out until next March to cash out my RJR position and close the AmeriTrade account. I'm a bit concerned about the service fees involved, but to a much greater extent, I'm worried whether AmeriTrade will mess up my tax information during the tranfer during the critical time of year-end. So I decided to make the conscious decision to hold on to my current structure, wait till March to cash out my RJR position with the status of long-term capital gain, and close the account. Hopefully RJR will stay above $55 in the next three months.

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