1. What is Buying Power?

Buying Power represents the total amount of capital available for purchasing securities in a brokerage account. It includes cash balances, the value of existing securities, and any available margin borrowing capacity.

2. How Does the Calculator Work?

The calculator uses the Buying Power formula:

Where:

• \( Cash \) — Available cash balance in the account ($)
• \( Securities\ Value \) — Current market value of all securities held ($)
• \( Account\ Margin\ Available \) — Additional borrowing capacity based on margin rules ($)

Explanation: This calculation determines the maximum amount you can invest in new securities while considering your current assets and borrowing capacity.

3. Importance of Buying Power Calculation

Details: Understanding your buying power is crucial for investment planning, risk management, and ensuring you don't exceed your financial capacity when making trades.

4. Using the Calculator

Tips: Enter your current cash balance, the total market value of your securities portfolio, and any available margin capacity. All values must be in dollars and non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between cash and buying power?
A: Cash refers only to the liquid funds available, while buying power includes cash plus the value of securities and available margin, representing total purchasing capacity.

Q2: How does margin affect buying power?
A: Margin allows you to borrow against your existing securities, effectively increasing your buying power beyond your cash and securities value.

Q3: Can buying power be negative?
A: No, buying power should always be a positive value. If calculations show negative, it may indicate an error in input values or account issues.

Q4: How often should I check my buying power?
A: Regularly monitor your buying power, especially before making large trades or when market conditions are volatile.

Q5: Are there limitations to margin buying power?
A: Yes, margin is subject to regulatory requirements, broker-specific rules, and maintenance margin requirements that can change based on market conditions.