Why is Fidelity making this change?
Fidelity has historically classified TSLA as a low-volatility stock, which capped the margin requirement for long positions at 40%. TSLA’s price has dropped approximately 70% over the past year and roughly 37% over the past month. Given the prolonged decline in the stock price, the overall risk profile has changed, and higher margin requirements are needed to effectively manage the risk in concentrated accounts. As outlined in the Customer Agreement, Fidelity reserves the right to change margin requirements at any time.
How does Fidelity calculate margin requirements?
Fidelity’s Rules-Based Requirements methodology generally applies a base margin requirement of 30% for fully marginable securities in diversified accounts, but account-level requirements may be higher after other factors are considered to determine a more accurate and true representation of risk. This method goes beyond the individual security-level characteristics and analyzes risk and the corresponding margin requirements based on each customer's overall account structure. The criteria used to assess this risk may vary from broker to broker, but, generally, firms use factors such as account concentration, security liquidity, ownership concentration, industry concentration, and security volatility.
How did Fidelity determine which accounts will be affected?
After conducting a risk analysis, Fidelity has decided to implement a 10% increase for all accounts in which the TSLA holdings account for more than 50% of the overall market value at the account level.
How do I calculate my new TSLA margin requirement?
To calculate the new house margin requirement, use the Margin Calculator on Fideltiy.com to find the current market value and margin requirement for your TSLA holdings. Your current house requirement of 40% will increase to 50%, so simply multiply the market value of your TSLA position by 50% (or 0.50) to calculate the new requirement.
If your current TSLA market value is $100K, the current margin requirement is $40K ($100K x 0.40 = $40K) Your new margin requirement will be increased by $10K to $50K ($100K x 0.50 = $50K)
How do I calculate my margin house surplus/call?
To calculate how the new TSLA requirement will affect your margin house surplus, take the difference between the new requirement and the old requirement, and subtract it from your current house surplus. If the number is positive, this is your new house surplus. If the number is negative, this is your house call. As outlined in the Customer Agreement, margin calls are due when issued.
Using the example above, the difference between the new and old requirements is $10K ($50K − $40K = $10K), so simply subtract $10K from the current house surplus figure to determine your new house surplus/call.
How do I access the Margin Calculator?
A link to the Margin Calculator tool is located at the bottom of the Balances page for your margin account on Fidelity.com. For Active Trader Pro users, it can also be found at the bottom of the “Trade & Orders” tab.