Even though presidential candidate Joe Biden unveiled tax and business policies that are much more moderate than initially expected, we are looking at substantially increased volatility in the equity markets as we approach the November election. Implied volatilities in options are, in some cases, very high. Our custodian partners are increasing margin requirements to help stem some of the volatility.
Margin requirements will increase by as much as 35% above standard margin requirements leading up to the November U.S. election. To illustrate, consider a Reg. T margin account with stock XYZ having an Initial Margin requirement of 50% and a Maintenance Margin requirement of 25%. With the increase fully implemented, the new requirements would be 67.5% Initial and 33.75% Maintenance. Accounts subject to risk-based margin will have their scanning ranges increased similarly.
This will be implemented each day gradually, increasing Initial margin requirements from normal levels starting September 28th to a rate that will be 35% higher by October 23rd. Maintenance margin requirements will grow similarly between October 5th and October 30th. The new requirements will be implemented each day after the market closes in New York and will be effective on the next trading day.