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My broker allows me to sell shares in the lots that they were bought.

For example, the fictitious NuCo, In., in order of purchase:

Lot A: 300 Shares of NUCO at $20
Lot B: 300 Shares of NUCO at $17
Lot C: 600 Shares of NUCO at $12
Lot D: 600 Shares of NUCO at $15

Let's say Lots A and B were bought using leverage and all others were bought with cash. I was able to buy A and B by borrowing because the majority of the account value sat in long term positions that that allowed A and B to be purchased well below to margin limit.

If want to sell lots C and D at $16, will I have paid my broker back, or still be using the borrowed margin account money?

The default sell order is FIFO (first in, first out).

This is a simplified version of a bad position I bought my self out of. The numbers were made up in order to show an average cost-per-share around $15.

I would like to sell off C and D to take the earnings and hold A and B expecting a recovery.

Since A and B were bought on margin, would they remain loans if I sold C and D.

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If this is the US then the maximum amount of margin borrowing for equities is 50%.

Lots A and B cost a total of $11,100 so that would be $5,550 borrowed (50%).

Lots C and D sold at $16 would generate $19,200 in sale proceeds so the margin loan would be paid off.

  • Sorry, to clarify, assume I had other long term holdings that were being used as the leverage in other stocks. My question is really is the loan tied to the lot? – Louis Dec 7 '19 at 7:40
  • A and B were 100% borrowed – Louis Dec 7 '19 at 7:53
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    You must have 50% of their value (SMA) in your account in order to buy them on margin. No, the loan is not tied to the lot. The loan is collateralized by the cash and/or marginable securities in your brokerage account. Read this: investopedia.com/terms/s/specialmemorandumaccount.asp – Bob Baerker Dec 7 '19 at 13:42
  • thank you, I didn't understand what the SMA was before. Could you make this comment the answer? – Louis Dec 7 '19 at 18:15
  • Would you also mind making an SMA tag? – Louis Dec 7 '19 at 18:32

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