sma vs buying power definition
What is 'Buying Power' Buying power, also referred to as excess equity, is the money an investor has available to buy securities. In a margin account, the buying power is the total cash held in the brokerage account plus maximum margin available. Also referred to as excess equity. The money an investor has available to buy securities.
What is SMA and how does it work? Overview: SMA refers to the Special Memorandum Account, which represents neither equity nor cash, but rather a line of credit created when the market value of securities in a Reg. T margin account increase in value. Its purpose is to preserve the buying power that unrealized gains provide towards subsequent purchases which, absent this handling, could be assured only by withdrawing excess equity and depositing it at the time the subsequent purchase is made.