Just logged into my margin account and saw some interesting developments. I had inherited 200 shares FMBI when my mother passed away 5 years ago. They were worth $33.50 (fair market value), and after watching them fall farther and farther along with the financial sector, I decided to pick a pain threshold of $5.99. So, I placed a sell-stop order on 200 FMBI with a trigger price of $5.99. As fate would have it, the stock dropped and was sold automatically at $5.99 which, after the $9.99 commission, turned the stock into $1,198 cash money.
Except, since I owe the broker-dealer for the money I borrowed, guess how that "cash" was applied? Yep--they used it to pay down my debit balance, which is now $3,528.76.
My 90 shares of Hospira (HSP) are worth $3,425.40, so maybe it's time to think about selling them and paying off the margin balance?
Should I place a sell-limit a few dollars above the current price? Or, should I try to set a floor below the current price with a sell-stop order, selling only if the stock drops from here?
Or, should I just watch the market every day and place a market order if I have to? Who knows? The Series 7 doesn't tackle important questions like that--they just expect you to know the basic terminology and be able to follow a blog post like this one.
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