Reg T Margin vs Portfolio Margin Explained

Reg T margin vs portfolio margin is a choice between two ways of answering one question: how much of your own money has to sit behind a position. Reg T is rule-based and flat, asking 50% of the purchase price up front and 25% of market value after that, whatever you happen to hold. Portfolio margin is risk-based. It revalues the whole account across a grid of price shocks and charges the largest loss that grid produces.

What is Reg T margin?

Regulation T is a Federal Reserve rule, 12 CFR Part 220, that caps the initial credit a broker may extend on a margin equity security at 50% of its value. Buy $20,000 of stock and $10,000 has to be yours. The other $10,000 is a loan from the broker.

Maintenance margin is a separate rule, FINRA Rule 4210(c), and it sets a floor of 25% of market value for long positions, with a higher floor on short stock. The arithmetic between the two is worth doing by hand once. Start with $20,000 of stock against a $10,000 loan. At a market value of $13,333 the equity is $3,333, which is exactly 25% of the position. A holding opened at the Reg T rate arrives at the regulatory maintenance line after a decline of one third. Most brokers set house maintenance at 30% to 40% rather than 25%, and the call comes earlier than the arithmetic above suggests.

For options, Reg T is strategy-based: the requirement is a lookup table keyed to position type rather than a risk calculation. A long call or put is paid for in full. An uncovered short put is charged the premium plus 20% of the underlying value less the out-of-the-money amount, with a floor near 10% of the strike. A defined-width vertical spread is charged its width less the credit received. Our margin for selling naked options guide walks those uncovered formulas line by line.

What is the Special Memorandum Account (SMA)?

SMA, the Special Memorandum Account of Reg T section 220.5, is the line item that confuses almost everyone who first meets it. It is neither cash nor equity. It is a running ledger of borrowing credit the account has earned. Cash deposits add to it, dividends add to it, half of sale proceeds add to it, and market gains that lift equity above the Reg T requirement add to it.

Here is the part that catches people out. SMA rises when holdings appreciate, and it does not fall when they depreciate. An account can display a comfortable SMA balance in the middle of a punishing month while its maintenance equity sits a few percent above the house line, since the two figures are computed from different inputs on different schedules. SMA records borrowing capacity that was created at some point in the past. The maintenance calculation records where the account stands right now. Only the second one produces a call.

What is portfolio margin, and how does TIMS work?

FINRA Rule 4210(g) lets an approved account be margined on composite risk instead of strategy lookups, using a methodology built on the Options Clearing Corporation's Theoretical Intermarket Margining System, or TIMS. Positions are sorted into classes by underlying, each class is revalued at ten equidistant points spanning a fixed range, and the requirement is the worst loss anywhere in that range:

• plus 6% to minus 8% for a high-capitalization broad-based market index
• plus or minus 10% for other broad-based indexes
• plus or minus 15% for individual equities and narrow-based indexes
• a small per-contract minimum charge on short options, whatever the grid returns

Eligibility is gated. The regulatory floor is $100,000 of account equity alongside approval for uncovered option writing. Broker house minimums sit above that floor, $125,000 being the common figure and several firms asking more. Check the number at your own broker, since the rule sets a minimum and every firm is free to demand more of it.

The grid stresses implied volatility as well as price, and volatility is not one number per underlying. Listed contracts carry a separate implied volatility at every strike, which the panel below reads straight off SPY contract data.

SELECT
    concat(if(step > 0, '+', ''), toString(step), '%') AS strike_vs_spot,
    round(avg(implied_volatility) * 100, 1)            AS avg_iv_pct,
    sum(volume)                                        AS contract_volume
FROM
(
    SELECT
        implied_volatility,
        volume,
        toInt32(round((toFloat64(strike_price) / toFloat64(underlying_close) - 1) * 20)) * 5 AS step
    FROM global_markets.options_greeks
    WHERE underlying_symbol = 'SPY'
      AND date >= '2026-05-01'
      AND date <  '2026-07-01'
      AND iv_converged = 1
      AND volume > 0
      AND days_to_expiry BETWEEN 20 AND 45
      AND underlying_close > 0
      AND abs(toFloat64(strike_price) / toFloat64(underlying_close) - 1) <= 0.205
)
GROUP BY step
ORDER BY step

Contracts struck -20% from spot averaged 36.7% implied volatility over May and June 2026, and contracts struck +20% averaged 20.1%. Same underlying, same 20 to 45 day expiry band, 9 strike buckets. A flat percentage rule applies one figure to every one of them. A revaluation grid prices each bucket on its own inputs.

Reg T margin vs portfolio margin on one position

The fastest way to feel the difference is a hedged position, so take a hypothetical. The numbers below are arithmetic for teaching, not market data. Stock XYZ trades at $100. You sell one 30-day $95 put and buy one 30-day $60 put against it, collecting $1.50 net.

Under Reg T, that short vertical is charged its width less the credit. The width is $35 per share, or $3,500 for the pair. Subtract the $150 credit and $3,350 is held.

Under portfolio margin, the pair is revalued down to the minus 15% point, $85. There the short $95 put is roughly $10 in the money and the long $60 put is still worthless, a loss near $1,000 before the credit is applied. The requirement lands under a third of the Reg T figure. The long put sits 25 points below the deepest point the grid ever visits, and the strategy table charges the full width regardless.

Now strip the hedge and sell the $95 put on its own. Reg T charges 20% of the $10,000 underlying value less the $500 out-of-the-money amount plus premium, roughly $1,500 and change. The grid at $85 finds a comparable loss on price alone, then adds the volatility shift on top, and on a name whose model band a broker has widened past 15%, which happens routinely on volatile or concentrated single names, the risk-based number passes the flat one. Risk-based margin measures rather than discounts, and measurement cuts both ways.

Is a 15% stress move realistic?

The grid assumes a 15% adverse move in a single name. On a long enough tape that assumption is ordinary rather than extreme.

WITH moves AS
(
    SELECT
        ticker,
        toFloat64(close) AS c,
        lagInFrame(toFloat64(close), 1) OVER (PARTITION BY ticker ORDER BY date ROWS BETWEEN 1 PRECEDING AND CURRENT ROW) AS prev_close,
        lagInFrame(toFloat64(close), 5) OVER (PARTITION BY ticker ORDER BY date ROWS BETWEEN 5 PRECEDING AND CURRENT ROW) AS close_5d_ago
    FROM global_markets.stocks_daily_aggs
    WHERE ticker IN ('SPY', 'MSFT', 'AMD', 'BAC', 'KO', 'XOM')
      AND date >= '2015-01-01'
      AND date <  '2026-07-01'
)
SELECT
    ticker,
    round(min((c / prev_close   - 1) * 100), 1) AS worst_1d_pct,
    round(min((c / close_5d_ago - 1) * 100), 1) AS worst_5d_pct
FROM moves
WHERE prev_close > 0
  AND close_5d_ago > 0
GROUP BY ticker
ORDER BY worst_5d_pct

Across 6 widely held names from January 2015 forward, AMD carried the deepest five-session decline at -32.7%, with a single worst session of -24.2%. Even MSFT, the shallowest of the set, reached -16.4% over five sessions. Every name in the panel has visited the minus 15% point at least once in the window, which is the point: the grid is not describing a disaster, it is describing a Tuesday that has already happened several times.

The environment those requirements live in also moves year to year, while the Reg T percentages never do.

SELECT
    toYear(session_date)                       AS year,
    round(stddevPop(daily_pct) * sqrt(252), 1) AS realized_vol_pct,
    round(min(daily_pct), 1)                   AS worst_day_pct,
    countIf(abs(daily_pct) >= 2)               AS days_over_2pct_count
FROM
(
    SELECT
        date AS session_date,
        (toFloat64(close) / lagInFrame(toFloat64(close), 1) OVER (ORDER BY date ROWS BETWEEN 1 PRECEDING AND CURRENT ROW) - 1) * 100 AS daily_pct
    FROM global_markets.stocks_daily_aggs
    WHERE ticker = 'SPY'
      AND date >= '2007-01-01'
      AND date <  '2026-07-01'
)
WHERE isFinite(daily_pct)
GROUP BY year
ORDER BY year

Realized volatility on SPY measured 15.9% in 2007 and 41.2% in 2008. The Reg T inputs across those two years were identical: 50% initial, 25% maintenance. A scenario-based requirement moves with the volatility surface it is fed, which is the entire design intent. The 2026 bar covers sessions through the end of June only.

What are the risks of portfolio margin?

Lower margin on the same position means the same account can hold a larger position, and the leverage that looked free in a calm year reprices during the move rather than after it. As the stress inputs widen, the requirement widens with them, on positions already carrying a loss.

SELECT
    session_date,
    daily_move_pct,
    drawdown_pct,
    round(min(drawdown_pct) OVER (ORDER BY session_date ROWS BETWEEN UNBOUNDED PRECEDING AND CURRENT ROW), 2) AS deepest_drawdown_pct
FROM
(
    SELECT
        toString(date) AS session_date,
        round((toFloat64(close) / lagInFrame(toFloat64(close), 1) OVER (ORDER BY date ROWS BETWEEN 1 PRECEDING AND CURRENT ROW) - 1) * 100, 2) AS daily_move_pct,
        round((toFloat64(close) / max(toFloat64(close)) OVER (ORDER BY date ROWS BETWEEN UNBOUNDED PRECEDING AND CURRENT ROW) - 1) * 100, 2) AS drawdown_pct
    FROM global_markets.stocks_daily_aggs
    WHERE ticker = 'SPY'
      AND date >= '2020-02-10'
      AND date <  '2020-04-16'
)
WHERE session_date > '2020-02-10'
ORDER BY session_date

This window is pinned to fixed historical dates, so the numbers never refresh. Over its 45 sessions the drawdown column bottomed at -34.1% and stood at -17.91% by 2020-04-15, on the most liquid equity instrument in the market. Our maximum drawdown explainer covers how to read that column on any position you hold.

Four things follow from the mechanics rather than from opinion. Requirements in a portfolio margin account are recomputed intraday, and a firm may liquidate positions the same day without the courtesy call a Reg T account often receives. Falling below the minimum equity line restricts new positions until it is restored. The scenario band is a house parameter, so the broker can widen it on a name mid-position. And the pattern day trader rule runs on its own separate $25,000 track, which a larger margin ceiling does nothing to satisfy. Aggregate borrowing across the industry is published monthly, and our FINRA margin debt statistics post tracks the series.

FAQ

What is the difference between Reg T margin and portfolio margin?

Reg T applies fixed percentages set by rule, 50% initial and a 25% maintenance minimum, plus a strategy lookup table for options. Portfolio margin revalues the whole account across a range of simulated market moves and charges the largest loss found. Reg T looks at what you own; portfolio margin looks at what the account loses in a stress scenario.

What is the minimum equity for a portfolio margin account?

FINRA Rule 4210(g) sets a regulatory floor of $100,000 in account equity together with approval for uncovered option writing. House minimums are higher, with $125,000 common and some firms above it. The broker's number is the one that binds, and it is worth confirming before assuming eligibility.

Does a portfolio margin account get a maintenance call?

Requirements are recalculated through the trading day rather than only at the close, and deficits are generally expected to be met the same day. Firms retain the right to liquidate intraday, which is a meaningful difference from the multi-day cure period many Reg T accounts are used to.

What does SMA mean in a margin account?

SMA stands for Special Memorandum Account, a Reg T ledger of borrowing credit the account has accumulated. It grows with deposits, dividends, part of sale proceeds, and market gains, and it does not shrink when positions lose value. A positive SMA balance says nothing about whether a maintenance call is close.

Is portfolio margin the same at every broker?

No. The rule sets minimums, and firms add house requirements on top: wider stress bands on volatile or concentrated names, higher equity thresholds, and concentration add-ons that vary by desk. Two brokers can quote different requirements on an identical portfolio, and both can be compliant.

Every panel above ships with the exact SQL that produced it, expandable underneath the chart. To run the same stress arithmetic over a name you actually follow, ask the question in plain English on the Strasmore terminal.