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Why could I buy more than the cash I had?
Buying power is a limit the broker is willing to let you trade against. It is not a pile of cash sitting in the account. A buy that uses it still has a share price, and that price can fall.
The short answer
Buying power is a limit the broker is willing to let you trade against. It is not a pile of cash sitting in the account. A buy that uses it still has a share price, and that price can fall.
The position
Here is one position (hypothetical, made-up prices). The count is 100 shares. The first figure in the story is $80. The later figure is $62.
| What you are looking at | Count | Price | Value | Versus the first total |
|---|---|---|---|---|
| The first total | 100 shares | $80 | $8,000 | $0 |
| After the price fell | 100 shares | $62 | $6,200 | −$1,800 |
The bottom row is this account. The −$1,800 is the gap. The price fell. Holding does not put the first figure back. These figures are made-up, so the subtraction stays checkable after the market moves.
Start with the count. 100 shares at $80 comes to $8,000. The later price is $62. The same count at that price comes to $6,200. Subtract. $8,000 minus $6,200 is $1,800. That is the whole table. It is not a fee hiding in the price, and it is not a forecast of tomorrow.
How to check it on the statement
Read the count first. Then read the price the statement used. Multiply those two yourself. If your product is not a share, multiply the point move by the contract size instead of multiplying a share price. The number you get should match the value in the table, or you are looking at a different count.
Write the first total on one line and the later total under it. The gap is a subtraction. Do not add a second story, such as a fee or a dividend, until you see that line on the statement. A missing line is a zero, not a guess.
If you sold part of the position, split the page into the cash that left and the count that stayed. Add those two. A sale of one piece does not freeze the price of the piece you kept.
If the order never filled, the statement still shows the old count. Look in the order history for a cancel, an expiry, or a limit the market never traded. The position page will not show an order that died.
Do this before you decide what the market "meant." The dollars are the count times the price you can point at. The reason can wait until those two numbers are written down.
What happened
The screen showed more buying power than the cash balance. You bought 100 shares at $80, which is $8,000. The price fell to $62. The shares are worth $6,200. The page does not name an interest rate on any borrowed part, because that rate is the broker's and it is not in this story. If interest was charged, read it off the statement as its own line. The share loss is the table.
How to read a brokerage statement shows the count you still have and the price the statement used. It does not replay the order you meant to send. If the statement's count disagrees with this page, use the statement and do the subtraction again.
What this is not
Cash is what you can withdraw. Buying power is what you can trade. Mixing them is how an $8,000 buy feels like it was paid for when the cash line was smaller. This page does not say every account lends. It says the shares you bought are down, whatever mix of cash and credit paid for them.
The account does not undo it
A TFSA or an RRSP changes the tax treatment of what is inside. It does not put the first price back. The shelter does not pay the gap back, and a lower price does not hand contribution room back. Room follows the contribution rules, not the chart. A taxable account shows the same mark. The wrapper decides tax. The count and the price decide the dollars.
If the custodian does not allow this product, the custodian's list wins over a general description. The math above is only for a position the account actually holds.
What to write down
- The cash balance, separate from buying power.
- The fill and the count.
- The later share price.
- Any interest line, from the statement, not from a guess.
Then subtract. If a step is missing, the gap on the screen is not explained yet. Do not fill the blank with a rate, a fee, or a yield you did not read off a statement or a contract spec.
Questions
Was the buying power my money? Not automatically. It is a trading limit. The cash line is the cash.
Where is the interest? Not in this table. If the broker charged it, it is on the statement. This page does not invent the rate.
Does the loss shrink if part was borrowed? No. The shares fell from $80 to $62 either way. The loan, if there is one, is extra.
Does a TFSA have this buying power? Often it does not. The custodian's list wins. If the shares are there, the price still fell.
Are these the live prices? No. They are hypothetical, so the −$1,800 stays checkable.
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