what is open trade equity ote 
open trade equity ote is the net of unrealized gain or loss on open derivatives positions put differently ote is the paper gains and losses represented by the present market value and the price paid or received for a position once the position is closed the gain or loss will become realized understanding open trade equityote is especially important for margin investors as fluctuations impact the available equity in their account if the unrealized losses cause the available equity to drop below their contracted maintenance margin then a margin call is issued where the investor is forced to deposit additional funds to bring the available equity back above the contracted maintenance margin or liquidate all or a portion of their open positions because maintenance margins are contracted with a broker investors are legally bound to maintain their margins in the event an investor is unable or unwilling to deposit cash or sell holdings at the time of a margin call their brokerage is empowered to close open positions from their client s portfolio at their discretion in order to restore the account to its minimum value open trade equity ote measures the difference between the initial trade price of all open positions and the last traded price of each of those positions the term is derived from the fact that the established positions have not yet been offset it is useful in providing the trader with an accurate snapshot of the actual value of an account as all open positions are marked to market in other words how much equity money is in the account if all the positions were closed at the prevailing market rates example of otefor instance say a trader has 10 000 in an account and uses it to purchase 50 shares of xyz at 200 per share the total investment is 10 000 and the ote at the instance of the trade being executed is zero the next day the value of each share increases to 250 now the trader has 2 500 in unrealized gains in that trade which means that the ote for that holding is also up 2 500 and the total equity in the account is up to 12 500 if they were to liquidate this position then the gains are said to have been realized the account balance would have increased by 2 500 to 12 500 and the ote would be zero if one does not liquidate the position and the price drops to 100 they would incur a 5 000 unrealized loss on that holding unless the position is sold or closed this loss remains unrealized but the ote is negative 5 000 and the total account equity is down to 5 000 a negative ote indicates a paper loss a positive ote shows a paper gain open trade equity at margin callthe financial industry regulatory authority finra requires that any investor wishing to open a margin account must begin with at least 2 000 in cash or securities 1 finra requires that the investor agree to a maintenance margin of at least 25 meaning that the investor must maintain an account balance of at least 25 of the total market value of the securities held in the account at all times 2 typically this maintenance margin is contracted at a higher percentage and it is common practice for maintenance margins to be 30 or more for instance an investor wants to buy 500 shares of a stock trading at 20 share they do not have the 10 000 needed to do this so they open a 5 000 account with a broker who has a 50 initial margin and a 35 maintenance margin requirement investor purchases 10 000 worth of shares which means that they have borrowed 5 000 from the broker at the instance of execution the ote is zero total value of investment is 10 000 initial margin is 5 000 50 x 10 000 and the maintenance margin is 3 500 35 x 10 000 the price begins to decline to where the total value of 500 shares falls to 6 000 which means that the ote is negative 4 000 the 5 000 that the investor put up as margin is now worth 3 000 5 000 50 x 4 000 this is below the 3 500 maintenance margin requirement so the investor receives a margin call at this point the investor will be required to make a deposit into the margin account to satisfy the 50 requirement in this case 2 000 this can take the form of a cash deposit or marginable securities they may also choose to take a loss on the investment by liquidating all or a portion of their open positions thereby reducing their margin requirements this usually results in realizing a loss on their trade 