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Long Market Value (LMV) is a term used by investors and brokers to describe the total amount of value held by securities that an investor currently owns in a brokerage account. In terms of stock, this amount is determined by multiplying the amount of shares held by the market price for each particular stock and then adding all of these totals together. The LMV is important to brokers because they generally require that an investor have a certain percentage of this value in their account as cash to cover the margin. An investor's total equity in an account is calculated by subtracting the debit balance, which is money borrowed from brokers to buy securities, from the LMV.
Investors generally have two options when it comes to stock. They can sell stock to other investors, a position also known as going short. By contrast, an investor can also buy shares of stock. That position is known as going long. The term long market value is derived from this, and it describes the worth of the securities purchased by an investor.
As an example of how the long market value is determined, imagine that an investor has purchased stock in two different companies. He has 20 shares of stock in the first company at $10 US Dollars (USD) per share, and he also has 10 shares of stock in the second company at $15 USD per share. That means that his shares in the first company are worth $200 USD, which is 20 times $10 USD, and the shares in the second company are worth $150 USD, or 10 times $15. The total LMV for his account would be $200 USD added to $150 USD, for a total of $350 USD.
This value is determined every day at the end of trading and rises and falls as the shares change prices. Brokers often require that a certain percentage of the long market value be paid into the account by the investor, an amount known as the margin. Using the example above, if the broker required a 50 percent margin of the LMV, the investor would have to have $175 USD in his account.
The remainder of the money would be supplied by the broker as a loan. This amount is the debit balance. In the above example, the debit balance would be $175 USD. An investor's equity is equal to the long market value minus the debit balance. Since the investor from the above example has a $350 USD LMV and a $175 USD debit balance, his equity in the account would be $175 USD.
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