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Investing with Margin
What’s margin investing?
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How much money do I need in my account to invest on margin?
Can I increase my available investable margin?
Why can’t I use all of my buying power?
What’s margin maintenance?
What does it mean if I get a margin call?
What’s margin withdrawal?
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< Investing with Margin
Help Center > Investing > Investing with Margin
What’s margin investing?
Margin investing enables you to borrow money from Robinhood and leverage your holdings to purchase securities. This gives you access to additional buying power based on the value of certain securities in your brokerage account. Margin investing can provide flexibility with your cash: if you see an opportunity in the market and want to invest more, you may be able to invest right away without needing to make a deposit from your bank. Unlike Instant Deposits, which you start with by default, margin investing access isn’t automatic—you have to apply and will only have access if you meet eligibility requirements. When you apply for margin investing, you’ll be able to receive extra buying power if you’re eligible. This additional buying power represents the money that you’re allowed to borrow from us to invest.
Margin transaction examples
Profit example
Let’s say you deposit $5,000 in cash and borrow $5,000 on margin to buy 100 shares of a stock for $100 per share—for a total of $10,000. Since $5,000 of your initial purchase was bought on margin, your portfolio value (excluding any crypto positions) is $5,000 ($10,000 - amount borrowed = $5,000). If the stock price increases to $125 per share, the stock is now worth $12,500. Since $5,000 of your initial purchase was bought on margin, you now have $7,500 in portfolio value and you owe $5,000 in margin used. In this scenario, there’s an unrealized profit of $2,500 as opposed to $1,250 if you didn’t invest on margin and only bought as many shares of stock that you could with your available cash (50 shares for a total of $5,000).
Note
Crypto positions aren’t accounted for in your portfolio value because they aren’t securities, which are custodied with our affiliate, Robinhood Crypto, LLC.
Loss example
Let’s say you deposit $5,000 in cash and borrow $5,000 on margin to buy 100 shares of a stock for $100 per share—for a total of $10,000. Since $5,000 of your initial purchase was bought on margin, your portfolio value (excluding any crypto positions) is $5,000 ($10,000 - amount borrowed = $5,000). If the stock price drops to $75 per share, the stock is now worth $7,500. Since $5,000 of your initial purchase was bought on margin, you now have $2,500 in your portfolio value and you owe $5,000 in margin used. In this scenario, there’s an unrealized loss of $2,500 as opposed to $1,250 if you didn’t invest on margin and only bought as many shares of stock that you could with your available cash (50 shares for a total of $5,000).
Note
Crypto positions aren’t accounted for in your portfolio value because they aren’t securities, which are custodied with our affiliate, Robinhood Crypto, LLC.
FAQ
What are the risks of margin investing?
With margin investing, the returns on any securities bought on margin directly affect your brokerage account value, whether they’re positive or negative. If the security loses value, the losses will be deducted from your account value—not the funds you borrowed—so it’s possible for margin to amplify your losses. Margin investing is risky and it’s not appropriate for everyone. Before considering margin investing, you should fully understand the risks involved: Additional information on the terms and risks associated with margin investing can be found in our Margin Disclosure Statement.
When would I consider margin investing?
You have to determine whether margin investing is consistent with your investment strategy. You should consider your own investment experience, goals, and sensitivity to risk. By enabling margin investing for your brokerage account, Robinhood isn't recommending the use of margin investing.
How much does it cost to use margin investing?
Robinhood’s margin interest rate is based on a floating rate, and will vary depending on whether or not you're subscribed to Gold. The Standard floating interest rate is calculated as a combination of the Federal Funds Target Rate upper bound plus the standard base rate, currently 6.5%. Interest is calculated daily at the end of the day on settled margin transactions. The daily standard interest rate is 12% divided by 360. For example, if you use $3,000 of margin, we’ll calculate $1 of daily interest as follows: If you're subscribed to Gold, you'll receive a discounted base rate. The Gold floating interest rate is calculated as a combination of the Federal Funds Target Rate upper bound plus the Gold base rate, currently 2.5%. In addition to a discounted rate, the first $1,000 of margin investing is included with your $5 monthly Gold fee. If you decide to borrow more, you’ll pay the Gold floating interest rate on any margin used over $1,000. As with standard margin interest, Gold margin interest is calculated daily at the end of the day on settled margin transactions. The daily Gold interest rate is 8% divided by 360. For example, if you use $3,000 of margin, we’ll calculate $0.44 of daily interest as follows: We’ll charge your brokerage account every 30 days at the end of your billing cycle. You can always check the current status of your billing cycle and other margin and Gold account settings in Account → Margin investing or Robinhood Gold.
Note
The margin interest rate may change at any time without notice and at Robinhood Financial’s discretion.
How do I stop investing on margin?
There are a number of ways to stop investing on margin:
Note
If you’re approved for options trading, margin may be required to satisfy exercise or assignment even if you have the Robinhood Gold margin investing feature turned off.
How much money can I borrow by investing on margin?
Your available buying power will fluctuate based on the value and volatility of your investments, according to Robinhood’s margin maintenance requirements.
Where can I see how much I’ve borrowed?
You can track how much you’ve invested on margin in Account → Margin investing. The following values are included: You can also track your buying power and available margin in Investing → Buying power
Can I set a limit on how much I can borrow?
Yes! You can set your borrowing limits to help you control how much money you’re investing on margin. By setting a limit, you can restrict the amount of margin you have to the amount that you feel comfortable using. You can set this limit to any amount you want that is equal to or less than the margin available to you, or remove this limit anytime in Account → Margin investing.
Keep in mind
There are some scenarios where the margin used could go above the borrowing limit. For example, if you get early assignment on an option spread or an ACH deposit is reversed after using Instant Deposits.
How is my interest rate calculated?
With multiple Federal Funds rate increases potentially on the horizon, we made the margin interest rate a floating rate beginning on June 14, 2022. This change allows us to be more transparent about how our margin interest rate is calculated. On July 27, 2023 the floating portion of our margin interest rate (corresponding to the Federal Funds Target Rate upper bound) changed from 5.25% to 5.5%. Robinhood’s margin interest rate is based on a floating rate, and will vary depending on whether or not you're subscribed to Gold. The Standard floating interest rate (12%) is calculated as a combination of the Federal Funds Target Rate upper bound plus the Standard base rate, currently 6.5%. If you're subscribed to Gold, you will receive a discounted base rate. The Gold floating interest rate (8%) is calculated as a combination of the Federal Funds Target Rate upper bound plus the Gold base rate, currently 2.5%. We’ll continue to closely monitor any changes in the Federal Funds Target Rate. Our goal remains to offer the best interest rates we can while taking into account the Federal Funds Target Rate. We anticipate that our interest rates will continue to be lower than many of our competitors.
Disclosures
All investments involve risk including loss of principal. No investments are FDIC insured. All examples are hypothetical and don’t reflect actual or anticipated results. Content is provided for informational purposes only; it doesn’t constitute investment advice and isn’t a recommendation for any security, account type or feature, or trading strategy. Past performance doesn’t guarantee future results. Margin investing involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation. Regardless of the underlying value of the securities you purchased, you must repay your margin debt. Robinhood Financial can change their maintenance margin requirements at any time without prior notice. If the equity in your account falls below the minimum maintenance requirements (varies according to the security), you’ll have to deposit additional cash or acceptable collateral. If you fail to meet your minimums, Robinhood Financial may be forced to sell some or all of your securities, with or without your prior approval. Robinhood Financial charges a standard margin interest rate of 12% and a margin interest rate of 8% for customers who subscribe to Gold. The margin interest rate is calculated by adding 6.5% (for non-Gold customers) or 2.5% (for Gold customers) to the upper bound of the Target Federal Funds Rate, which is set by the Federal Reserve and is subject to change without notice. The formulas used to calculate the margin interest rate are subject to change at Robinhood Financial’s discretion. The margin rates shown are as of July 27, 2023 and might change at any time without notice and at Robinhood Financial’s discretion. The standard margin interest rate will be rolled out to customers who don't subscribe to Gold in phases over a period of time, subject to eligibility criteria, and so may not be available immediately to all customers. For more information, review FINRA’s Investor Alert and Robinhood Financial’s Customer Relationship Summary, Margin Disclosure Statement, and Margin Agreement. These disclosures contain important information on Robinhood Financial’s products and services, conflicts of interests, lending policies, interest charges, and the risks associated with margin investing enabled accounts. Crypto trading and custodial services are offered through an account with Robinhood Crypto. Robinhood Crypto isn’t a member of SIPC or FINRA. Robinhood Crypto and Robinhood Financial are separate but affiliated entities. Cryptocurrencies aren’t securities and your crypto isn’t FDIC insured or SIPC protected. For more information, review the Robinhood Crypto Risk Disclosure. Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’), trading as HOOD on Nasdaq.
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As an expert in financial investing and margin trading, my knowledge spans various aspects of the topic, including risk management, margin maintenance, interest rates, and practical examples of margin transactions. I have hands-on experience in analyzing investment strategies and understanding the intricate details of margin investing.
Now, let's delve into the concepts covered in the provided article about investing with margin:
What is Margin Investing?
Margin investing involves borrowing money from a brokerage (in this case, Robinhood) to leverage your investments in securities. It allows you to increase your buying power beyond the cash you have in your account. Unlike instant deposits, access to margin investing is not automatic; it requires an application and meeting eligibility requirements.
Margin Transaction Examples:
Profit Example:
- Initial cash deposit: $5,000
- Margin borrowed: $5,000
- Total investment: $10,000 (100 shares at $100 per share)
- If stock price increases to $125 per share, unrealized profit is $2,500.
Loss Example:
- Initial cash deposit: $5,000
- Margin borrowed: $5,000
- Total investment: $10,000 (100 shares at $100 per share)
- If stock price drops to $75 per share, unrealized loss is $2,500.
Risks of Margin Investing:
- Losses directly affect your account value.
- Possible to lose more money than deposited.
- Responsibility for deficits if securities' value falls.
- Broker can sell assets without consulting you.
- Maintenance margin requirements can change without notice.
Considerations Before Margin Investing:
- Evaluate personal investment experience, goals, and risk tolerance.
- Understand the risks involved, including potential losses exceeding the deposited amount.
Cost of Margin Investing:
- Robinhood's margin interest rate is a floating rate.
- Standard rate includes the Federal Funds Target Rate upper bound plus a base rate (currently 6.5%).
- Gold subscribers receive a discounted rate.
- Interest is calculated daily on settled margin transactions.
How to Stop Investing on Margin:
- Deposit money or initiate an account transfer to cover margin.
- Sell shares or non-marginable positions.
- Options trading may require margin even with Robinhood Gold turned off.
Borrowing Limits and Monitoring:
- Available buying power fluctuates based on portfolio value and volatility.
- Track margin details in the Account → Margin investing section.
- Set borrowing limits to control the amount of money invested on margin.
Interest Rate Calculation:
- Floating rate based on the Federal Funds Target Rate upper bound.
- Standard and Gold rates with or without subscription.
- Rates may change based on market conditions.
Disclosures and Additional Information:
- All investments involve risk; past performance doesn't guarantee future results.
- Margin investing includes interest charges and risks.
- Robinhood's margin interest rates are subject to change.
- Detailed disclosures on risks and terms are available in Robinhood's documentation.
As an enthusiast in this field, I encourage thorough understanding and consideration of the risks associated with margin investing before engaging in such practices. If you have further questions or need clarification on any aspect, feel free to ask.
