⚠️ Margin Warning
Margin trading amplifies both gains and losses. You can lose more than your initial investment. Only use margin if you fully understand the risks.
Margin basics
Initial vs Maintenance
- • Initial margin: 50% minimum (Reg T)
- • Maintenance: 25% minimum (can be higher)
- • House requirements: Often stricter than regulatory minimums
- • Margin call: When equity falls below maintenance
Interest & Costs
- • Interest rates: Typically 6-12% annually
- • Daily compounding on borrowed amounts
- • Rate tiers: Higher balances get better rates
- • Additional fees may apply
How to enable
Meet eligibility requirements
Minimum $2,000 account value, investment experience, financial stability.
Complete margin application
Provide income, net worth, investment objectives, and experience details.
Read and sign disclosures
Margin agreement, risk disclosure document, and credit terms.
When not to use margin
1. Volatile earnings plays: Overnight gaps can trigger immediate margin calls.
2. Illiquid microcaps: Hard to exit positions when margin calls hit.
3. Concentrated bets: Single-stock risk amplified by leverage.
4. Overnight gaps: Market closures prevent immediate risk management.
5. When emotions run high: Fear and greed lead to poor margin decisions.
6. Without stop-loss discipline: No exit strategy amplifies losses.
7. As your only strategy: Margin should enhance, not replace, solid fundamentals.
Safer alternatives
Options Strategies
- • Cash-secured puts: Generate income while waiting to buy
- • Covered calls: Add income to existing positions
- • Defined risk spreads: Limited downside exposure
- • Protective puts: Hedge existing positions
Position Sizing
- • Smaller positions: Avoid need for leverage
- • Sector diversification: Spread risk across industries
- • Time diversification: Dollar-cost averaging
- • Cash reserves: Opportunities without borrowed funds
Remember: Margin is a tool, not a strategy. It should enhance well-researched positions, not compensate for poor analysis or inadequate capital.
Frequently Asked Questions
What happens if I can't meet a margin call?
Your broker will liquidate positions to bring the account into compliance. You may have no control over which stocks are sold.
Can I lose more money than I invested?
Yes—if positions move against you faster than you can react, you may owe money beyond your initial investment.
How is margin interest calculated?
Daily on the amount borrowed, typically 6-12% annually. Rates vary by account size and broker.