What’s margin investing? | Robinhood

What’s margin investing?

Margin investing (also referred to as margin lending) involves interest charges and carries increased risk, it can magnify both your gains and losses, and you could lose more than you invested.

Margin investing allows you to borrow money from Robinhood to buy securities, with your portfolio as collateral. This gives you access to additional buying power based on the value of the securities in your brokerage account and allows you to leverage your existing holdings to purchase securities. When we refer to additional buying power, we mean the amount of money that you’re allowed to borrow from us to invest. If you want to diversify your portfolio or see an opportunity in the market and want to invest more, you may be able to invest right away.

Margin investing is an optional product. You have to apply, meet eligibility requirements, and pass an appropriateness test to get access. There is no credit check performed as part of the margin investing application process.

Keep in mind

You can’t have Stock Lending and Margin Investing enabled at the same time.

Risks of margin investing

You must determine whether this type of trading strategy is right for you given your specific investment objectives, investment experience, understanding of margin investing, risk tolerance, and financial situation.

Margin investing involves the risk of greater investment losses and isn’t appropriate for everyone. You should fully understand the conditions and risks involved with using a margin loan to purchase securities:

  • You could lose more than you initially invested
  • Leveraged investments create a greater potential risk of loss
  • Additional costs from margin interest charges (review our UK Fee Schedule)
  • You'll be responsible for any deficit if falling prices reduce the value of your securities below the margin maintenance requirement, and you may have to deposit additional funds to your brokerage account account or close positions to reduce your margin loan on short notice to cover the margin maintenance requirement in your account.
  • Potential margin calls or liquidation of securities
  • We can close some or all of your positions or sell other assets without consulting you to pay off your margin debt.
  • You’re not entitled to choose which positions we close or securities we sell from your account to cover your margin debt.
  • We can change our house margin maintenance requirements for each security (margin ratio) at any time, and aren't required to provide you advance written notice. This is because we need to be able to adjust the margin ratios in line with rapidly changing market conditions for each security to minimise the risk of insufficient collateral in your account that covers your margin loan.
  • You’re not entitled to an extension of time on a margin call.
  • Under the margin agreement, purchased shares may serve as collateral for your margin loans and may be lent by RHS to others. You may give up some or all of your voting rights with respect to purchased shares, but you’ll still get a payment for any dividends related to them. Shares and cash owed to you (net of any margin balance owed by you) are protected under SIPC up to $500,000 (including $250,000 for claims for cash) in the unlikely event that Robinhood fails. For details, review our SIPC, FIDC and Account Protection Disclosure.

For more information on the terms and risks associated with margin investing, review our Margin Disclosure Statement.

Robinhood U.K. Ltd. is acting as credit broker and not a lender. The lender is Robinhood Securities, LLC. which is also part of the same group. Robinhood U.K. Ltd. can only introduce you to margin lending with Robinhood Securities, LLC. For details, review the FAQ.

What’s margin maintenance?

Margin maintenance (sometimes referred to as maintenance margin) is the minimum portfolio value that you need in your account to prevent a margin call. For more details, review What’s margin maintenance?

What’s a margin call?

A margin maintenance call (also referred to as margin call) is a request to increase the amount of equity in your account. You can do this by depositing cash or by liquidating existing positions to generate cash to reduce the margin loan. A margin call is issued when your portfolio value falls below your margin maintenance requirement. To learn more, review What does it mean if I get a margin call?

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 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 unrealised 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).

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 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 unrealised 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).

Based on the 2023 average GBP/USD exchange rate of 1.24 (£1 is $1.24) an unrealised loss of $2,500 is equivalent to £2,016.

FAQ

How to apply for margin investing?

In Account (person icon), select Menu (3 bars) in the app → InvestingMargin investing, and then follow the on-screen instructions to apply. Note that to access margin investing, you must apply and will only have access if you meet eligibility and appropriateness requirements, including the regulatory minimum portfolio value of $2,000.

When to consider margin investing?

Margin investing allows you to borrow money from Robinhood to buy securities and your portfolio is used as collateral. Margin investing involves interest rate charges and carries increased risk, so it is not suitable for everyone. You must determine whether this type of trading strategy is right for you given your specific investment objectives, investment experience, understanding of margin investing, risk tolerance, and financial situation.

How much does it cost to use margin investing?

Robinhood’s margin rate is applied to the full settled margin balance depending on how much you borrow. Check out Robinhood margin rates for details.

How do I stop investing on margin?

The following are ways to stop investing on margin:

  • You can deposit money or initiate an account transfer to your brokerage account to cover any margin used.
  • Or you can sell shares to cover it.

You can disable margin investing entirely in the Margin Investing settings.

How much money can I borrow with margin investing?

Your available buying power will fluctuate based on the value and volatility of your investments, according to Robinhood’s margin maintenance requirements.

Can I set a limit on how much I can borrow?

Yes, you can set your borrowing limit 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 available 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 InvestingMargin investing.

Keep in mind

It’s possible for the margin used to go over the borrowing limit in some situations.

Where can I see how much I’ve borrowed?

You can track how much you’ve invested on margin in Account (person icon) → Margin investing. The following values are included.

  • Total margin: The total margin is the maximum margin that your brokerage account is allowed to use based on your portfolio value and the nature of your holdings. Review What’s margin maintenance for details.
  • Margin used: The portion of your margin available that you’re currently using (i.e., your debit cash balance or margin loan).
  • Borrowing limit: The maximum limit you set on the amount of margin you can use.

You can also track your buying power and available margin in InvestingBuying power

Disclosures

All investments involve risk including loss of principal. All examples are hypothetical and don’t reflect actual or anticipated results. Content is provided for informational purposes only, 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, investment experience, your understanding of margin investing, risk tolerance, and financial situation.

Robinhood charges a margin interest rate that varies depending on your settled margin balance and 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’s discretion.

For more information, review FINRA’s Investor Alert and our Customer Relationship Summary, Margin Disclosure Statement, and Margin Account Agreement. These disclosures contain important information on Robinhood UK products and services, conflicts of interests, lending policies, interest charges, and the risks associated with margin investing enabled accounts.

In relation to margin, Robinhood UK is acting as credit broker and not a lender. Margin is provided by Robinhood Securities, LLC. Robinhood UK and Robinhood Securities, LLC are part of the same group. Robinhood UK can only introduce customers for margin to Robinhood Securities, LLC. Margin investing is optional and subject to Robinhood's eligibility criteria and terms and conditions apply.

Was this article helpful?
Reference No. 3886283
Still have questions? Contact Robinhood Support
PARTICIPATION IS POWER™

All investing involves risk and a loss of principal is possible.

Robinhood U.K. Ltd (Robinhood UK) is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the U.S. by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

Robinhood U.K. Ltd is a private limited company registered in England and Wales (09908051).

Robinhood does not provide investment advice. Individual investors should make their own decisions.

Commission-free trading of stocks refers to $0 commissions for Robinhood self-directed individual brokerage accounts that trade U.S. listed securities and ADRs. Keep in mind, other costs such as regulatory fees may apply to your brokerage account. Please see Robinhood UK’s Fee Schedule to learn more.

UK Privacy policy

Robinhood, 85 Willow Road, Menlo Park, CA 94025.© 2024 Robinhood. All rights reserved.
Follow us on

All investing involves risk and a loss of principal is possible.

Robinhood U.K. Ltd (Robinhood UK) is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the U.S. by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

Robinhood U.K. Ltd is a private limited company registered in England and Wales (09908051).

Robinhood does not provide investment advice. Individual investors should make their own decisions.

Commission-free trading of stocks refers to $0 commissions for Robinhood self-directed individual brokerage accounts that trade U.S. listed securities and ADRs. Keep in mind, other costs such as regulatory fees may apply to your brokerage account. Please see Robinhood UK’s Fee Schedule to learn more.

UK Privacy policy

Robinhood, 85 Willow Road, Menlo Park, CA 94025.© 2024 Robinhood. All rights reserved.