With margin investing enabled, why do I have an account deficit? | Robinhood

With margin investing enabled, why do I have an account deficit?

Before you begin

If you aren't using the margin investing feature, check out I’m not using the margin investing feature. Why do I have an account deficit?

Margin requirements

If your brokerage portfolio value (excluding any crypto positions) drops below your margin maintenance requirements, you may have an account deficit. This doesn’t necessarily mean that you’re in a margin call. Resolve your account deficit by the end of the trading day to avoid margin calls and to open new positions.

In the majority of cases, account deficits due to portfolio value (excluding any crypto positions) being below maintenance requirements will result in a margin call. If you are borrowing funds, and your portfolio value (excluding crypto) drops below the $2,000 regulatory requirement, you may be in an account deficit.

Note

Crypto positions are not accounted for in your portfolio value because cryptocurrencies aren't securities, and they're custodied with our affiliate, Robinhood Crypto, LLC.

ACH reversals after using Instant Deposits

If you have a Robinhood Gold subscription with margin investing disabled, you can access at least $5,000 in Instant Deposits. If you're starting off with a Robinhood Cash account, you’ll get Instant Deposits for up to the first $1,000 from your deposits.

If you spend some or all of your Instant Deposits and your scheduled ACH transfer is canceled (your transfer is reversed), the amount of the reversed deposits will be deducted from your buying power, potentially causing you to have an account deficit. To learn more about how you can avoid reversals, check out How to prevent bank transfer reversals.

Fees

If you’re charged a fee, and this fee brings your portfolio value (excluding any crypto positions) to either of the following will cause the brokerage account to be in a deficit:

  • Below $2,000 when investing on margin or
  • Below your margin maintenance requirement

Some of the most common fees that can cause an account deficit are Robinhood Gold fees and fees associated with American Depositary Receipts (ADRs).

You can find all of your past Robinhood Gold fees and interest fees in AccountHistory. You can also find information about your next Gold billing cycle in AccountRobinhood Gold. Check out our fee schedule for details.

Option exercise and assignment

Note

For more information about exercises and assignments, check out Expiration, Exercise, and Assignment.

If you’re trading an options spread, your long leg generally covers your short leg. However, you may have an account deficit if the short leg of your options spread is assigned prior to the expiration date. If you’re assigned early on a short leg, it can lead to margin being used if it overspends your available buying power for your account, which can lead to an account deficit.

This is because the positions you hold are used to calculate your buying power, and at that time, the shares (for call spreads) or buying power (for put spreads) are needed to cover the deficit in your account. If your long leg is in-the-money and you would like to exercise, you can either do so in your app or contact us so we can help do it for you. You can also experience an account deficit when your long leg is exercised in anticipation of your short leg being assigned. Generally, if the short leg assignment is processed in the account, the deficit will be covered.

Keep in mind

An account deficit due to early assignment might result in a margin call. In these cases, our brokers are likely to take action to cover your position for you.

How do I resolve an account deficit?

You can resolve an account deficit by depositing funds, closing positions, or exercising options contracts.

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.

Options trading entails significant risk and isn’t appropriate for all investors. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Customers should consider their investment objectives and risks carefully before investing in options. Supporting documentation for any claims, if applicable, will be furnished upon request.

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 its 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.

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. Crypto 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) is a registered broker-dealer and 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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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

© 2024 Robinhood. All rights reserved.
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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

© 2024 Robinhood. All rights reserved.