What’s margin investing? | Robinhood

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:

  • You can lose more money than you deposit
  • 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 on short notice to cover market losses
  • We can sell some or all of your securities or other assets without consulting you to pay off your margin debt
  • You’re not entitled to choose which securities we sell from your account to cover your margin debt
  • We can change “house” maintenance margin requirements at any time and aren't required to provide you advance written notice
  • You’re not entitled to an extension of time on a margin call

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:

  • $3,000 margin used and subject to interest
  • $3,000 * (12% / 360) = $1 per day

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 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:

  • $3,000 margin used
  • $1,000 included with your monthly fee, leaving $2,000 subject to interest
  • $2,000 * (8% / 360) = $0.44 per day

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 AccountMargin 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:

  1. You can deposit money or initiate an account transfer to your brokerage account to cover any margin used
  2. You may choose to sell your shares
  3. You may also sell non-marginable positions, such as options or crypto
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 AccountMargin investing. The following values are included:

  • Total Margin: The total margin is the maximum margin that your brokerage account is allowed to have based on your portfolio value (excluding any crypto positions) and the nature of your holdings. What’s margin maintenance has more details.
  • Margin Used: The portion of your margin available that you’re currently using (i.e., your debit balance).
  • 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

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 AccountMargin 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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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.

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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.