Overview

Investing on margin means that you’re borrowing money from Robinhood to buy stocks. This lets you invest more money (your own money plus borrowed money) for greater potential gains or losses. The Financial Industry Regulatory Authority (FINRA), a government-authorized regulator of brokerage firms, mandates that investors deposit at least $2,000 before trading on margin.

When you sign up for Robinhood Gold, you’ll be able to receive extra buying power when you enable borrowing. This buying power represents the cash you have already available to spend, plus the amount you may borrow on margin.

Robinhood Gold is a margin account, so there are additional risks and responsibilities you should be aware of.

With margin investing, the returns on any stocks bought on margin directly affect your account value, whether they’re positive or negative. If the stock loses value, the losses will be deducted from your account value—not the funds you borrowed—so it’s possible for margin to increase your losses.

Here are two examples of margin scenarios:

Example 1: Profit

Let’s say you deposit $5,000 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 (minus any cryptocurrency positions) is $5,000 ($10,000 - amount borrowed = $5,000).

If that stock increases to $125 per share, the stock is now worth $12,500. Since $5,000 of your initial purchase was done on margin, you now have $7,500 in Portfolio Value. As the stock increases in price, your Portfolio Value increases, but you still owe $5,000 in margin used. In this scenario, there’s a profit of $2,500 as opposed to $1,250 if only cash was used to purchase 50 shares of stock.

Example 2: Loss

Let’s say you deposit $5,000 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 with margin, your portfolio value (minus any cryptocurrency positions) is $5,000.

If that stock drops to $75 per share, the stock is now worth $7,500. Since $5,000 of your initial purchase was done on margin, you now have $2,500 in your Portfolio Value. As the stock decreases in price, your Portfolio Value decreases, and you still owe $5,000 in margin used.

In this scenario, there’s a loss of $2,500 as opposed to $1,250 if only cash was used to purchase 50 shares of stock.

Yes! We created borrowing limits to help you control how much margin you use. 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, that is equal to or less than the margin available to you under applicable regulations.

You can track how much margin you can use in the Margin Investing settings screen. The Gold settings screen includes the following values:

• Total Margin – The total margin is the maximum margin that your account is allowed to have based on your portfolio value (minus any cryptocurrency positions) and the nature of your holdings. For more information, please visit the margin maintenance help center article.
• Margin Used – The portion of your margin available that you are currently using. This was previously referred to as “Gold Used.”
• Borrowing Limit – Your set maximum limit on the amount of money you can borrow.
• You can also track your buying power in the account overview section of the app.

Margin trading 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.

For more information please see Robinhood Financial’s Margin Disclosure Statement, Margin Agreement and FINRA Investor Information. These disclosures contain information on Robinhood Financial’s lending policies, interest charges, and the risks associated with margin accounts.