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What’s margin investing?

The margin investing feature allows you to borrow money from Robinhood to purchase securities. This gives you access to additional money based on the value of certain securities in your account. Margin investing can provide flexibility with your cash: if you see an opportunity in the market and want to invest more, you can invest right away without needing to make a deposit from your bank.

Unlike Instant Deposits, which you start with by default, margin investing access is not automatic—you have to upgrade to Robinhood Gold and apply for eligibility.

When you sign up for Robinhood Gold and 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.

Here are two examples of margin transactions:

Example 1: Profit

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 (minus any cryptocurrency 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: Cryptocurrency positions are not accounted for in your portfolio value because cryptocurrencies are not securities, and they are custodied with our affiliate, Robinhood Crypto, LLC.

Example 2: Loss

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 (minus any cryptocurrency 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

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

What are the risks of margin investing?

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 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 will be responsible for any deficit when falling stock prices reduce the value of your securities below the margin maintenance requirement, and you may have to deposit additional funds to your 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 are not 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 account, Robinhood is not recommending the use of margin investing.

Even if margin is not appropriate for your individual situation, you can still sign up for Gold and use all of the other premium features.

How much does it cost to use margin investing?

The first $1,000 of margin investing is included with your $5 monthly fee. If you decide to borrow more, you’ll pay 2.5% yearly interest on any margin used over $1,000.

Your interest is calculated daily at the end of the day on settled margin transactions. The daily interest rate is 2.5% divided by 360. For example, if you use $3,000 of margin, we’ll calculate $0.14 of daily interest as follows:

  • $3,000 margin used
  • $1,000 included with your monthly fee, leaving $2,000 subject to interest
  • $2,000 * (2.5% / 360) = $0.14 per day

We’ll charge your account every 30 days at the end of your Gold billing cycle. You can always check the current status of your billing cycle and view unpaid interest in the Gold billing section of your account overview (Account tab > Menu > Investing).

Note

Robinhood can increase or decrease the interest rate at its discretion and will provide 30 days advance notice of any changes to the interest rate via email.

How do I stop investing on margin?

There are two ways to stop investing on margin:

  1. You can deposit money to your account. Using the example above, you could stop investing on margin by depositing $300 into your account.
  2. You may also choose to sell your shares. Using the example above, you could sell $300 worth of positions and apply the cash to reduce the amount you’re investing on margin to zero. You can sell any position you own because margin is a feature of your entire securities account, not individual stocks. Cryptocurrencies are not considered securities and are therefore non-marginable—they’re custodied with our affiliate, Robinhood Crypto, LLC.
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 investable margin 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 the Margin Investing section of your Robinhood Gold settings. The following values are included:

  • 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. Learn more about margin maintenance.
  • Margin Used: The portion of your margin available that you’re currently using (i.e., your debit balance).
  • Borrowing Limit: Your set maximum limit on the amount of money you can borrow.

You can also track your buying power and available margin on the Buying Power screen (Investing tab > Buying Power).

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

Yes! We created 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 the Margin Investing section of your Robinhood Gold settings.

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.


Disclosures

All investments involve risk including loss of principal. No investments are FDIC insured. All examples are hypothetical and do not reflect actual or anticipated results. Content is provided for informational purposes only; it does not constitute investment advice and is not a recommendation for any security, account type or feature, or trading strategy. Past performance does not 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.

The margin interest rate charged by Robinhood Financial is 2.5% as of December 21, 2020. The rate might change at any time and at Robinhood Financial’s discretion.

For more information, please see 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.

Cryptocurrency trading and custodial services are offered through an account with Robinhood Crypto. Robinhood Crypto is not a member of SIPC or FINRA. Robinhood Crypto and Robinhood Financial are separate but affiliated entities. Cryptocurrencies are not securities and your cryptocurrency investments are not FDIC insured or SIPC protected. For more information see 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 currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’), trading as HOOD on Nasdaq.

Reference No. 20210824-1799517-5536156
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