What’s margin withdrawal?
If you’ve enabled Margin investing, you can also turn on Margin withdrawal to use margin for day-to-day spending and withdrawals. With margin, you can borrow money by using your portfolio as collateral. Investors usually use margin to borrow money for more investments, but you can also withdraw the funds as cash.
The following are some of the potential benefits of using margin for cash.
Let’s say you have $5,000 of uninvested cash in your account, and you decide to buy $5,000 of marginable YOWL stock. Then you decide you want to buy a $1,000 computer. You can borrow $1,000 against the $5,000 of YOWL stock in your portfolio to complete the purchase and have a $1,000 margin balance.
To ensure margin is right for you, it’s important to consider other options, for example:
A few risks to consider:
Crypto positions can’t be traded on margin. They aren’t accounted for in your portfolio value because crypto aren’t securities, and they’re custodied with our affiliate, Robinhood Crypto, LLC.
If you don’t borrow money by spending on margin, you can earn interest on your uninvested brokerage cash that’s swept to our network of program banks. If you borrow money by spending on margin, you won’t have any uninvested brokerage cash left in your account to sweep to banks, so you won’t earn any interest.
If you’re borrowing money, we’ll generally decline transactions that would take your account below the $2,000 equity minimum. An exception to this is if you have a transaction that results in a different amount than initially authorized (such as a tip at a restaurant or a gas purchase that exceeds the hold placed by the gas station). If this is the case, your account could fall below the $2,000 equity minimum, potentially resulting in a minimum equity call.
We’ll generally deny any authorization that puts your account into a margin call. An exception is an unauthorized transaction (such as a tip that exceeds the amount authorized). If this happens, it might cause a margin call.
Margin calls can also happen for other reasons, such as a decline in the value of your holdings, ACH reversals, or options assignments—causing your portfolio value (excluding crypto) to fall below your margin maintenance requirement. If you get a margin call, you need to bring your portfolio value back up to your minimum margin maintenance requirement, or you risk Robinhood having to liquidate your positions.
Yes. In addition to trading activity, your intraday withdrawals will affect your day trade limit, which is issued at the beginning of each trading day.
Margin borrowing increases your level of market risk and, as a result, has the potential to magnify both your gains and losses. Before using margin, customers must determine whether this type of strategy is right for them given their investment objectives and risk tolerance. Regardless of the underlying value of the securities you purchased, you must repay your margin loan. 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. 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. Robinhood Gold is an account offering premium services available for a subscription fee. Not all investors will be eligible to trade on margin. Margin involves the risk of greater investment losses. Additional interest charges may apply depending on the amount of margin used.
Robinhood Financial 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 Financial’s discretion. The variable margin rates are as of November 7, 2024 and might change at any time without notice and at Robinhood Financial’s discretion.
Examples listed are for illustrative purposes only. They aren’t a recommendation of a security or investment strategy.