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.
When you sign up for Robinhood Gold, you’ll receive extra buying power. This represents the money that you’re allowed to borrow from us to invest.
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.
For example, suppose you have $2,000 in your Robinhood brokerage account and own $4,000 of MEOW—$2,000 with your own cash and $2,000 with margin which you borrowed from Robinhood. If MEOW decreases by 25%, your portfolio of MEOW stock will drop to $3,000 in value. However, you still borrowed $2,000 from Robinhood and need to pay that back. Since the value of your total portfolio is now $3,000 but you owe $2,000, your account is now worth $1,000.
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, though all limits are subject to regulatory rules on margin, which are based upon the equity in your account.
You can track how much margin you can use in the Gold settings screen. The Gold settings screen includes the following values:
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.