With margin investing enabled, why do I have an account deficit?
If you aren't using the margin investing feature, check out I’m not using the margin investing feature. Why do I have an account deficit?
If your investing portfolio value (excluding any crypto positions) drops below your margin maintenance requirements, you may have an account deficit. This doesn’t necessarily mean that you’re in a margin call. Resolve your account deficit by the end of the trading day to avoid margin calls and to open new positions.
In the majority of cases, account deficits due to portfolio value (excluding any crypto positions) being below maintenance requirements will result in a margin call. If you are borrowing funds, and your portfolio value (excluding crypto) drops below the $2,000 regulatory requirement, you may be in an account deficit.
Crypto positions are not accounted for in your portfolio value because cryptocurrencies aren't securities, and they're custodied with our affiliate, Robinhood Crypto, LLC.
If you have a Robinhood Gold subscription with margin investing disabled, you can access at least $5,000 in Instant Deposits. If you're starting off with a Robinhood Cash account, you’ll get Instant Deposits for up to the first $1,000 from your deposits.
If you spend some or all of your Instant Deposits and your scheduled ACH transfer is canceled (your transfer is reversed), the amount of the reversed deposits will be deducted from your buying power, potentially causing you to have an account deficit. To learn more about how you can avoid reversals, check out How to prevent bank transfer reversals.
If you’re charged a fee, and it brings your portfolio value (excluding any crypto positions) to either of the following will cause the investing account to be in a deficit:
Some of the most common causes of account deficits are Robinhood Gold subscription charges and fees associated with American Depositary Receipts (ADRs).
You can find all of your past Robinhood Gold subscription charges and interest fees in Account → History. You can also find information about your next Gold billing cycle in Account → Robinhood Gold. Check out our fee schedule for details.
For more information about exercises and assignments, check out Expiration, exercise, and assignment.
If you’re trading an options spread, your long leg generally covers your short leg. However, you may have an account deficit if the short leg of your options spread is assigned prior to the expiration date. If you’re assigned early on a short leg, it can lead to margin being used if it overspends your available buying power for your account, which can lead to an account deficit.
This is because the positions you hold are used to calculate your buying power, and at that time, the shares (for call spreads) or buying power (for put spreads) are needed to cover the deficit in your account. If your long leg is in-the-money and you would like to exercise, you can either do so in your app or contact us so we can help do it for you. You can also experience an account deficit when your long leg is exercised in anticipation of your short leg being assigned. Generally, if the short leg assignment is processed in the account, the deficit will be covered.
An account deficit due to early assignment might result in a margin call. In these cases, our brokers are likely to take action to cover your position for you.
You can resolve an account deficit by depositing funds, closing positions, or exercising options contracts.
For joint account deficits, both owners are equally responsible for resolving them.
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, 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 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.
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.
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.