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I have margin investing enabled. Why do I have an account deficit?

Before you begin

If you are not using the margin investing feature, check out I’m not using the margin investing feature. Why do I have an account deficit?

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Margin Requirements

If your portfolio value (minus any cryptocurrency 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 (minus any cryptocurrency positions) being below maintenance requirements will result in a margin call. If you are borrowing funds, and your portfolio value (minus crypto) drops below the $2,000 regulatory requirement, you may be in an account deficit.

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.

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ACH Reversals After Using Instant Deposits

If you have a Robinhood Instant account, your transfers will give you early access to some funds in the form of Instant Deposits; this allows you to access funds before they actually arrive. Similarly, if you have a Robinhood Gold account with margin investing disabled, you can access at least $5,000 in Instant Deposits. (If you have a Robinhood Cash account, you’ll only receive Instant Deposits for up to $1,000 of the funds 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.

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Fees

If you are charged a fee, and this fee brings your portfolio value (minus any cryptocurrency positions) to either

  1. below $2,000 when investing on margin or

  2. below your margin maintenance requirement,

the account will be in deficit. Some of the most common fees that cause customers to have an account deficit are Robinhood Gold fees and fees associated with American Depositary Receipts (ADRs). You can find all of your past Robinhood Gold fees and interest fees in the History section of the app. Additionally, you can find information about your next Gold billing cycle in the Robinhood Gold section of the app (Account tab > Menu > Investing) section of the app. Check out our fee schedule to learn more.

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Option Exercise and Assignment

Note

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.

Keep in mind

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.

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How do I resolve an account deficit?

You can resolve an account deficit by depositing funds, closing positions, or exercising options contracts.


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. 20210825-1805513-5566732
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