I’m not using the margin investing feature. Why do I have an account deficit?

Before you begin

If you are using the margin investing feature, check out I have margin investing enabled. Why do I have an account deficit?

You have an account deficit because you’ve used more buying power than you had available. Several things can cause you to have an account deficit, including ACH reversals after using Instant Deposits, fees, and cases when you’re assigned early on an options spread or in certain option exercise scenarios.

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ACH Reversals After Using Instant Deposits

If you have a Robinhood Instant brokerage 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 brokerage 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 $1000 of the funds from your first deposit.) 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're charged a fee and you don’t have enough brokerage cash in your account to cover it, you may have an account 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 payments in the History section of your app. Additionally, you can find information about your next Gold billing cycle in the Account Overview 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 should cover 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. When you’re assigned early on a short leg in general, before you exercise the long leg of your spread, your buying power will decrease and you may have 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, Robinhood is 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 or closing positions.


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.

Options trading entails significant risk and is not appropriate for all investors. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Customers should consider their investment objectives and risks carefully before investing in options. Supporting documentation for any claims, if applicable, will be furnished upon request.

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 standard margin interest rate of 9.75% and a margin interest rate of 5.75% for customers who subscribe to Gold. The margin interest rate is calculated by adding 6.5% (for non-Gold customers) or 2.5% (for Gold customers) to 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 margin rates shown are as of September 22, 2022 and might change at any time without notice and at Robinhood Financial’s discretion. The standard margin interest rate will be rolled out to customers who do not subscribe to Gold in phases over a period of time, subject to eligibility criteria, and so may not be available immediately to all customers.

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) is a registered broker-dealer and provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’), trading as HOOD on Nasdaq.

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Reference No. 20210825-1805513-5566731-2018881
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