What does it mean if I get a margin call?
A margin maintenance call is when your portfolio value (minus any crypto positions) falls below your margin maintenance requirement.
Margin maintenance calls can happen for a variety of reasons, including a decline in the value of your holdings, ACH reversals, or options assignments. If you get a margin maintenance call, you need to bring your portfolio value (excluding any crypto positions) back up to your minimum margin maintenance requirement, or you risk Robinhood having to liquidate your position(s) to bring your portfolio value (excluding any crypto positions) back above your margin maintenance requirement.
How do I avoid a margin call?
How do I avoid a margin call? Margin calls are no fun, so we’re happy to give you some tips on how to avoid them.
- You can compare the stocks value in your portfolio (Account (person icon → Menu (3 bars) → Investing) to the margin maintenance value (Account (person icon) → Menu (3 bars) → Margin investing) to determine if you're approaching a margin call.
- Look out for updates from us when your portfolio value (excluding any crypto positions) is getting close to your investing account’s margin maintenance requirement. You’ll typically receive a message in the app when you’re close to receiving a margin call, and an email once you’ve received one.
- If you elect to deposit funds after receiving such a message in the app or a margin call, you may see a pre-filled or optional deposit amount that we expect will help keep your portfolio value above your margin maintenance. Depositing such an amount, however, doesn’t guarantee that you won’t get a margin call. Any pre-filled or optional deposit amount is provided solely for your reference, is subject to change, and isn’t a recommendation. You can always enter a different deposit amount or sell stocks to help keep your portfolio value above your margin maintenance.
What do I do if I get a margin maintenance call?
What do I do if I get a margin maintenance call?
There are a number of ways to resolve a margin call:
- You can deposit additional funds or initiate an account transfer to increase your portfolio value above the margin maintenance requirement (excluding any crypto positions).
- You may choose to sell some of your securities to cover the required amount. The proceeds from the sales can help cover your margin call. This may allow you to avoid depositing additional funds. Keep in mind that you may also sell non-marginable positions such as options or crypto to cover your maintenance call.
Note
Crypto positions can't be traded on margin. They’re not accounted for in your portfolio value because crypto are not securities and they’re held with Robinhood Crypto.
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 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 12% and a margin interest rate of 8% 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 July 27, 2023 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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FAQs
If the value of the stock falls such that your equity in the account falls below the required maintenance margin, then your broker will issue a margin call asking you to liquidate the position or deposit cash or securities to reestablish sufficient equity in the account.
What does it mean to receive a margin call? ›
A margin call is a demand made by a broker for an investor to deposit additional funds into their margin account. The possibility of a margin call is one of the key risks of margin trading, a strategy that allows investors to purchase securities, such as stocks, with borrowed money.
Why do I keep getting margin calls? ›
There are three ways to receive a margin call: You trade for more than the buying power in your account. The value of your margin account decreases. Your broker raises the house maintenance margin requirements.
Should I worry about a margin call? ›
Buying securities on margin is not a good idea for most investors who are saving for a long-term goal such as retirement. A margin call will force you to boost your account equity either by adding additional cash and securities, or by selling existing holdings.
What to do if you get a margin call? ›
A margin call is a demand from your brokerage firm to increase the amount of equity in your account. You can do this by depositing cash or marginable securities to your account or by liquidating existing positions to generate cash.
Can I ignore a margin call? ›
If You Fail to Meet a Margin Call
Forced liquidations generally occur after warnings have been issued by the broker regarding the under-margin status of an account. Should the account holder choose not to meet the margin requirements, the broker has the right to sell off the current positions.
When receiving a margin call notification What should you do answer? ›
To satisfy a margin call, the investor of the margin account must either deposit additional funds, deposit unmargined securities, or sell current positions.
How do I recover from a margin call? ›
How do I resolve a margin call
- Deposit money into your margin loan to reduce your loan balance.
- Transfer additional approved shares or managed funds to increase your portfolio value.
- Sell a sufficient part of your portfolio to reduce your gearing (use the What if Calculator or contact us to confirm the required amount)
If you can't repay money owed in a margin account and the company sends or sells the debt to collections, that could be reported and hurt your credit. However, what generally happens is that the company monitors how much you owe and your overall account balance.
How does a margin call end? ›
Tuld also informs Rogers that Sullivan is going to be promoted. The film ends with Rogers burying his euthanized dog in his ex-wife's front yard during the night. She informs him that their son's firm also sustained heavy losses but avoided bankruptcy.
What Triggers a Margin Call? A margin call is triggered when the investor's equity, as a percentage of the total market value of securities, falls below a certain required level (called the maintenance margin).
How realistic is margin call? ›
Although the film does not depict any real Wall Street firm, and the fictional firm is never named, the plot has similarities to some events during the 2008 financial crisis: Goldman Sachs similarly moved early to hedge and reduce its position in mortgage-backed securities, at the urging of two employees, which ...
How risky is margin? ›
While margin loans can be useful and convenient, they are by no means risk free. Margin borrowing comes with all the hazards that accompany any type of debt — including interest payments and reduced flexibility for future income.
Does a margin call mean I owe money? ›
However, our opinions are our own. See how we rate investing products to write unbiased product reviews. A margin call occurs when the equity in your investing account drops to a certain level and you owe money to your brokerage firm.
Can you owe your broker money? ›
So, if you wanted to buy a stock for $100, you could put $50 of your own money in and borrow $50 from your broker. Keep in mind, though, that interest will immediately start accruing on your loan. But, if your stock falls to $40 in price, you'll still owe $50 to your broker.
How to avoid margin shortfall? ›
Set appropriate stop-loss orders: Placing stop-loss orders helps limit potential losses and protects your account from sudden market movements. Diversify your trading portfolio: Spreading your investments across different assets can help mitigate the risk of a single position causing significant margin shortfalls.
How long do you have after a margin call? ›
If an investor's account value drops to a level where a margin call is issued by their broker, the investor typically has two to five days to meet it.
What happens when you get margin called Robinhood? ›
If you get a margin maintenance call, you need to bring your portfolio value (excluding any crypto positions) back up to your minimum margin maintenance requirement, or you risk Robinhood having to liquidate your position(s) to bring your portfolio value (excluding any crypto positions) back above your margin ...
What is a margin call accepted? ›
A margin call occurs when the importance of security on which you have a short position rises. Then, you'll have to top off your trading account with fresh funds until you reach the needed maintenance margin. This capital may take the form of cash or new securities.
