What’s margin investing? | Robinhood (2024)

Let’s say you deposit $5,000 in cash and borrow $5,000 on margin to buy 100 shares of a stock for $100 per share—for a total of $10,000.

Since $5,000 of your initial purchase was bought on margin, your portfolio value (excluding any crypto positions) is $5,000 ($10,000 - amount borrowed = $5,000).

If the stock price increases to $125 per share, the stock is now worth $12,500. Since $5,000 of your initial purchase was bought on margin, you now have $7,500 in portfolio value and you owe $5,000 in margin used.

In this scenario, there’s an unrealized profit of $2,500 as opposed to $1,250 if you didn’t invest on margin and only bought as many shares of stock that you could with your available cash (50 shares for a total of $5,000).

Let’s say you deposit $5,000 in cash and borrow $5,000 on margin to buy 100 shares of a stock for $100 per share—for a total of $10,000.

Since $5,000 of your initial purchase was bought on margin, your portfolio value (excluding any crypto positions) is $5,000 ($10,000 - amount borrowed = $5,000).

If the stock price drops to $75 per share, the stock is now worth $7,500. Since $5,000 of your initial purchase was bought on margin, you now have $2,500 in your portfolio value and you owe $5,000 in margin used.

In this scenario, there’s an unrealized loss of $2,500 as opposed to $1,250 if you didn’t invest on margin and only bought as many shares of stock that you could with your available cash (50 shares for a total of $5,000).

With margin investing, the returns on any securities bought on margin directly affect your brokerage account value, whether they’re positive or negative. If the security loses value, the losses will be deducted from your account value—not the funds you borrowed—so it’s possible for margin to amplify your losses.

Margin investing is risky and it’s not appropriate for everyone. Before considering margin investing, you should fully understand the risks involved:

• You can lose more money than you deposit
• You'll be responsible for any deficit if falling prices reduce the value of your securities below the margin maintenance requirement, and you may have to deposit additional funds to your brokerage account on short notice to cover market losses
• We can sell some or all of your securities or other assets without consulting you to pay off your margin debt
• You’re not entitled to choose which securities we sell from your account to cover your margin debt
• We can change “house” maintenance margin requirements at any time and aren't required to provide you advance written notice
• You’re not entitled to an extension of time on a margin call

Additional information on the terms and risks associated with margin investing can be found in our Margin Disclosure Statement.

You have to determine whether margin investing is consistent with your investment strategy. You should consider your own investment experience, goals, and sensitivity to risk. By enabling margin investing for your brokerage account, Robinhood isn't recommending the use of margin investing.

Robinhood’s margin interest rate is based on a floating rate, and will vary depending on whether or not you're subscribed to Gold.

The Standard floating interest rate is calculated as a combination of the Federal Funds Target Rate upper bound plus the standard base rate, currently 6.5%.

Interest is calculated daily at the end of the day on settled margin transactions. The daily standard interest rate is 12% divided by 360. For example, if you use $3,000 of margin, we’ll calculate $1 of daily interest as follows:

• $3,000 margin used and subject to interest
• $3,000 * (12% / 360) = $1 per day

If you're subscribed to Gold, you'll receive a discounted base rate. The Gold floating interest rate is calculated as a combination of the Federal Funds Target Rate upper bound plus the Gold base rate, currently 2.5%.

In addition to a discounted rate, the first $1,000 of margin investing is included with your $5 monthly Gold fee. If you decide to borrow more, you’ll pay the Gold floating interest rate on any margin used over $1,000.

As with standard margin interest, Gold margin interest is calculated daily at the end of the day on settled margin transactions. The daily Gold interest rate is 8% divided by 360. For example, if you use $3,000 of margin, we’ll calculate $0.44 of daily interest as follows:

• $3,000 margin used
• $1,000 included with your monthly fee, leaving $2,000 subject to interest
• $2,000 * (8% / 360) = $0.44 per day

We’ll charge your brokerage account every 30 days at the end of your billing cycle. You can always check the current status of your billing cycle and other margin and Gold account settings in Account → Margin investing or Robinhood Gold.

There are a number of ways to stop investing on margin:

1. You can deposit money or initiate an account transfer to your brokerage account to cover any margin used
2. You may choose to sell your shares
3. You may also sell non-marginable positions, such as options or crypto

Your available buying power will fluctuate based on the value and volatility of your investments, according to Robinhood’s margin maintenance requirements.

You can track how much you’ve invested on margin in Account → Margin investing. The following values are included:

• Total Margin: The total margin is the maximum margin that your brokerage account is allowed to have based on your portfolio value (excluding any crypto positions) and the nature of your holdings. What’s margin maintenance has more details.
• Margin Used: The portion of your margin available that you’re currently using (i.e., your debit balance).
• Borrowing Limit: The maximum limit you set on the amount of margin you can use.

You can also track your buying power and available margin in Investing → Buying power

Yes! You can set your borrowing limits to help you control how much money you’re investing on margin. 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 you want that is equal to or less than the margin available to you, or remove this limit anytime in Account → Margin investing.

With multiple Federal Funds rate increases potentially on the horizon, we made the margin interest rate a floating rate beginning on June 14, 2022. This change allows us to be more transparent about how our margin interest rate is calculated.

On July 27, 2023 the floating portion of our margin interest rate (corresponding to the Federal Funds Target Rate upper bound) changed from 5.25% to 5.5%.

Robinhood’s margin interest rate is based on a floating rate, and will vary depending on whether or not you're subscribed to Gold.

The Standard floating interest rate (12%) is calculated as a combination of the Federal Funds Target Rate upper bound plus the Standard base rate, currently 6.5%.

If you're subscribed to Gold, you will receive a discounted base rate. The Gold floating interest rate (8%) is calculated as a combination of the Federal Funds Target Rate upper bound plus the Gold base rate, currently 2.5%.

We’ll continue to closely monitor any changes in the Federal Funds Target Rate. Our goal remains to offer the best interest rates we can while taking into account the Federal Funds Target Rate. We anticipate that our interest rates will continue to be lower than many of our competitors.