Merrill A Bank of America Company Merrill A Bank of America Company Open an account Login Open Menu bar Find answers to common questions at MerrillSchedule an Open an accountwith Merrill Previous tabNext tab Slide 1 of 4Slide 2 of 4Slide 3 of 4Slide 4 of 4 Margin is an extension of credit, using marginable securities held as collateral Margin lending allows you to borrow against the securities in your account. Some ways to use margin include: Take an interactive tour of how margin works What factors might you consider when deciding if margin is for you? We've summarized a few in this table, and you can find more details in the Footnote*Net account value must remain above $2,000 while a margin loan is outstanding. Higher minimum requirements may apply for specific investing strategies. Margin can potentially enhance your profits — or it can magnify your losses. Observe this in action with our interactive margin illustrator. In this example, start out with a $50 stock and see what could happen as stock prices change. You purchase 200 shares of a $50 stock for a total investment of$10,000 You borrow $5,000 You invest $5,000 Current market value: Click here to add five dollars– 200 SHARES OF A $50 STOCK Click here to subtract five dollars+ Your total stock value: $10,000 PROFIT/LOSS $0Footnotes1,2 OR WITHOUT MARGIN: If you invest only $5,000 of your own money and $0onmargin Your total stock value: $5,000 $0Footnotes1,2 Footnote1 After paying back borrowed funds Margin is a way to access the loan value of your securities for many purposes, including to purchase other securities. Let's review how this works. You are required to maintain a minimum level of equity in your margin account. Investing in the Margins Get to know the basics of margin trading in this brief article View all margin-eligible securities in the Margin loans are secured against the holdings in your account. No matter what you use the loan for, there are several factors that need to be considered. Margin isn't for everyone. It can be quite risky. You could lose money. But in the right circ*mstances, a margin loan could be a useful tool for managing your money.Footnote1 Advantages of margin Risks of margin Although there is no set repayment schedule, you may be required to add to your margin account, sometimes with little to no notice. A maintenance call occurs when your net account equity falls below the minimum amount set by us (usually 30% for stock or mutual funds). Suppose your account holds $25,000 of marginable stock and a $14,000 margin loan. Your net account equity would be $11,000, or 44%. Previous slideNext slide Slide 1 of 4 Slide 2 of 4 Slide 3 of 4 Slide 4 of 4 1 Open a Merrill online investing and trading account.Footnote* 2 Select the "Margin" option to apply for the margin lending program. 3 Fund your account with at least $2,000 in cash or margin eligible securities. Open an account Margin cannot be added to Retirement Accounts, UTMA/ UGMA accounts or Merrill Guided Investing accounts. When must my loan be paid? Your loan, or debit balance, is an open-ended collateralized loan. You may keep the loan open for as long as you choose, provided you comply with the terms of the account and Merrill Lynch is satisfied with the conditions of your margin account. When is interest charged in a short account? Whenever the short market value (settled) exceeds the credit balance (settled), interest is charged on the difference. In a mixed account (long and short) with a debit balance (settled), interest is charged on the debit balance (settled) plus the short market value (settled). What methods can I use to reduce or pay off my debit balance/loan? You can reduce or pay off your debit balance (which includes margin interest accrued) by depositing cash into your account or by liquidating securities. The proceeds from the liquidation will be applied to your debit balance. I sold a stock short, and now I'm being charged whenever the company pays a dividend. Why is that? The shorted stock was borrowed in order to be sold in the open market, so the dividends are being paid to the current holder who purchased the shares. Since the dividend income is being paid to the new holder, the short seller has the obligation to make up that lost revenue that is also due to the original owner. A short seller is obligated to cover dividends and any corporate reorganizations that occur in the shorted security. When can I begin to trade using margin? Margin trading can begin once the account is fully approved, and your account is updated to reflect margin buying power. Review current margin rates For a detailed understanding of what margin is and how it works, download the Open a new account and add margin Open an account Add margin to an existing account Need help? Options involve risk and are not suitable for all investors. Certain requirements must be met to trade options. Before engaging in the purchase or sale of options, investors should understand the nature of and extent of their rights and obligations and be aware of the risks involved in investing with options. Prior to buying or selling an option, clients must receive the options disclosure document "Characteristics and Risks of Standardized Options." Call the Investment Center at 1.877.653.4732 for a copy. A separate client agreement is needed. When you purchase securities, you may pay for the securities in full, or if your account has been established as a margin account with the margin lending program, you may borrow part of the purchase price from Merrill. If you choose to borrow funds for your purchase, Merrill's collateral for the loan will be the securities purchased, other assets in your margin account, and your assets in any other accounts at Merrill. If the securities in your margin account decline in value, so does the value of the collateral supporting your loan, and, as a result, we can take action, such as to issue a margin call and/or sell securities in any of your accounts held with us, in order to maintain the required equity in your account. If your account has a Visa® card and/or checks, you may also create a margin debit if your withdrawals (by Visa card, checks, preauthorized debits, FTS or other transfers) exceed the sum of any available free credit balances plus available money account balances (such as bank deposit balances or money market funds). Please refer to your account documents for more information. Before opening a margin account, you should carefully review the terms governing margin loans. For Individual Investor Accounts, these terms are contained in the Margin Lending Program Client Agreement. For all other accounts, the terms are in your account agreement and disclosures. It is important that you fully understand the risks involved in using margin. These risks include the following: If you have any questions or concerns about margin and the margin lending program, please contact the Merrill Investment Center at 855.332.5920. MAP6185688-06172025 Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets. Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF). Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp"). Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp. Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation. 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appointmentwith MerrillMargin trading basics
Cash vs. Margin
Cash account Margin account Can I borrow using the securities I own in my account? No Yes How much do I need to get started with margin? Not applicable $2,000 Is there a minimum balance to maintain? No YesFootnote* Do I have to pay interest? Not applicable Applicable May I use the account for short selling? Not permitted Permitted How much am I able to withdraw? Available cash Available cash + available loan value Potential gains and losses with margin lending
on margin
of your own money
Footnote2 Interest charges, commissions and fees not includedHow margin loans may fit into your portfolio
Securities eligible for margin Position Initial (Reg T) requirement Maintenance requirement (at least) U.S. listed common stock 50% 30% Mutual Funds 100% 30% U.S. Treasury Notes/Bills 5% 5% Municipal Bonds 20% 15% Corporate/Non-convertible Bonds 30% 30% Exchange Traded Funds 50% 30% Margin loans
A closer look at margin loans
Your securities are the collateral for your loan — so, you may need to come up with money ... fast
What is a maintenance call?
How it works
Next steps to get started
Open a new account and add margin
Add margin to an existing account
Frequently asked questions
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888.637.3343Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value Are Not Deposits Are Not Insured by Any Federal Government Agency Are Not a Condition to Any Banking Service or Activity
FAQs
How do you trade on margin successfully? ›
Buy gradually, not at once: The best way to avoid loss in margin trading is to buy your positions slowly over time and not in one shot. Try buying 30-50% of the positions at first shot and when it rises by 1-3%, add that money to your account and but the next slot of positions.
How do you explain margin trading? ›Margin is the money borrowed from a broker to purchase an investment and is the difference between the total value of an investment and the loan amount. Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker.
What is an example of buying on margin? ›For example, if you had $5,000 cash in a margin-approved brokerage account, you could buy up to $10,000 worth of marginable stock: You would use your cash to buy the first $5,000 worth, and your brokerage firm would lend you another $5,000 for the rest, with the marginable stock you purchased serving as collateral.
How risky is investing on margin? ›Investors can potentially lose money faster with margin loans than when investing with cash. This is why margin investing is usually best restricted to professionals such as managers of mutual funds and hedge funds.
Is it better to trade on margin or cash? ›Cash accounts provide stability and simplicity, while margin accounts offer the allure of increased opportunities and flexibility. You should approach margin trading with caution, fully understanding the mechanics and risks involved.
How much money do you need to trade on margin? ›Initial margin requirement
So if you wanted to buy $10,000 of ABC stock on margin, you would first need to deposit $5,000 or have equity equal to $5,000 in your account. Margin accounts require a minimum of $2,000 in net worth to use the margin feature.
1. : the part of a page or sheet outside the main body of printed or written matter. 2. : the outside limit and adjoining surface of something : edge. at the margin of the woods.
What is margin trading for beginners? ›Trading on margin allows you to borrow funds from your broker in order to purchase more shares than the cash in your account would allow for on its own. Margin trading also allows for short-selling. By using leverage, margin lets you amplify your potential returns—as well as your losses, making it a risky activity.
Is margin trading good for beginners? ›Is Margin Trading Good for Beginners? Buying stocks on margin is not for beginner investors. It's important to understand the risks and that the margin loan doesn't exceed the investor's ability to repay the loan.
What is the formula for buying margin? ›$10,000 * (100%-30%) = $7,000 → the maximum amount you are eligible to borrow. $7,000 - $3,000 = $4,000 → Now you have used $3,000 of the available margin, your current available margin becomes $4,000, which is also your cash buying power. $4,000 / 50% = $8000 → the margin buying power for purchasing XYZ stock.
What is margin with example? ›
Expressed as a percentage, it represents the portion of a company's sales revenue that it gets to keep as a profit, after subtracting all of its costs. For example, if a company reports that it achieved a 35% profit margin during the last quarter, it means that it netted $0.35 from each dollar of sales generated.
How is margin paid back? ›You determine the payback schedule and payment amount. It's important to have a plan for reducing your margin balance to minimize the interest amount you're charged which you can do by selling a security or depositing cash into your account through electronic funds transfer (EFT), bank wire, or depositing a check.
Can you lose money on margin? ›While margin traders can make higher profits, they can also incur larger losses. It is even possible for a margin trader to lose more money than they originally had to invest—meaning that they would have to make up the difference with additional assets.
How to use margin wisely? ›- Invest wisely. The rule of thumb here is that one should never invest a sum of money that he cannot afford to lose. ...
- Borrow less than the allowed limit. ...
- Borrow only for the short term.
For example, if an investor has taken a position through margin trading and the trade is going bad, leading to the balance falling below the minimum margin, then a margin call is triggered. If the investor does not honour the margin call, the broker can square off the position and liquidate the assets.
Do margin trades settle instantly? ›With margin accounts proceeds are immediately available to use when you close a position, this no settlement period benefit is required for active traders.
Should beginners trade on margin? ›The Bottom Line. Day trading on margin is a risky exercise and should not be tried by novices. People who have experience in day trading also need to be careful when using margin for the same.
How much money do day traders with $10,000 accounts make per day on average? ›With a $10,000 account, a good day might bring in a five percent gain, which is $500. However, day traders also need to consider fixed costs such as commissions charged by brokers. These commissions can eat into profits, and day traders need to earn enough to overcome these fees [2].
How many times can you trade on margin? ›If your trading activity qualifies you as a pattern day trader, you can trade up to 4 times the maintenance margin excess (commonly referred to as "exchange surplus") in your account, based on the previous day's activity and ending balances.