Your version of Internet Explorer is no longer supported and may not display all the features of our website. For the best experience, please update your browser with the latest version. When you trade on margin, you pay a portion of the cost required to buy securities and Scottrade loans you the remaining amount.
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An interest charge is applied to your account monthly based on the amount of funds you borrow. Margin can be a low-cost, flexible way to seek increased investment returns or to meet your personal financial needs. Some of the primary benefits associated with margin loans include the seven things listed in this article. While margin loans offer access to additional funds and the potential for increased investment returns, they're characterized by unique risks associated with market movement and your account activity.
It's important to evaluate your risk tolerance carefully when determining whether margin fits into your financial strategy. Read this article to get four tips for managing margin risk according to your risk tolerance and financial strategy. Learn how to open a margin account or add margin to an existing account. Plus, take a look at which accounts are eligible for margin and which aren't, and see how to determine whether or not a security is marginable.
As collateral on your margin loan, Scottrade requires you to keep a certain amount of equity readily available in your account. This amount is called the maintenance requirement. We also enforce the Fed requirement, or the initial equity level required to enter into a trade. An account with a large percentage of investments in a single asset class may be considered concentrated. A margin call is a demand that an investor using margin deposit additional money or stock so the margin account is brought up to the minimum requirement.
There are two main types of margin calls at Scottrade: Maintenance Calls and Fed Calls. Leveraged ETFs mix equities with derivatives to magnify exposure to the benchmark index, and they have daily investment objectives. Leveraged ETFs are generally either two-times 2x leveraged or three-times 3x leveraged, meaning that while a regular ETF will attempt to match the benchmark index's performance 1: Federal Reserve Regulation T, commonly called Reg T, governs how trades are paid for.
Reg T violations can have serious consequences, so it's important to understand the rules before you trade. Margin can be used to increase your buying power, provide fast access to cash for personal needs or to help you manage risk in your portfolio. Take a look at the ins and outs of each strategy. Any specific securities, or types of securities, used as examples are for demonstration purposes only.
None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security or account. Such consent is effective at all times when using this site.
Brokerage products and services offered by Scottrade, Inc. All investing involves risk. The value of your investment may fluctuate over time, and you may gain or lose money. In this instance, equity is defined as Total Brokerage Account Value minus Recent Brokerage Deposits on Hold.
The performance data quoted represents past performance. Past performance does not guarantee future results. The research, tools and information provided will not include every security available to the public. Although the sources of the research tools provided on this website are believed to be reliable, Scottrade makes no warranty with respect to the contents, accuracy, completeness, timeliness, suitability or reliability of the information.
Information on this website is for informational use only and should not be considered investment advice or recommendation to invest. Scottrade does not charge setup, inactivity or annual maintenance fees.
Applicable transaction fees still apply. Scottrade does not provide tax advice.
How Margin Trading Works | Scottrade
The material provided is for informational purposes only. Please consult your tax or legal advisor for questions concerning your personal tax or financial situation. Investors should consider the investment objectives, charges, expense, and unique risk profile of an exchange-traded fund ETF before investing. A prospectus contains this and other information about the fund and may be obtained online or by contacting Scottrade. The prospectus should be read carefully before investing.
Leveraged and inverse ETFs may not be suitable for all investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies. Investors should monitor these holdings, consistent with their strategies, as frequently as daily. Investors should consider the investment objectives, risks, charges and expenses of a mutual fund before investing. No-transaction-fee NTF funds are subject to the terms and conditions of the NTF funds program.What is Margin?
Scottrade is compensated by the funds participating in the NTF program through recordkeeping, shareholder or SEC 12b-1 fees. Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market.
It contains information on our lending policies, interest charges, and the risks associated with margin accounts. Options involve risk and are not suitable for all investors.
Supporting documentation for any claims will be supplied upon request. Consult with your tax advisor for information on how taxes may affect the outcome of these strategies.
Keep in mind, profit will be reduced or loss worsened, as applicable, by the deduction of commissions and fees. Market volatility, volume and system availability may impact account access and trade execution.
Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss, in a down market. Third-party websites, research and tools are from sources deemed reliable. Scottrade does not guarantee accuracy or completeness of the information and makes no assurances with respect to results to be obtained from their use.
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Balance Restrictions | Scottrade
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Noncore Investments Determining Your Asset Mix How Many Funds Do You "Need"? How Many Investments Should You Have? How Much Risk Can You Tolerate?
Regulatory Trading Suspensions Trading Halts: Primary Margin Risks While margin loans offer access to additional funds and the potential for increased investment returns, they're characterized by unique risks associated with market movement and your account activity.
It's important to evaluate your risk tolerance carefully when determining whether margin fits into your financial strategy 4 Tips for Managing Margin Risk Read this article to get four tips for managing margin risk according to your risk tolerance and financial strategy. How To Open a Margin Account Learn how to open a margin account or add margin to an existing account. Maintaining a Margin Account As collateral on your margin loan, Scottrade requires you to keep a certain amount of equity readily available in your account.
Concentrated Accounts An account with a large percentage of investments in a single asset class may be considered concentrated. Margin Calls A margin call is a demand that an investor using margin deposit additional money or stock so the margin account is brought up to the minimum requirement. Margin Requirements for Leveraged ETFs Leveraged ETFs mix equities with derivatives to magnify exposure to the benchmark index, and they have daily investment objectives.
Regulation T FAQ Federal Reserve Regulation T, commonly called Reg T, governs how trades are paid for. Call Us At Unauthorized access is prohibited.