Trading on margin gives you extra buying power to get into the positions you want.
Your account or portions of it may be liquidated, and incur a $25 Margin Call fee if:
Margin trading allows you to borrow against your existing holdings, leveraging them to take additional positions. F1Trade offers low margin rates based on each client’s margin balance. You can make a great deal of money trading on margin, but you can also lose through leverage. That’s why it’s crucial to understand the benefits and risks of margin trading before using your margin trading account. It’s a powerful tool for traders when used responsibly.
Trading on margin means taking out a “margin loan” against your holdings. Since the value of your holdings changes constantly, the amount you can borrow also fluctuates. If your portfolio rises, you can buy more stock. If it declines, your buying power declines. Another plus – trading on margin allows you to stick to a strategy if you require additional funds. Rather than selling stock if you need money immediately, or want to make other investments, margin trading lets you stay in the market with this leveraged money.
For example, with a typical margin agreement, you can borrow up to 50 percent of marginable stock. Borrowing that much money is usually not done, because margin trading involves risks. Using that amount as an example, if you want to purchase $100k of stock, the brokerage lends you $50k on margin to buy it. Should the stock grow to $125k and you sell, you’ve made a 50 percent ROI. If the stock falls to 75k, you’ve lost 50 percent – and you owe margin interest fees. Purchasing a winning stock on margin is a terrific investment. Purchasing a loser – not so much. With F1Trade, you can borrow up to 6 times your equity.
The margin call is the risk side of trading on margin. While the term received its name because the broker would call the trader, today such notification occurs electronically. If your portfolio falls below a certain amount, known as the “maintenance margin,” the brokerage issues a margin call. That means you must add enough money to your account to meet the maintenance margin. Getting a margin call is one of those experiences you really want to avoid.
F1Trade offers discount margin interest rates, more competitive than other loan options. Clients with higher balances pay lower rates. While your portfolio’s value changes, the amount of your margin loan does not. Once you understand the rules and risks regarding margin trading, contact F1Trade regarding your discount margin interest rate offer.