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? ›
Pay margin loan interest regularly. Carefully monitor your investments, equity, and margin loan. Set up your own "trigger point" somewhere above the official margin maintenance requirement, beyond which you will either deposit funds or securities to increase your equity.
Is margin trading good for beginners? ›Using borrowed funds to invest can give a major boost to your returns, but it's important to remember that leverage amplifies negative returns too. For most people, buying on margin won't make sense and carries too much risk of permanent losses. It's probably best to leave margin trading to the professionals.
What is the formula for margin in investing? ›To determine gross profit margin, divide the gross profit by the total revenue for the year and then multiply by 100. To determine net profit margin, divide the net income by the total revenue for the year and then multiply by 100.
How do you understand margin? ›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 are the rules for margin trading? ›1. Client needs to pay separate margin for sale trades also, as Buy and Sell trades are executed in different settlements. 2. Broker may choose to pay for the buy position of client (buy value – margin paid by the client) and collect the payout of shares on T+2 day in Client Unpaid Securities Account (CUSA).
Why is there a $25,000 minimum for day trading? ›Why Do I Have to Maintain Minimum Equity of $25,000? Day trading can be extremely risky—both for the day trader and for the brokerage firm that clears the day trader's transactions. Even if you end the day with no open positions, the trades you made while day trading most likely have not yet settled.
What is a disadvantage of margin trading? ›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. The primary dangers of trading on margin are leverage risk and margin call risk.
What is trading on margin for dummies? ›When trading, you put up a percentage of the financial vehicle's value to control the full value you're buying. This is called margin, which functions as a “good faith deposit.” The margin requirement is the amount of money a trader is required to have in his account to control a certain order size.
What are the rules for margin investing? ›Initial margin requirement
For new purchases, the initial Regulation T margin requirement is 50% of the total purchase amount. 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.
Buying on Margin Example
Consider an investor who purchases 100 shares of Company XYZ stock at $100 per share. The investor funds half the purchase price with their own money and buys the other half on margin, bringing the initial cash outlay to $5,000. One year later, the share price rises to $200.
What is a good profit margin? ›
An NYU report on U.S. margins revealed the average net profit margin is 7.71% across different industries. But that doesn't mean your ideal profit margin will align with this number. As a rule of thumb, 5% is a low margin, 10% is a healthy margin, and 20% is a high margin.
How to use margin effectively? ›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.
What is a margin short answer? ›In the business world, margin is the difference between the price at which a product is sold and the costs associated with making or selling the product (or cost of goods sold). Broadly speaking, a company's margin is its ratio of profit to revenue.
What is sales margin for dummies? ›First, determine the total sales of all products sold, or total revenue. Next, subtract the total cost of the product from the total revenue to get the net profit. Lastly, divide the total revenue into the net profit to get your sales margin.
How do you profit from margin trading? ›A margin account lets you borrow money from your broker to buy securities, using the assets in your account as collateral. Trading on margin gives you more money to invest, which can boost your gains. But it also amplifies your losses, so it's essential to understand how it works.
Is it OK to trade on margin? ›While margin loans can be useful and convenient, they are by no means risk free. Trading on margin enables you to leverage securities you already own to purchase additional securities, sell securities short, or access a line of credit.
How do you get approved for margin trading? ›Margin trading typically requires submitting an application and posting collateral with your broker, and you must pay margin interest on money borrowed. Margin interest rates vary among brokerages. In many cases, securities in your account can act as collateral for the margin loan.
How long do margin trades take to settle? ›Two-day securities settlement—currently known as T+2—has been the standard since 2017 when the Securities and Exchange Commission (SEC) amended its rules to shorten settlement from three days. How will T+1 affect you and your investments?