What margin is and how Robinhood lets you use it
Margin is borrowed money from Robinhood that you can use to buy stocks, options, or other investments. When you buy on margin, you put down part of the purchase price yourself and borrow the rest. Robinhood charges you interest on the borrowed amount, and you must repay it.
Robinhood offers margin to account holders who meet certain requirements. The amount you can borrow depends on your account type, the value of your existing holdings, and Robinhood's margin requirements for specific securities. Not all stocks or investments are marginable — some carry higher borrowing costs or stricter limits.
Margin amplifies both gains and losses. If a stock you bought on margin rises, your profit is larger than it would be with your own money alone. If it falls, your loss is also larger, and you may owe money even after selling the position.
Key Takeaways
- Margin is a loan from Robinhood that you repay with interest, and the interest rate varies based on how much you borrow and your account balance.
- You must have at least $2,000 in your account to use margin, and Robinhood can demand repayment at any time if your account value drops.
- Buying on margin increases both potential profits and potential losses, since you are controlling more money than you actually own.
- Robinhood charges a maintenance requirement — a minimum amount of your own money you must keep in the account — and will force-sell positions if you fall below it.
Margin requirements and account minimums on Robinhood
To use margin on Robinhood, your account must have at least $2,000 in cash or securities. This is a federal requirement set by the Financial Industry Regulatory Authority (FINRA), not a Robinhood rule alone. Once you meet this minimum, you can request margin access through your account settings.
After you have margin access, Robinhood enforces a maintenance requirement — the minimum amount of your own money (called equity) you must keep in the account at all times. For most stocks, this is 30 percent of the total value of marginable securities you own. For example, if you hold $10,000 in stocks bought on margin, you must keep at least $3,000 of your own money in the account. If your equity drops below this level, Robinhood will issue a margin call.
Different securities have different maintenance requirements. Some stocks, especially volatile or low-priced ones, require 50 percent or higher. Options and certain other investments carry their own rules. You can check the maintenance requirement for a specific stock in Robinhood's app before you buy.
How margin interest is calculated and charged
Robinhood charges interest on the amount you borrow, not on the full purchase price. The interest rate depends on your account balance and how much margin you are using. Robinhood publishes its margin interest rates on its website, and rates typically range from around 5 percent to 11 percent annually, though this varies.
Interest accrues daily and is charged to your account monthly. If you borrow $5,000 at 8 percent annual interest, you owe approximately $33 per month (though the exact amount depends on the daily balance and the precise rate applied). The longer you hold a margin position, the more interest you pay.
You can repay margin at any time by depositing cash or selling securities. When you sell a marginable position, the proceeds go toward repaying the borrowed amount first, then the interest owed, and any remainder stays in your account as cash.
What happens when you get a margin call
A margin call occurs when the value of your account drops so far that your equity falls below the maintenance requirement. When this happens, Robinhood will notify you and give you a set time to deposit more cash or sell positions to bring your equity back above the minimum.
If you do not respond to a margin call within the important date — typically a few business days — Robinhood will force-sell your positions without asking you first. The app will sell the most liquid (easiest to sell) securities first, which may not be the positions you would choose to sell. You have no control over which investments are liquidated.
Force-selling can lock in losses and trigger tax consequences. If you sell at a loss, you realize that loss for tax purposes in that year. If you sell at a gain, you owe capital gains tax. Robinhood does not consider your tax situation when executing a margin call.
Margin on different investment types
Stocks are the most straightforward marginable investment on Robinhood. You can typically borrow up to 50 percent of the purchase price of most stocks, meaning you put down 50 percent and borrow 50 percent. Some stocks with lower trading volume or higher volatility may have stricter limits.
Options on Robinhood have different margin rules. Buying options (calls or puts) requires cash and does not use margin. Selling options (writing covered calls or cash-secured puts) can use margin, but the margin requirement is often much higher than for stocks — sometimes 100 percent or more of the position value. This means you may not actually borrow anything; you straightforward need to have enough equity in your account to cover the position.
Cryptocurrencies and certain other assets on Robinhood are not marginable at all. You must pay the full purchase price in cash. Check the specific security in the Robinhood app to see whether margin is available for it.
Risks of using margin and when it goes wrong
The biggest risk is that losses are magnified. If you buy $10,000 of stock using $5,000 of your own money and $5,000 borrowed, a 20 percent drop in the stock price means you lose $2,000 — which is 40 percent of your own money. A larger drop can wipe out your entire account and leave you owing Robinhood money.
Margin calls can force you to sell at the worst time. If the market drops sharply, many investors face margin calls simultaneously. You may be forced to sell positions at a loss to meet the call, locking in losses you might have recovered if you had held longer. You also cannot control which positions are sold.
Interest costs compound over time. If you hold a margin position for months or years, the interest paid can significantly reduce your returns. A position that gained 10 percent might net only 5 percent after interest costs.
How to request and manage margin on Robinhood
To request margin access, open the Robinhood app, go to your Account settings, and look for the Margin section. You will see your current margin balance, available margin to borrow, and maintenance requirement. If you do not yet have margin access, you can request it there if your account meets the $2,000 minimum.
Once you have margin access, buying on margin is the same as buying with cash — you straightforward place an order as usual. The app will show you how much margin you are using and how much is available. You can also turn off margin for specific orders if you want to use only your own cash.
To repay margin, deposit cash into your account or sell marginable positions. The proceeds automatically go toward repaying the borrowed amount. You can also set up automatic repayment in some cases, though Robinhood's options here are limited compared to other brokers.
Frequently Asked Questions
Can I use margin to buy stocks on Robinhood if I have less than $2,000?
No. Federal rules require a $2,000 minimum account balance to use margin on any brokerage, including Robinhood. Once you reach $2,000, you can request margin access through your account settings.
What is the difference between a margin call and a forced liquidation?
A margin call is a notice that your equity has fallen below the maintenance requirement and you have a few days to fix it by depositing cash or selling positions. A forced liquidation happens if you do not respond to the margin call — Robinhood then sells your positions without your permission to bring your account back into compliance.
Does Robinhood charge interest if I borrow margin but do not use it?
No. Interest is charged only on the amount you actually borrow to buy securities. If you have margin access but use only your own cash to buy, you pay no margin interest.
Can I use margin to buy options on Robinhood?
You cannot use margin to buy call or put options — you must pay the full premium in cash. You can use margin when selling options (writing covered calls or cash-secured puts), but the margin requirement is usually very high and may require you to have significant equity in your account.
What happens to my margin debt if I close my Robinhood account?
You must repay all borrowed margin before closing your account. If you have an outstanding margin balance, Robinhood will not allow you to close the account until it is paid off. You can repay by depositing cash or selling marginable positions.