Robinhood offers different types of accounts having different features to the customers. A Robinhood gold account is one of the types of accounts that one can apply for.
This is used by a lot of investors as through this they can gain good profits. But, for this, you will also have to fulfill certain requirements and also must be aware of all the terms and conditions of the margin maintenance and trading.
What Is Margin Maintenance In Robinhood?
So, Margin maintenance is new for a lot of people and they may not be aware of what it is.
Margin maintenance can be defined as the minimum value of your portfolio that you will have to maintain before Robinhood can approve the margin call.
The margin maintenance option will be available under the Robinhood Gold settings and Margin investing tab.
One thing that you have to keep in mind is that the margin maintenance can vary according to the model considering different factors like market liquidity and volatility.
For example, if you invest in stocks, the margin maintenance will be higher because of increased volatility. This is to make sure that there is enough value in your portfolio so that it can cover the position in case its value decreases in the future.
However, if the maintenance margin drops below the required amount, you will get a margin call. Another thing that you will have to be aware of is that all the maintenance requirements can be changed anytime by Robinhood.
Also, Robinhood has the complete allowance to sell any position which may seem perfect to fulfill the margin call and that too without any authorization of the user.
Robinhood Margin Maintenance Requirement
As mentioned, you will have to maintain a certain portfolio value to get access to margin investing in Robinhood. But the maintenance requirement is also dependent upon the basis of trading that you do.
For usual investors, you will have to maintain a minimum 2000$ in your portfolio before you can get access to trading.
Earlier, the platform charged 5 percent but then reduced the interest by 2.5% to motivate the investors to choose a Gold account. Moreover, you will have to pay the charges only above 1000$ on a daily basis.
You will have to make sure to maintain this value of your portfolio so that you do not get any margin call.
Also Read: Can You Trade After Hours On Robinhood?
How Does Robinhood Calculate Margin Maintenance?
Robinhood considers different things while calculating Margin maintenance. When it comes to the margin maintenance calculations, it keeps the model in mind.
It keeps in mind the market liquidity and volatility. For example, if stocks are more volatile, you may see that the margin maintenance is high and for other securities, the margin maintenance may be less.
Robinhood Margin Maintenance Percentage
So, you must know that you need to get access to a Gold account to access margins. For the gold account, you will have to pay 5$ monthly at the starting of every cycle of 30 days.
In case you are using margin investing and you get a margin of more than 1000$, you will have to pay 2.5 percent interest annually for the margin.
Moreover, the interest will be calculated on a daily basis and you will be charged for it after every billing cycle.
Robinhood Margin Maintenance Example
So, to explain margin maintenance in a better way, we have come up with an example for you. Consider that you have bought stocks of any company of 10000$ on margin from Robinhood.
At this time, if the Robinhood maintenance percentage is 25%, you will then have to maintain 2500$ in your portfolio. So, the amount is calculated according to the percentage of the amount of stock that you have bought. For 10000$ stock at 25% margin maintenance, you need to keep 2500$.
One thing that you will have to keep in mind is that the maintenance margin can be changed by Robinhood at any time. So, if the volatility of your stock increases, there are chances that the margin maintenance will change.
There are times when you have started with a 25% charge and because of the increased volatility, it may change to 35%. You will then have to maintain 3500$ for 10000$ stock on margin.
Why Is My Margin Maintenance Negative In Robinhood?
Now, it is also common to see margin maintenance negative in Robinhood.
Moreover, if you have processed a short leg assignment, the difference will have to be covered. You may face the margin call if the difference occurred because of the early assignment. If this happens, Robinhood will take action and cover the position.
Also Read: How to Add Money to Robinhood Without a Bank Account?
Why I Am Unable To Use Margin On Robinhood?
Another common question that most people ask is they are not able to use the margin on Robinhood. You must know that Robinhood uses margin only when the cash present in your account is depleted.
So, if there is still some positive cash present in your account, you will not be able to use the margin. For example, if you have 200$ cash in your Robinhood account, and you buy stocks of 200$, the cash will be used for the transaction.
But if you will again make a transaction of 500$, the stocks will be purchased using the margin only.
Is Margin Trading Worth It?
Yes, Margin Trading is Worth it. it is a good way for you to increase profits. You can buy stocks even if you do not have the required capital.
Moreover, you must know that you can still boost your trade and keep all your investments low. Moreover, only the 2.5% interest offered by Robinhood on margin is quite competitive and makes it worth it.
Also Read: How to Enable Dark Mode in Robinhood?
Winding Up
There is no doubt that margin trading is a good and smart investment option if you wish to keep the investment costs low and receive high margins. With Robinhood Gold, you can get access to other perks as well.
We have attempted to provide all the information about margin maintenance in this article. Hopefully, we have cleared all your queries. To read more such informational articles, visit our website.
