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Margin
A margin account allows an investor to borrow money from Ally Invest using other securities currently held in the account, such as cash or stock, as collateral. Funds may be borrowed to make additional trades or they may simply be withdrawn from the account as cash. As with any loan, interest will be charged on any borrowed funds. Explore our current Margin Interest Rates
Keep in mind, industry regulations require that all margin accounts maintain a minimum of $2,000 in equity at all times. If this minimum is not maintained, borrowing on margin will no longer be available to the account.
Finally, there are some risks to using margin. Although it's nice to have the ability to borrow money, potentially allowing you to trade more shares of stock and achieve larger profits, choosing to trade on margin also opens yourself up to the possibility of incurring larger losses which could potentially exceed your initial investment. Learn about Long Common Stock on Margin
If you have a margin account with $2,000 or more of equity in it, you can borrow money from Ally Invest to make additional investments. Interest (calculated daily, debited monthly) is charged when you buy securities using margin.
When you log in, you can view the total value of marginable securities that you can buy using your own money and the money you can borrow from Ally Invest given the equity you have in your account. This client, for example, just deposited $10,000 in her account:
Buying Power
Stock Buying Power
$20,000.00
Option Buying Power
$10,000.00
Cash Available To Withdraw
$10,000.00
Options Requirements
$0.00
Equity Percentage
100%
She can buy marginable stock worth $20,000, options worth $10,000, or she can simply withdraw the $10,000 she just deposited. Because she has not borrowed any money from Ally Invest, she has full 100% equity in her account. Not all securities are marginable: options and penny stock, for example, are not marginable securities. You can use any extra cash generated by your buying power to buy options and penny stock. But any option or penny stock in your account will not increase your buying power as they cannot be used as collateral for borrowed money.
When you buy marginable securities, Ally Invest can generally lend you as much money as you deposited in the account, or half the market value of marginable securities that you have in your account. This way, 50% of the value of the securities you buy will be bought using money that you borrowed from Ally Invest.
If the value of any investment bought with money borrowed on margin decreases, your equity will also decrease. Ally Invest will generally allow your equity to go as low as 30% before it will require you to deposit more funds.
Day trading requirements and buying power calculations are different and a little more complicated. View our Day Trading Disclosures to learn all the rules related to day trading.
No. Short selling stock involves selling securities that you have borrowed. Cash generated from short selling is reserved in your account for the future re-purchase of the stock that was sold short. This is not a free cash credit and therefore not eligible to earn interest. The amount of cash held for the repurchase of short stock will be adjusted to the market weekly.