Margin Trading at E*TRADE

Increase Your Buying Power

If used correctly, trading on margin offers a number of potential advantages2, including:

  • Cost of Funds:

    Borrow up to 50% of the value of securities purchased at competitive rates.
  • Increased Buying Power:

    Control a larger trading position with up to 4x intra-day leverage.
  • More Flexibility:

    Diversify3 your portfolio, hedge positions or profit from market declines.
  • Portfolio Margin:

    Lower requirements and more leverage4
Margin Page

Margin trading involves borrowing against securities you already own to purchase additional securities. The following example shows how the same trade works in a cash account vs. margin account.

  • Cash AccountIf an investor buys a stock for $50 a share and the stock price rises to $60, the profit per share is $10. If the stock price drops to $40, the loss per share is $10. So the gain or loss is 20%.
  • Margin Account - GainIf an investor buys stock for $50 a share, he or she pays $25 per share (the initial margin) and borrows $25. If the stock rises to $60, the profit is still $10 - but it's a 40% gain on the initial investment. Of course, the borrowed $25 per share, plus interest, needs to be repaid.
  • Margin Account - LossIf the stock price drops to $40, the loss will be $10 per share plus the cost of the margin loan. In this example, the investor loses 40% of his or her cash investment and must still pay back the margin loan plus interest.

Margin Requirements

  • Industry rules require that investors have at least $2,000 (the minimum margin) in a margin account before purchasing stocks.
  • Once shares are purchased on margin, the value of the account must not fall below the maintenance margin.The maintenance margin is 25% of the total market value of the stocks in the account. However, firms can set their own house requirement which may differ from the maintenance margin.
  • Currently, the house requirement at E*TRADE is 25%. For certain volatile stocks and concentrated positions the house requirement may be higher.
  • If the equity in the margin account falls below the house requirement of 25%, E*TRADE will issue a margin call requiring you to deposit more cash. If the margin call is not met in a timely fashion, the firm may liquidate the position or any security in your account without your permission.

Margin Risks

  • Investing on margin is investing with borrowed money.
  • You are responsible for repaying the loan plus interest.
  • The firm can increase its house maintenance margin requirements at any time and is not required to provide you with advance written notice.
  • You are not entitled to an extension of time on a margin call.
  • It's possible to lose more money than you deposited in the account.

Get up to $600 cash credit for deposits or transfers made within 45 days of account open.
Deposit or Transfer
$25K - $99,999
$100K - $249,999
$250K and above
And open an account with $10,000 or more and receive free stock & options trades for 60 days once funds become available.
*Call us to see how you can qualify for more at 1-800-ETRADE-1