How it works

Let’s say you’ve spotted a stock that you think will go up. You have enough cash on hand to buy a few hundred shares, but you’d like to buy more. A margin loan lets you borrow money against your portfolio, add it to your cash on hand, and make the larger investment. That gives you more profit if the stock goes up, but you could lose more if the stock goes down. 

Buying with cash- image

Buying with cash

This is the regular way of trading: You buy 100 shares of a stock at $50 a share, and pay for it with $5,000 from your cash account

Buying on margin - image

Buying on margin

You use your $5,000, borrow another $5,000 on margin, and instead of 100 shares, you buy 200. At $50/share, that’s a $10,000 investment.

The reward - image

The potential reward

The stock goes up to $60/share—a $10 profit. With cash, your profit is $10 x 100 shares = $1,000. But with a margin loan, you could have bought twice as much stock, for a $2,000 profit which represents a 40% return on your initial investment of $5000

The risk - image

The risk

…or the stock drops to $40/share—a $10 loss. Now the situation is reversed. With cash, your loss is -$10 x 100 shares = -$1,000. But with a margin loan, you could have bought twice the stock, and lost twice the money (-$10 x 200 shares = -$2000) which also represent a 40% loss on your initial investment of $5000.

Why use E*trade for margin trading? - image

Why use E*TRADE for margin trading?

We give our margin traders tools and greater flexibility—with competitive margin rates and maintenance requirements.

  • Competitive maintenance requirements that potentially provides you more buying power
  • Debit cards and checks provide a convenient way to access extra cash to help meet short-term needs
  • Speak with a Financial Consultant - 1-800-387-2331

 

Key tools and insights - image

Key tools and insights

We give you easy access to the tools you need to make better-informed decisions about using margin.

  • Margin calculator: Create what-if scenarios to see the potential outcomes of different transactions
  • Requirements search: Different transactions require different margin levels. Look them up with just a few clicks
  • Margin analyzer: An all-in-one dashboard to monitor margin requirements for different positions

 

E*trade portfolio Margin - image

E*TRADE Portfolio Margin

Our Portfolio Margin account can give you even more trading power. It’s an advanced type of margin account, with requirements and limits based on the “net risk” of your portfolio.

 

 

 

$

Get up to $600 plus 60 days of commission-free stocks and options trades


 for deposits of $10k or more.1 How it works

$

Get up to $600 plus 60 days of commission-free stocks and options trades


 for deposits of $10k or more.1 How it works

Inside The Margins Image
There are lots of ways to use margin in your portfolio. Here are some places to start exploring.2
video
Growth vs. Value: Which Style is Right for You?

Intermediate

Alex Bryan of Morningstar sits down with Mike Cannizzaro of E*TRADE to discuss the differences...

Watch video

video
The Power of Diversification

Basic

In this 3-minute video, you will learn what diversification is and how you can use it to build...

Watch video

video
Investing for Income

Intermediate

Cara Esser of Morningstar explains some alternative investment ideas to create income for...

Watch video