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
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
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 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
…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?
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
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
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.
- Available to experienced investors with Level 4 options trading approval
- Minimum account equity of at least $100,000 must be maintained at all times
- For details, call 1-866-222-6124 to speak with a representative
- Download applications
Personal Portfolio Margin Application
Business Portfolio Margin Application