Margin

A margin account permits investors to borrow funds from their brokerage firm to purchase marginable securities on credit and to borrow against marginable securities already in the account. Interest is charged on the borrowed funds for the period of time that the loan is outstanding.

 

Accounts with a minimum value of $2000 are eligible for margin with the exception of:

Uniform Gifts to Minors Account (UGMA)

Coverdell (Education Savings Account)

Minor IRA

Guardian/Conservator account

Estate account

Accounts managed by TD Ameritrade Investment Management

In addition, an IRA or qualified plan account approved for margin:

Will not be permitted to borrow funds

Will not be able to have a debit balance

May not short stock or sell uncovered options

Note: Some foreign accounts in specific countries are not able to add margin privileges.

 

How do I apply for margin?

To apply for margin trading, log in to your account at www.tdameritrade.com, go to Client Services > My Profile and select General. In the Elections & routing section, select Apply next to Margin trading. You will be asked to complete three steps:

1. Read the Margin Risk Disclosure statement.

2. Enter your personal information.

3. Agree to the terms.

Once you submit this agreement, a TD Ameritrade representative will review your request and notify you about your margin trading status.

 

How does my margin account work?

Generally, a client pledges the securities in their account as collateral for a loan that they may then use to purchase additional securities. The Federal Reserve Board (FRB) sets margin requirements for various marginable securities. For instance, the current margin requirement for initial purchase of eligible securities is 50% of the purchase amount. This is commonly referred to as the Regulation T (Reg T) requirement. Under Reg T, you must have at least 50% of the value of the trade in your account in either cash or fully paid marginable securities by settlement date of the trade. Although, The Federal Reserve determines which stocks can be used as collateral for margin loans, TD Ameritrade is not obligated to extend margin on all approved stocks.

As an example, a client with $10,000 of cash in a margin account would be able to purchase up to $20,000 worth of marginable securities, this is known as a client’s Stock Buying Power.

Margin trading increases risk of loss and includes the possibility of a forced sale if account equity drops below required levels. Margin is not available in all account types. Margin trading privileges subject to TD Ameritrade review and approval. Carefully review the Margin Handbook and Margin Disclosure Document for more details. Please see our website or contact TD Ameritrade at 800-669-3900 for copies.