Trading FAQs: Margin

5 things you should know about margin

  • How does margin work?

    A margin account lets you leverage securities you already own as collateral for a loan to buy additional securities.

    Here’s an example: Suppose you use $5,000 in cash and borrow $5,000 on margin to buy a total of $10,000 in stock. If the stock rises in value to $11,000 and you sell it, you would pay back the $5,000 borrowed on margin and realize a profit of $1,000. That’s a 20% return on your $5,000 investment.

    If you didn’t use a margin loan, you would have paid $10,000 in cash for the stock. Not only would you have tied up an additional $5,000, but you would have realized only a 10% return on your investment. The 10% difference in the return is the result of leveraging your assets.

    However, leverage works as dramatically when stock prices fall as when they rise. For example, let’s say you use $5,000 in cash and borrow $5,000 on margin to purchase a total of $10,000 in stock. Suppose the market value of the stock you’ve purchased for $10,000 drops to $9,000. Your equity would fall to $4,000, which is the market value minus the loan balance of $5,000. In this instance, you could suffer a loss of 20% due to a 10% decrease in market value.

    This example does not account for any fees, commissions, interest, or taxes you may be required to pay.

  • What securities are eligible collateral for margin borrowing?

    You can use these securities as collateral for margin borrowing:

    • Equities and ETFs trading over $3 a share (special requirements exist for certain securities and accounts)
    • Most mutual funds that you’ve owned for at least 30 days
    • Treasury, corporate, municipal, and government agency bonds

    You cannot use these securities as collateral for margin borrowing:

    • CDs
    • Money market funds
    • Annuities
    • Options
    • Offshore mutual funds
  • What is a margin call?

    If the margin equity in your account falls below security requirements then your account is issued a margin call. If your account is issued a margin call, you must deposit more money or marginable securities in your account or sell a position. See Day trading under Trading Restrictions for more information.

    You’ll find more information—including types of margin calls, how calls are triggered, and how to meet a margin call—in the FAQs under "How does margin work?"

  • What are the risks associated with margin?

    Margin investing carries greater risks and may not be appropriate for everyone. Before you use margin, carefully review your investment objectives, financial resources, and risk tolerance to determine whether margin borrowing is right for you. Here are some of the risks that you should think about before you get started:

    Leverage risk:Leverage works as dramatically when stock prices fall as when they rise. For example, let’s say you use $5,000 in cash and borrow $5,000 on margin to purchase a total of $10,000 in stock. Suppose the market value of the stock you’ve purchased for $10,000 drops to $9,000. Your equity would fall to $4,000, which is the market value minus the loan balance of $5,000. In this instance, you could suffer a loss of 20% due to a 10% decrease in market value.

    This example does not account for any fees, commissions, interest, or taxes you may be required to pay.

    Margin call risk:If the securities you hold fall below the minimum maintenance requirement, your account will incur a margin call. Margin calls are due immediately. It’s smart to leave a cushion in your account to help reduce the likelihood of a margin call. Sometimes you may face higher maintenance minimums, especially when the securities you’re using as collateral carry additional risks, such as risks derived from concentrating your investments in one area or sector.

    Short selling is also a margin account transaction that entails the same risks as a margin call along with some added risks. When you short sell a security, you’re combining several different investment strategies to potentially profit if a particular stock drops in value. However, if that shorted security rises in value, you can incur a loss that might be unlimited. In addition, you might be charged a short interest fee on the securities you borrowed to sell short; those fees can change—sometimes significantly—without warning.

    All short sale orders are subject to the availability of the stock being borrowed, which must be confirmed by Fidelity prior to the order being entered. The availability of this borrowed stock to initiate and maintain a short sale position can change at any time, which could increase the likelihood of a buy-in of your short position. If you’d like more information, see About short selling.

  • What are my responsibilities for my margin account?

    Before using margin, you must be fully aware of the trading risks and requirements. You must ensure your account holds the minimum equity to cover a trade before you place it. If the equity in your account is not sufficient or Fidelity believes the risk is too great, we can sell your assets at any time. If we have to make repeated account liquidations, we may restrict or terminate your account per the Customer Agreement.

Margin calls

  • What are the types of margin calls and how do I meet them?

    Margin call information is provided to help you understand when your account is in a call and see what amounts are due and when. The method and time for meeting a margin call varies, depending on the type of call.

    Call type Trigger Call meeting methods
    House Account margin equity falls below Fidelity’s requirement.
    • Sell margin-eligible securities held in the account, or
    • Deposit cash or margin-eligible securities.

    Time allowed: 4 business days

    Fidelity reserves the right to meet margin calls in your account at any time without prior notice.

    Exchange Account margin equity falls below exchange requirements.
    • Sell margin-eligible securities held in the account, or
    • Deposit cash or margin-eligible securities.

    Time allowed: 2 business days

    Fidelity reserves the right to meet margin calls in your account at any time without prior notice.

    Federal Equity is insufficient to satisfy the 50% initial requirement on an opening transaction.
    • Sell margin-eligible securities held in the account, or
    • Deposit cash or margin-eligible securities

    Note: Repeatedly liquidating securities to cover a federal call while below exchange requirements may result in restrictions on margin trading in the account.

    Time allowed: 4 business days

    Fidelity reserves the right to meet margin calls in your account at any time without prior notice.

    Day trade A day trade exceeds your account’s day trade buying power.
    • Deposit of cash or marginable securities only. A sale of an existing position may satisfy a day trade call but is considered a day trade liquidation. 3-day trade liquidations within a 12-month period will cause the account to be restricted.

    Note: There is a 2-day holding period on funds deposited to meet a day trade call.

    Time allowed: 5 business days

    Fidelity reserves the right to meet margin calls in your account at any time without prior notice.

    Day trade minimum equity Margin equity falls below the $25,000 pattern day trader equity requirement.
    • Deposit of cash or marginable securities

    Note: There is a 2-day holding period on funds deposited to meet a day trade minimum equity call.

    Time allowed: 5 business days

    Fidelity reserves the right to meet margin calls in your account at any time without prior notice.

    Fidelity can sell assets in your account without contacting you. While Fidelity generally attempts to notify customers of margin calls, it is not required to do so. Even if you are notified, Fidelity can still sell assets before the time indicated in the notice, if it believes such action is warranted. You understand that if we contact you in advance in certain instances, we are not obligated to do so and such action will not be deemed a waiver of our rights under this agreement.

  • How do I use the Margin Calculator?

    Get familiar with the calculator by reviewing the Margin Calculator step-by-step instructions.

    The Hypothetical Transaction Tool, which is part of the Margin Calculator, allows you to see the potential impact of stock and option trades, deposits, and withdrawals on your margin balances and margin requirements. You’ll find videos that walk you through using the Margin Calculator.

    For illustrative purposes only

  • How can I use the Margin Calculator to help me avoid a margin call?

    Use the Margin Calculator’s Hypothetical Transaction Tool to mock up trades before you place them. The link for this tool appears on the trade ticket. You can also get to the tool from your Balances page at the bottom under Additional resources. The calculator shows you real-time balances and security requirements needed for the trade you might place:

    Avoid Margin Call

  • What creates margin calls and when are they due?

    Margin calls occur because your account has dropped in value either because the value of your holding has dropped, or because you’ve withdrawn cash or securities from your account so you no longer have enough account equity to meet the margin requirement.

    Margin calls are due immediately: You must meet the call by depositing enough cash or marginable securities in your margin account to avoid account liquidation. It’s your responsibility to monitor and take action. Due dates for margin calls are included in margin call notifications as a best-case scenario but timing can be accelerated by Fidelity in its sole discretion. By covering the margin call immediately, you reduce the probability of account liquidation and have more control over your investments. If you experience repeated account liquidations, Fidelity can restrict your account, remove the margin feature, or terminate your account per the Customer Agreement.

    You'll find specific call types, triggers, and call meeting methods in the FAQs under "How does margin work?"

  • Can trading certain types of securities lead to an accelerated margin call?

    Yes, it’s important you understand when trading some securities or trading in certain situations, there’s a potential for an increased margin-call risk. Specifically:

    • Trading low-priced stocks
    • Trading volatile stocks (e.g., leverages ETFs, IPOs, or options)
    • Trading securities in advance of corporate earnings announcements or corporate actions

    Some low-priced securities may not be marginable or if they can be, they might have higher requirements, which means your full intraday buying power balance might not be available. Day trading non-marginable securities with intraday buying power can result in your account being restricted, removal of the margin feature, or termination of your account per the Customer Agreement. The intraday buying power balance is typically used for fully marginable securities in ordinary market conditions. Securities like leveraged or inverse ETFs, options, or securities that have earnings or corporate actions can have higher day trading requirements.

    Keep in mind that using features such as checkwriting, bank cards, and bill payment services can create a margin loan or increase the amount outstanding of an existing margin loan and may increase the risk of a margin call.

    You can find more details under Trading Restrictions, Day trading.

  • What happens if I fail to meet a margin call?

    If you fail to meet a margin call:

    • Your account might have restrictions placed on it
    • Fidelity could liquidate your positions
    • Your account's margin and options features can be removed

Trading on margin

  • What is the difference between trading in cash account vs. trading on margin?

    When you place trades in a cash account, you can only buy and sell securities with cash. You can’t borrow against your securities to make purchases. When using your cash account, you must pay in full for your purchases and deliver securities for your sales by the trade settlement dates. However, if you place trades in a margin account, you can leverage the equity in securities you already own to purchase additional securities.

    If you have a margin account, remember to place trades in the margin account type (which is the default). By selecting this account type, your available cash is used to pay for your trades before creating a margin loan for you. Additionally, by using the margin account type, the settlement times only impact the ability to withdraw funds. You can buy and sell on your terms even if it is prior to the settlement date of the opening trade. See Trading Restrictions, Day trading for additional information.

    If you place a trade in your margin account, and you select the cash account type, you no longer get the benefits of holding securities in margin and you must follow the trade settlement rules for a cash account.

    If your goal is to hold the securities in margin but avoid getting charged the margin interest, use your balance under "Available to trade without margin impact."

    Trading cash trading margin

    Note: If you open and close the same security in the margin type more than 4 times in a 5-day period, you’ll be classified as a pattern day trader and you’ll need to maintain $25,000 in margin equity.

  • What is buying power?

    Buying power is reflected as an account balance. Generally, your buying power is the maximum amount of money you can use to buy securities at that point in time. This amount is determined by adding the total cash plus the loan value of marginable securities you have in your account. Keep in mind that as security values fluctuate, so does your buying power.

  • What are the types of balances and how do they apply to me?

    Available to trade without margin impact: This balance represents any free cash available in the account. Staying within this balance should help ensure that you are not creating a margin loan subject to margin interest.

    Non-margin buying power: This balance can be used to purchase securities that don’t allow for borrowing against them (i.e., those that have 100% margin requirement). This balance uses your cash and margin surplus from any margin-eligible securities already in the account, which means you can create a margin loan and borrow against those other positions to buy something that isn't margin-eligible.

    Margin buying power: This is the balance you’d use if you want to use all of your cash and create a margin loan. You will pay margin interest and be subject to margin calls. Before you consider using all of this balance, we suggest using the Margin Calculator to understand the potential impact of the specific trade that you want to place because this balance assumes the lowest possible house requirement: typically 30%. However, if the trade creates a concentrated position or the security isn't fully marginable, you will typically have a higher security requirement. If you don’t use the Margin Calculator or understand the security-specific margin requirements first, your account may generate a house call.

    Intraday buying power: This balance is the amount available for day trading a long, fully marginable position. We suggest that you use the Margin Calculator to understand security-specific margin requirements to avoid exceeding this balance and creating a margin or day trade call. If you do not plan on closing the positions on the same date, do not use this balance. Due to the increased leverage, attempting to hold this overnight can result in the margin call being accelerated and becoming due immediately.

    For detailed information, see Day trading under Trading Restrictions.

  • Can I calculate hypothetical trades on margin?

    Yes, Fidelity’s Hypothetical Transaction Tool, within the Margin Calculator lets you calculate the impact of hypothetical equity trades on your margin balances and buying power while also factoring in the specific margin requirements for your account. With the Margin Calculator, you can:

    • Check the impact several margin trades will have on your overall margin balances
    • Determine how many shares you may purchase of a particular security
    • Determine how many shares of a specific security to sell to meet a margin call
    • Estimate the cost of placing a trade on margin for a specific account
    Hypothetical

Day trading

  • What is day trading?

    Day trading is defined as buying and selling the same security—or executing a short sale and then buying the same security— during the same business day in a margin account. Pattern day traders, as defined by FINRA (Financial Industry Regulatory Authority) rules must adhere to specific guidelines for minimum equity and meeting day trade margin calls.

    For more information, see Day trading under Trading Restrictions.

  • How do I know if I’m classified as a day trader?

    You can check your classification at the bottom of your Balances page: Go to your Trading Profile and select the Trade Restrictions & Violations link. Additionally, if you have an intraday buying power balance that means you’re classified as a pattern day trader as this balance only displays for day traders. Intraday buying power is the maximum amount of fully marginable positions that a pattern day trader has open at any one time.

  • When do I use my intraday buying power balance vs. margin buying power?

    If you’re trading using your intraday buying power balance, the expectation is that positions are liquidated prior to the close of the trading session in which you opened the position. Using the intraday buying power balance to open a position and hold it overnight increases the likelihood that a margin call is issued and due immediately.

    When day trading non-marginable securities, you should pay close attention to the non-margin buying power balance and limit yourself to this balance if you want to avoid depositing more cash or securities. Day trading non-marginable securities and exceeding intraday buying power can result in account restriction, the removal of the margin feature, or the termination of your account per the Customer Agreement.

    Fidelity monitors accounts and we conduct reviews throughout the day. If your account requires attention, you may receive an alert indicating that you must take immediate action. You should be aware of the risks involved when you use your intraday buying power balance and be prepared to deposit cash or marginable securities immediately. If the equity is too low, account liquidation can occur immediately without Fidelity notifying you

    If you’re unsure if you’ll close a position or several positions in the same trading session, use the Margin Calculator and use your margin buying power balance

  • Can trading certain types of securities lead to an accelerated margin call?

    Yes, it’s important you understand when trading some securities or trading in certain situations, there’s a potential for an increased margin-call risk. Specifically:

    • Trading low-priced stocks
    • Trading volatile stocks (e.g., leverages ETFs, IPOs, or options)
    • Trading securities in advance of corporate earnings announcements or corporate actions

    Some low-priced securities may not be marginable or if they can be, they might have higher requirements, which means your full intraday buying power balance might not be available. Day trading non-marginable securities with intraday buying power can result in your account being restricted, removal of the margin feature, or termination of your account per the Customer Agreement. The intraday buying power balance is typically used for fully marginable securities in ordinary market conditions. Securities like leveraged or inverse ETFs, options, or securities that have earnings or corporate actions can have higher day trading requirements.

    Keep in mind that using features such as checkwriting, bank cards, and bill payment services can create a margin loan or increase the amount outstanding of an existing margin loan and may increase the risk of a margin call.

    You can find more details under Trading Restrictions, Day trading.

Margin requirements

  • How are margin requirements determined?

    Margin requirements tell you how much equity you must have in your account to cover what you’re buying (or what you hold) on margin. The requirements are determined by the Federal Reserve (Fed requirement), FINRA (Exchange requirement), and your broker (House requirement). Generally, the Fed requirement is 50% and the Exchange requirement is 25% for long positions and 50% to 30% for short positions. These requirements are static, meaning they’re unlikely to change, but they can be higher than normal based on the security you are trading. For example, double leveraged ETFs will have double the Exchange requirement for long positions, which means a 50% Fed requirement, a 50% Exchange requirement, as well as a 50% House requirement (Fed and house requirements cannot be less than the Exchange requirement). Triple leveraged ETFs have triple leverage built into them so that means 75% Fed, Exchange, and House requirements.

  • How do the House requirements change if I’m trading within a diversified vs. a non-diversified account?

    When your account is diversified—that is, you invest in different securities and different industries—the House requirements are optimal. House requirements are more dynamic because your broker (Fidelity) sets them and they depend on many factors. The base rate for long positions is 30% and for short positions, it’s 35%. Keep in mind that the requirement might be higher based on certain factors. For example, if you’re highly concentrated in one position, that position will have a higher requirement than if you have a diversified portfolio. The same logic applies if you have different securities in the same industry. In this example, notice the LNG holding in a diversified portfolio vs. a concentrated one:

    Diversified

    Diversified

    For illustrative purposes only

    Non-diversified

    Non-Diversified

    For illustrative purposes only

    House requirements are reviewed systematically based on volatility, concentration, industry and liquidity levels and can be viewed in the Margin Calculator. On some occasions, the House requirements are deemed insufficient for the leverage in the account and raised to adequately cover the risk. It is very important to review your margin account daily and become familiar with the House requirements for your account.

    There are other reasons why requirements can be adjusted. For example, if a stock is trading below $10 per share (long) or $17 (short), it will have a higher requirement based on low-priced security requirements. If a stock is trading below $3 per share (long) or $5 per share (short), it will have 100% requirement (i.e., it’s non-marginable). Shorting anything that is trading at or below $2.50 per share has a $2.50 per share requirement (so the requirement can actually be higher than 100% of the value of the position; this is set by FINRA). As mentioned before, anything that has a higher Exchange requirement will have a higher House requirement, such as leveraged or inverse ETFs, IPOs, mutual funds, and iShares. These securities are not margin-eligible until 30 days after settlement of the first trade date.

    Typically, when an account is concentrated in one specific equity position, a concentration add-on will increase the house requirement based on a tiered schedule. In certain cases, the position may benefit from a reduced house requirement based on the volatility of the security. In such instances, the new house requirement will fall below the requirement expected (base + add-on concentration percentage). To maintain the lower requirement, the concentrated position must meet the standards based on volatility. If the position fails to meet this standard, the house requirement may be increased again to align with the normal concentration add-on.

    Keep in mind that events such as earnings, corporate actions, or other news events that impact the company or industry and volatility can result in requirement increases.

  • What are the minimum equity requirements?

    Margin borrowing: $2,000 – In order to carry a margin debit balance or sell a security short, you must have at least $2,000 of margin equity in the account.

    Day trading: $25,000 – If you’re classified as a day trader, your account must maintain $25,000 in account equity to continue day trading in the account. To remove the day-trader classification, you must go 60 days without completing a day trade.

    Spreads: $10,000 in total account value and $2,000 in margin equity because pairing spreads is a function of margin. The option market value isn’t counted toward margin equity because options are contracts, not actual equities. Because of this, you must maintain at least $2,000 in marginable equity in either cash or securities. The total account value, which includes all account positions less any debit balance, must maintain a balance above $10,000.

    Naked options: Equity options require a total account value of $20,000 and margin equity of $2,000. Index options require total account value of $50,000 and margin equity of $2,000.

  • What are the types of margin requirements?

    Margin requirements are intended to help protect securities firms and their customers from some of the risks associated with leveraging investments by requiring customers to either meet or maintain certain levels of equity in their account.

    There are 2 primary types of margin requirements: initial and maintenance.

    • Initial/Reg T requirements:
    • An initial margin requirement is the amount of funds required to satisfy a purchase or short sale of a security in a margin account. The initial margin requirement is currently 50% of the purchase price for most securities, and it is known as the Reg T or the Fed requirement, which is set by the Federal Reserve Board. In addition, Fidelity requires customers to have a minimum account equity of $2,000 when placing orders on margin.
    • Maintenance requirements:
    • Ongoing margin requirements after the purchase is complete are known as maintenance requirements, which require that you maintain a certain level of equity in your margin account. Maintenance requirements are set by the NYSE, FINRA, and/or the brokerage firm.
    • At Fidelity, house maintenance requirements are systematically applied based on the composition of an account. These are called rules-based requirements (RBR). RBR applies changes to requirements based on the changes in the positions held in an account on a daily basis. In this way, the aggregate requirement truly reflects the risk in an account based on the current structure of the portfolio. Fidelity, as well as other broker dealers, has the right to modify the maintenance requirements on specific securities and individual customer accounts.
    • RBR is applied to accounts with a position in a margin or short account. RBR is applied to stocks, corporate bonds, municipal bonds, treasuries, options, and preferred stock. RBR examines individual accounts and calculates requirements based on portfolio attributions (add-on percentages), which are added to the existing base requirements. RBR requirements are additive, i.e., any one security could qualify for more than just one type of add-on with a maximum long side requirement of 100%. Short side requirements may go over 100%. The account level add-ons are:
      • Issuer (position) concentration: Concentration of a position held versus the account’s gross market value
      • Liquidity: Based on the trading volume of a security
      • Ownership concentration: Based on all the securities held of a common issuer
      • Industry concentration: Position owned compared to total shares outstanding of the issuer

    Fidelity provides the margin maintenance requirement for all securities held in your account. Fidelity also provides the ability for you to enter symbols to retrieve the maintenance requirement for securities not held in your account, as well as evaluate the impact of hypothetical trades on your account balances using our Margin Calculator.

    Note: All margin maintenance requirements displayed using the “margin requirement” tool are specific to the margin account through which you access the tool. Maintenance requirements may vary by account and may be subject to RBR add-on requirements in addition to the base requirements. Fidelity requires customers to have a minimum account equity of $2,000 when placing orders on margin.

    With respect to maintenance requirements on specific securities, Fidelity considers a number of factors, including the stock’s trading volatility and liquidity, company earnings and market capitalization, as well as whether the account in question is in a concentrated position.


    Example: If you purchase $20,000 of marginable stock with a 30% house margin requirement, you would need to initially deposit $10,000, which is the 50% Fed requirement. You would not need to deposit additional money beyond the $10,000 because the house maintenance requirement is below the 50% Fed requirement.

    Let’s say, however, the security purchased now makes up 80% of the gross market value of your portfolio. This security would be subject to an RBR add-on of 30%, bringing the house requirement to 60%. Since the account has a maintenance requirement higher than the Fed requirement, you would need to deposit funds to meet the higher requirement, rather than 30%. In this example, the security purchased increased the house maintenance requirement to 60%, requiring a deposit totaling $12,000. This amount is equal to 60% of the purchase price.

    Note: Fidelity may impose a higher house maintenance requirement than the Fed requirement (or Reg T). In a situation where the maintenance requirement is the greater of the 2, you must maintain an equity level at or above the higher requirement. Low-price security requirements govern all accounts with equity or mutual funds. Stocks or mutual funds between $3 and $10 will have the higher of a $3 per share requirement or the normal RBR requirement. Stocks or mutual funds below $3 per share will have a 100% margin requirement. Add-ons are not mutually exclusive and a single position could have multiple add-ons.

  • What are the requirements for equities?

    Maintenance requirements are calculated using rules-based requirements in which the RBR add-ons are added to the base requirements. A majority of securities have base requirements of:

    • 30% (long side)
    • 35% (short side)

    There may be instances where securities have higher base requirements. Some examples are distressed sectors, distressed issuers, and levered ETFs.

    Security Price per share/maintenance requirement
    Equities $3 and under: 100% of market value
    Over $3 and under $10: The greater for the regular RBR calculation or $3 per share
    $10 and over: see RBR calculations below

    Issuer (Position) Concentration
    The market value of a position as a percent of the account’s gross market value (position market value/portfolio gross market value)

    Long positions

    Level of concentration Add-on
    0%–10% 0%
    10.01%–20% 5%
    20.01%–40% 10%
    40.01%–50% 15%
    50.01%–75% 20%
    75.01%–100% 30%

    Short positions

    Level of concentration Add-on
    0%–10% 0%
    10.01%–20% 10%
    20.01%–40% 15%
    40.01%–50% 20%
    50.01%–75% 30%
    75.01%–100% 35%

    Liquidity
    The quantity of a position as a percent of the security’s 20-day median trading volume (position quantity/security’s 20-day median volume)

    Long side

    Days to liquidate Add-on
    0–1 0%
    1.01–2 10%
    2.01–3 20%
    3.01–5 30%
    above 5 50%

    Short side

    Days to liquidate Add-on
    0–1 0%
    1.01–2 10%
    2.01–3 20%
    3.01–5 30%
    above 5 50%

    Ownership concentration
    The quantity of a position as a percent of the number of shares outstanding (position quantity/shares outstanding)

    Ownership Add-on
    0%–1% 0%
    1.01%–3% 10%
    3.01%–5% 25%
    5.01%–100% 100%

    Industry Concentration
    The net market value of position(s) in the global industry classification standard (GICS) as a percent of the account’s gross market value (net market value in each GICS sub sector/gross market value)

    Level of concentration (within same industry) Add-on
    0%–40% 0%
    40.01%–70% 5%
    70.01%–100% 10%

    Note: The industry add-on should only trigger for an account that has no positions greater than 40% of total market value. Certain volatile equity and option positions as well as low market cap securities may have concentration add-ons over 30%.

  • What are the requirements for mutual funds?
    Security Price per share/maintenance requirement
    Mutual funds $3 and under: 100% of market value
    Over $3 and under $10: $3 per share
    $10 and over: 30% of market value
    Exception: Select Money Market and Spartan* Money Market are 30%.
  • What are the requirements for fixed income?
    Security Initial requirement Maintenance requirement
    Convertible corporates 50% of market value Greater of 30% of market value or 10% of principal (not to exceed 100% of market value) and subject to RBR add-on requirements
    Nonconvertible corporates Greater of 30% of market value or 10% of principal (not to exceed 100% of market value) Greater of 25% of market value or 10% of principal (not to exceed 100% of market value) and subject to RBR add-on requirements
    U.S. agency debt Greater of 10% of market value or 6% of principal (not to exceed 100% of market value) 15% regardless of maturity
    Municipals Greater of 25% of market value or 15% of principal (not to exceed 100% of market value) Greater of 20% of market value or 10% of principal (not to exceed 100% of market value) and subject to RBR add-on requirements
    Treasury bills notes, bonds, and zeros Greater of 10% of market value or 6% of principal (not to exceed 100% of market value) Determined by time to maturity
    CATS and TIGRs Greater of 25% of market value or 10% of principal (not to exceed 100% of market value) Market value or 10% of principal (not to exceed 100% of market value) and subject to RBR add-on requirements
    Preferred stock Aligned with its equivalent corporate debt Aligned with its equivalent corporate debt and subject to RBR add-on requirements
    Unit investment trusts Same as regional equities Same as regional equities
    Other fixed income Greater of 10% of market value or 6% of principal (not to exceed 100% of market value) Greater of 10% of market value or 6% of principal (not to exceed 100% of market value)

    Corporate Bonds

    Industry concentration add-on
    The aggregate industry net market value of position(s) as a percent of the account’s gross market value (aggregate industry net market value/gross market value).

    Level of concentration Add-on
    50.01%–70% 0%
    70.01%–100% 5%

    Concentration add-on
    The aggregate issuer net market value as a percent of the account’s gross market value (aggregate issuer net market value/gross market value)
    Note: Concentration add-ons are applied at the issuer level.

    Level of concentration Add-on
    0%–50% 0%
    50.01%–75% 5%
    75.01%–100% 10%

    Ownership add-on
    The quantity of a position as a percent of the number of shares outstanding (position quantity/issue shares outstanding)
    Note: Ownership add-ons are applied at the issuer level.

    Level of concentration Add-on
    0%–30% 0%
    30.01%–50% 5%
    50.01%–100% 10%

    Treasuries

    Security Maturity Requirement
    Bills, notes, bonds, and zeros Less than 1 year 3%
    1–3 years 5%
    3–5 years 6%
    5–10 years 8%
    10–30 years 10%
    CATS and TIGRs All maturities Greater of 20% of market value or 10% of principal (not to exceed 100% of market value)

    Preferred Stock

    RBR Concentration add-on
    The aggregate issuer net market value as a percent of the account’s gross market value (aggregate issuer net market value/gross market value)

    Level of concentration Add-on
    0%–15% 0%
    15.01%–20% 5%
    20.01%–50% 10%
    50.01%–75% 20%
    75.01%–100% 30%

Options trading

  • What are the margin requirements for covered and uncovered positions?

    As a reminder, covered means having cash or securities to cover the position if needed; uncovered, also known as “naked,” means you don’t have cash or securities to cover the position.

    Covered Options Margin Requirements:

    Order Options level Margin requirement
    Buy calls to open
    Buy puts to open
    Level 2 The initial debit, in cash or available to borrow. No margin agreement required.
    Buy calls to close
    Buy puts to close
    n/a The initial debit, in cash or available to borrow. The position must be short in the account. Check for possible assignment.
    Note: Closing a short options position may release additional funds that can be applied to the purchase requirement.
    Sell calls to open Equities: Level 4
    Indexes: Level 5
    Covered: Level 1
    Uncovered: See below.
    Covered: No margin requirement. The underlying stock must be long in the account.
    Sell puts to open Equities: Level 4
    Indexes: Level 5
    Cash covered: Level 2
    Uncovered: See below.
    Covered: No margin requirement except for the short stock. The underlying stock must be short in the account.
    Sell calls to close
    Sell puts to close
    n/a No margin requirement. Positions must be long in the account.

    If there is no underlying stock in the account, the full exercise value of the short put must be in the cash account.

    Uncovered options margin requirements

    Looking to place uncovered options trades? Then you must have a margin agreement and be approved for the appropriate options level:

    • Level 4 for equity
    • Level 5 for index

    To short naked calls or naked puts you must maintain a minimum equity balance of $20,000 for equity options and $50,000 for index options in your account.

    Equity calls: The higher of the following requirements:

    • 25% of the underlying stock value, minus the out-of-the-money amount, plus the premium
    • 15% of the underlying stock value, plus the premium (i.e., the cost of buying an option contract or the income received for selling an option contract)

    Equity puts: The higher of the following requirements:

    • 25% of the underlying stock value, minus the out-of-the-money amount, plus the premium
    • 15% of the strike price, plus the premium

    Index calls: The higher of the following requirements:

    • Broad-based indexes (i.e., S&P 500):
      • 20% of the underlying value, minus the out-of-the-money amount, plus the premium
      • 15% of the underlying value, plus the premium
    • Narrow-based indexes (i.e., industry-specific indexes):
      • 25% of the underlying value, minus the out-of-the-money amount, plus the premium
      • 15% of the strike price, plus the premium

    Options spread requirements
    Nonretirement accounts require the following account agreements and equity requirements before placing any spreads:

    • Margin agreement on file
    • Level 3 options agreement for equity and index spreads
    • A minimum equity balance of $10,000 for equity and index spreads

    The margin requirement for debit spreads in a nonretirement account is the initial debit paid to execute the trade. The margin requirement for credit spreads in nonretirement accounts is the lower of the difference in strike prices or the short option’s requirement as an uncovered position.

    Retirement accounts require the following account agreements and equity requirements before placing any spreads:

    • Level 2 options agreement
    • Option Spreads in Retirement Accounts Agreement on file
    • A minimum equity balance of $10,000 while holding any spread positions

    The margin requirement for a debit spread in a retirement account is the initial debit paid to execute the trade, plus a cash spread reserve of $2,000. The margin requirement for a credit spread in a retirement account is the greater of the difference in strike prices and the $2,000 cash spread reserve.

    Note: The $2,000 cash spread reserve is counted toward the credit spread requirement, and is not required for each subsequent spread that is maintained in the account.

    RBR concentration add-ons may be applied to naked options.

    • Certain volatile equity and option positions as well as low market cap securities may have concentration add-ons over 30%.
  • What balances do I use for options?

    There are a few balances that can apply to options trading. Here’s a breakdown of the balance fields and their definitions:

    Balance Definition Frequency
    Options in-the-money Options that have intrinsic value (i.e., the difference between the strike price of the option and the price of the underlying security). A call option is considered “in-the-money” if the price of the underlying security is higher than the strike price of the call. A put option is considered “in-the-money” if the price of the security is lower than the strike price. Real-time
    Options requirements Margin requirements for single or multi-leg option positions. Your positions, whenever possible, will be paired or grouped as strategies, which can reduce your margin requirements. Intraday
    Cash covered put reserve The value required to cover short put options contracts held in a cash account. Cash covered put reserve is equal to the options strike price multiplied by the number of contracts purchased, multiplied by the number of shares per contract (usually 100). Cash available to buy securities, cash available to withdraw, and available to withdraw values will be reduced by this value. Intraday
    Cash spread reserve The requirement for spread positions held in a retirement account. For debit spreads, the requirement is full payment of the debit. For credit spreads, it’s the difference between the strike prices or maximum loss. A $2,000 minimum equity deposit is required in addition to the debit requirement, but can be counted toward the credit requirement. Overnight

    Frequency definitions:

    Real-time: Balances display values that change with market price fluctuations on the underlying securities in your account. Essentially, it is a complete recalculation based on price fluctuations of positions, trade executions, and money movement into or out of the account.

    Intraday: Balances reflect trade executions and money movement into and out of the account during the day.

    Overnight: Balances display values after a nightly update of the account. In some cases, certain balance fields can only be updated overnight due to regulatory restrictions.

  • What are my obligations if I don’t intend to buy the underlying security of an equity option?

    In the absence of any instructions from you, equity options that close $0.01 or more in the money are automatically exercised, which means the underlying security must be bought or sold. Equity options are not settled in cash. If you can’t cover the position because your account has insufficient buying power, you must close the position before the options contract expires. If your account cannot support the underlying position that the option contract(s) represent, the contract(s) can be liquidated or blocked from being exercised. If you want to hold an option that’s in or near-the-money at expiration, call a Fidelity representative to block the automatic exercise from occurring. This request is only possible with long, unpaired options and helps prevent account liquidation for the option. However, you will be taking on more risk because if you fail to close an option that you’ve blocked from an automatic exercise, the option will expire worthless regardless if it is in or out-of-the-money. If you experience repeated account liquidations, Fidelity can restrict your account, remove the margin and/or options feature, or terminate your account per the Customer Agreement.

  • What are the risks of selling out-of-the-money options if I don’t intend to meet a margin call?

    You should never trade into margin calls without planning to make a deposit of cash or marginable securities. You should avoid selling options into expiration with the intent to expire out of margin calls. The size of the margin call can cause an accelerated margin call, which might result in account liquidation. If you experience repeated account liquidations, Fidelity can restrict your account, remove the margin and/or options feature, or terminate your account per the Customer Agreement.

    Here’s an example:

    SPY is trading at $279 and the out-of-the-money calls are expiring this week at a strike of $300 and they’re trading at $.01. SPY’s value increasing by 7% or more in just a few days is highly unlikely. However, simply because it’s unlikely, it doesn’t mean there is not a requirement that needs to be met to hold this position.

    Each contract still has a base house requirement. In this case, that requirement would be $5,000.01 (25% of underlying value of $7,000), less the out-of-the-money amount ($2,000), plus the premium ($0.01). So even though the option is unlikely to be assigned, there is still a significant charge to margin per contract and this requirement is expected to be met at the time of trade execution.

  • What happens if an options assignment results in a short position in my account?

    When an option is exercised, the resulting position is maintained in your account until we receive further instructions from you. However, if a position cannot be maintained (for example, if it would result in a short position in a retirement account, or result in an equity level that is below the required minimum, or if there are no shares available for a short sale), we will liquidate the position at your sole risk and will charge you 2 commissions.

    If an option assignment results in a short equity position in your account, you might be charged short interest fees to maintain that position. This is referred to as short position that is “hard to borrow.” In addition, if the short position is not initially hard to borrow, it may subsequently become unavailable or hard to borrow, in which case you are responsible for payment of any and all related fees, including daily short interest fees. When an option is exercised, you will be charged the full aggregate exercise price for any underlying security.

  • What are the risks of day trading options?

    Day trading option strategies, such as spreads, butterflies, or condors, have lower day trade requirements if the positions are opened and closed as the same strategy on the order ticket. Your positions—whenever possible—are paired or grouped as strategies on the same order ticket, which can reduce your margin requirements. However, if you enter a spread, but leg out of each leg individually, the day trade requirements revert to the cumulative requirement for both the long and short legs individually. If you do this, you run the risk of creating a large margin call, so it’s important to close your positions in the same way you opened them.