Trading FAQs: Margin

You can use these securities as collateral for margin borrowing:

• Most equities* trading over $3 a share
• Mutual funds and ETFs that have been held for at least 30 days
• Treasury, corporate, municipal, and government agency bonds

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.

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.

View important information about using margin (PDF)

A margin call lets you know that your account is below levels required to support the loan, and you need to take action to increase your equity in order to maintain access to buying power and to create margin loans. To meet a margin call, you may need to deposit more money or marginable securities in your account or liquidate a position. There are more ways to meet a margin call; learn more about meeting and avoiding margin calls in the Learning Center.

Margin calls can be triggered for several reasons:

• Your account has dropped in value due to the value of your holding(s).
• Your account has dropped in value because you have withdrawn cash or securities from your account, so you no longer have enough account equity to meet the margin requirement. 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 on an existing margin loan, and may increase the risk of a margin call.
• When trading some securities, such as low-priced or volatile stocks, or trading in certain situations, such as in advance of corporate earnings announcements or corporate actions.
• When day trading non-marginable securities or securities that are not fully marginable with intraday buying power. See below for more about margin and day trading.
• When the underlying position on an option moves against you. See below for more about margin and options trading.

Margin calls are due immediately and can be covered in the following ways:

• You may deposit cash to cover the call.
• You may transfer marginable securities to cover the call.
• You may liquidate securities in your account to cover the call.

It's your responsibility to monitor your account and act when necessary. By covering the margin call immediately, you reduce the probability of account liquidation and have more control over your investments.

Sign up for text alertsLog In Required so you'll always be aware of your margin obligations.

If you experience repeated account liquidations, Fidelity can restrict your account, remove the margin feature, or terminate your account per the Customer Agreement (PDF).

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.

Use the Margin CalculatorLog In Required to enter hypothetical transactions and see their impact on your margin availability. (A link for this tool will also appear on your Balances screen under Margin > Calculator.)

The Hypothetical Transaction tool in the Margin Calculator enables you to simulate deposits as well as stock and option trades before you place them. This enables you to see the potential impact on your margin balances and margin requirements. It will help you to:

• Determine how many shares you may purchase of a particular security without triggering a margin call.
• 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.

Margin with debt protection (MDP) is a feature that can help keep you from incurring margin interest and avoid trading violations while you actively trade.

When this feature is enabled, the security margin requirements will be set at 100%, eliminating available leverage. If you attempt to buy a security that exceeds your balance available to trade, you will receive an error message letting you know that the account cannot support this trade.

Only posted cash or settled proceeds of fully paid-for securities qualify as "settled funds." MDP allows for trading on unsettled funds without having to worry about trading violations like good faith violations. 

Even with the MDP feature enabled, there are still some scenarios where you could incur a margin debit balance. For example, if you make a deposit and the deposit “bounces” after trading on the funds, or if you transfer in a debt from another firm. MDP simply helps ensure that you won't place a trade that may directly cause a margin debit. 

Read more about margin with debt protection in the Learning Center.

You can enable and disable Margin with Debt Protection (MDP) using the Account Features screen on Fidelity.com, Fidelity Mobile, and Active Trader Pro. MDP can be enabled if the account meets the following requirements:

• The account is eligible for margin (or already has it enabled).
• The account does not have a debit balance.
• The account does not have options tier 2 or higher. (Note: If you apply for Options tier 2 or 3 with MDP enabled, you will be informed that this options level requires the full margin capability and, by applying for this level of options, you are also disabling MDP.)
• The account does not hold a short equity position.

You can switch from MDP back to margin on the same Account Features screen. This returns the account to a full margin account with normal margin requirements, normal margin balance views, and the ability to trade using margin.

Use this same screen to remove margin from your account altogether and go back to cash trading.

Your buying power is the maximum amount of money you can use to buy securities at a given point in time. This amount is determined by adding the total cash plus the loan value of marginable securities you have in your account. As security values fluctuate, so does your buying power.

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 (that you will be charged interest on) 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 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 CalculatorLog In Required 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 CalculatorLog In Required or understand the security-specific margin requirements first, your account may generate a house call.

Intraday buying power:
Intraday buying power applies to pattern day traders. For detailed information, see "Day trading" below.

When you're ready to start trading on margin, it's important to understand how to read your margin balances. View a video to learn more (1:15)

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 meet day trade margin calls.  

To learn if you're classified as a day trader, 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.

Watch the pattern day trading video in the Learning Center.

Once your account is considered a pattern day trading account, that designation is permanent, although you may request a one-time removal in certain cases. This can be done by selecting the pattern day trader designation link on your Balances page to review if you are eligible for the one-time removal.

If you're planning to open and close a position in the same trading day, use your intraday buying power. Using the intraday buying power balance to open a position and hold it overnight increases the likelihood that a margin call will be issued and be due immediately.

If you're unsure whether you'll close a position or several positions in the same trading session, use the Margin CalculatorLog In Required and use your margin buying power balance.

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 (PDF).

The intraday buying power balance is typically used for fully marginable securities in ordinary market conditions. Please note that some securities can have higher day trade requirements.

Fidelity monitors accounts and reviews them 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.

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), NYSE (exchange requirement), and your broker (house requirement). Generally, the Fed requirement is 50% for both short and long positions, and the exchange requirement is 25% for long positions and 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.

Example:
Double-leveraged ETFs will have double the exchange requirement for long positions, which means they have a 50% Federal, exchange, and house requirement on long positions and 60% on short positions. Triple-leveraged ETFs have a 75% Federal, exchange, and house requirement; 90% on short positions. 4x-leveraged ETFs have a 100% Federal, exchange, and house requirement.

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. It's known as the Reg T, or the Fed requirement, and it's set by the Federal Reserve Board.

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 New York Stock Exchange (NYSE), the Financial Industry Regulatory Authority (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 (RBRs). RBRs apply 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.

Maintenance requirements are calculated using RBRs added to the base requirements. A majority of securities have base requirements of 30% long side and 35% short side. There may be instances where securities have higher base requirements. Some examples are distressed sectors, distressed issuers, and leveraged ETFs.

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.

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. Once your account is considered a pattern day trading account, that designation is permanent, although you may request a one-time removal in certain cases.

Spreads: To hold spreads, you must maintain $10,000 in total account value (including all account positions less any debit balance) and $2,000 in margin equity, because pairing spreads is a function of margin.

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

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 CalculatorLog In Required.

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 additional rules-based requirements (RBRs) as well as the base requirements.

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.

For 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 two, 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.

Fidelity, as well as other broker dealers, has the right to modify the maintenance requirements on specific securities and individual customer accounts. RBRs are applied to accounts with a position in a margin or short account. RBRs are applied to stocks, corporate bonds, municipal bonds, Treasuries, options, and preferred stock. RBRs examine individual accounts and calculate 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 with total shares outstanding of the issuer

Margin requirements differ based on the composition of your account and the type of security in question. Please refer to the table below for details.

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

• 30% long side
• 35% short side

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

Issuer (position) concentration
The market value of a position as a percentage of the account's gross market value (position market value/portfolio gross market value)

Long positions

Short positions

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

Long side

Short side

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

Industry Concentration
The net market value of position(s) in the global industry classification standard (GICS) as a percentage of the account's gross market value (net market value in each GICS subsector/gross market value)

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%.

Corporate Bonds

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

Concentration add-on
The aggregate issuer net market value as a percentage 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.

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

Treasuries

Preferred Stock

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

Please see the table below to understand the different types of balances used for trading options.

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.

Because there are potentially significant risks, 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 (PDF).

Consider this example: QRST 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 $0.01. QRST's value increasing by 7% or more in just a few days is highly unlikely.

For any options position in your account, you're responsible for ensuring that your account can support the requirements.

Each contract still has a base house requirement. In this case, that requirement would be $4,876.

Starting with 25% of the underlying value of ($279 x 100) = $6,975

Minus the out-of-the-money amount (the difference between the current price $279 and the strike price $300) so ($21 x 100) = $2,100

Plus the premium ($0.01 x 100) = $1

= $4876

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.

If an options 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 a 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. Information on the current charges for any hard-to-borrow securities can be found on the Positions tab underneath the short position.

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, result in an equity level that is below the required minimum, create a debit balance in a non-margin account, or if there are no shares available for a short sale), we will liquidate all or a portion of the position at your sole risk and will charge an additional commission on the liquidation.

When an option is exercised, you will be charged the full aggregate exercise price for any underlying security.

A day trade call may be created when you exceed your intraday buying power when day trading option strategies, such as spreads, butterflies, or condors. Keep in mind that these may have lower day trade requirements if the positions are opened and closed as the same strategy on the order ticket. 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. For reduced day trade requirements, it is important to close intraday positions in the same way you opened them.

Margin requirements for covered and uncovered positions are enumerated in the table below. Remember that covered means having cash or securities to cover the position if needed; uncovered, also known as naked, means that you don't have cash or securities to cover the position.

Covered Options Margin Requirements:

Uncovered options margin requirements

If you're looking to place uncovered options trades, you must have a margin agreement and be approved for the appropriate options tier:

• Tier 3 for equity
• Tier 3 for index

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

Equity calls: The higher of the following requirements:

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

Index calls: The higher of the following requirements:

• Broad-based indexes (e.g., S&P 500):
  • 20% of the underlying value, minus the out-of-the-money amount, plus the premium, or
  • 15% of the underlying value plus the premium.

• Narrow-based indexes (e.g., industry-specific indexes):
  • 25% of the underlying value, minus the out-of-the-money amount, plus the premium, or
  • 15% of the underlying value plus the premium.

Index puts: The higher of the following requirements:

• Broad-based indexes (e.g., S&P 500):
  • 20% of the underlying value, minus the out-of-the-money amount, plus the premium, or
  • 15% of the strike price 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, or
  • 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
• Tier 2 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:

• Tier 1 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 options positions as well as low-market-cap securities may have concentration add-ons over 30%.