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41 votes
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Should I invest on margin?

Are you prepared to meet margin calls? If the value of your holding falls enough that you drop below the minimum maintenance margin, the broker can demand that you add additional assets to bring ...
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24 votes

How badly will my credit score be affected if I don't pay back a small margin debt?

Credit scores are not completely transparent, but when I look at my score there's no mention of the magnitude of any events. Truthfully I have no bad events but the only indication is a count (0), not ...
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  • 113k
21 votes

Should I invest on margin?

Well one thing you seemed to not have considered, basing your returns purely on past average returns over 30 years, is that if there is a downturn within your 5 years or so of investing, you may not ...
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  • 20.8k
20 votes

How badly will my credit score be affected if I don't pay back a small margin debt?

Just open another bank account with a different institution. Walk in, sit down, leave with a new bank account and routing number. (You may be able to do this online with some institutions, but either ...
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  • 20.1k
17 votes

How does losing money (under margin) work?

To put it very simply, a 10X leverage means that if your asset drops 10% you have lost 100% of your money. ABC (whatever the target asset) trades at 10,000. If you only put up 1,000, a 10% drop wipes ...
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12 votes

How does losing money (under margin) work?

With margin you always owe what you borrowed. The gain or loss is all yours. To buy $20,000 worth of Bitcoin you supplied $2000 and borrowed $18,000. The Bitcoin is now worth $19,000 and you still owe ...
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  • 5,260
11 votes

Should I invest on margin?

Are there factors I haven't considered? Margin calls. Your reasoning is all very logical. The issue is when (not if, when) your investment drops such that some needs to be sold or you need to wire ...
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  • 48.4k
11 votes
Accepted

How does losing money (under margin) work?

10x leverage means your profits are 10 times more and your losses are 10 times more. So imagine what your profit or loss would have been if you didn't have any leverage. If you would have made $100 ...
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11 votes

How does a margin account help with debt consolidation?

A margin account is effectively debt that is secured against your investments. In general, debt is the cheapest when it is secured against your assets [ie: the lender has the legal right to liquidate ...
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9 votes

How do brokers make money from margin accounts?

They will make money from brokerage as usual and also from the interest they charge you for lending you the money for you to buy your shares on margin. In other words you will be paying interest on ...
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  • 20.8k
8 votes

Should I invest on margin?

In a sense, margin leverages losses more than gains. This is related to the dreaded margin call. If you invest with 2x leverage, and your stocks fall 25%, you will be forced to liquidate with a loss ...
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  • 28.1k
7 votes

Why is a margin account required for limited risk spreads?

The spread is two trades, one of which opens up some risk one of which limits/cancels the risk. There is nothing stopping you from selling part of the spread opening the door to the risk. You're ...
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  • 48.4k
7 votes

I was denied a margin account for being unemployed, what should I do?

Put more money into the account. You have to demonstrate that you have the cash to back your bets. If you don't have the money, and you're unemployed, then what are you doing messing around with a ...
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  • 183
7 votes

What is the actual reason the short sellers of GME can't just hold their positions until the price goes back to normal?

You're conflating several issues and assuming that one is better than the other. OK, one by one: The daily interest cost is the borrow rate times the price of the stock. Perhaps yesterday, GME's ...
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  • 73.6k
7 votes

Can (did already) the GME-related hedge funds cover the $5 billion?

The losses may be $5 billion but it's possible that not all of the losses have been realized and some of it is still on paper (some of the short positions are still open) - likely ones added later on ...
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  • 73.6k
7 votes
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What is the difference between margin trading and short selling?

Although margin trading and short selling have in common the concept of borrowing something, they are distinct trading concepts with vastly different outcomes and risk profiles — primarily because the ...
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  • 31.4k
6 votes

Why do some stocks have a higher margin requirement?

It is a question of how volatile the stock is perceived to be, its beta correlation to the S&P500 or other index. Margin requirements are derived from the Federal Reserve, Self Regulatory ...
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  • 20.1k
6 votes
Accepted

Why are vertical option spreads level 3, requiring margin?

If the short leg is assigned early, the broker cannot immediately exercise the other leg, because the assignment notification process occurs overnight. The offsetting exercise obtains the needed cash ...
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  • 28.1k
5 votes

How do brokers make money from margin accounts?

Your broker will charge you commissions and debit interest on your "overdraft" of $30,000. However it is very likely that your contract with the broker also contains a rehypothecation clause which ...
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  • 1,682
5 votes

Should I invest on margin?

Margin is a double edged sword. On 50% margin, it's twice as good to the upside and twice as bad to the downside. To succeed with it, you need several ingredients. First and foremost, you need a ...
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  • 73.6k
5 votes

What is the actual reason the short sellers of GME can't just hold their positions until the price goes back to normal?

Your question assumes that eventually "the price goes back to normal". There is no guarantee that will happen. Short sellers have experienced large losses but also an increase in the risk of ...
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  • 28.1k
5 votes
Accepted

Operating Margin depends on Revenue?

If a company sees increased demand and can handle it with existing employees, capital and expenses, then it certainly has increased its efficiency (the same resources are producing more revenue). Thus ...
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5 votes

How badly will my credit score be affected if I don't pay back a small margin debt?

ANY unpaid debt is negative for your credit. That being said, there are so many different scoring models, even by the same bureau, that it's virtually impossible to assess the consequences. Some ...
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  • 5,262
4 votes
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How Does A Special Memorandum Account Work

Here is another explanation of an SMA. SMA refers to the Special Memorandum Account which represents neither equity nor cash but rather a line of credit created when the market value of securities in ...
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4 votes
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Gold futures' margin

The initial margin is $5940 and maintenance margin $5400. A simple search of Comex Gold Margin gives the CME group site. You then need to specify CMX metals to see the margins. Gold is currently ...
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4 votes
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Forex & CFDs good profits, but why?

This was all luck, that amount of leverage will destroy your account in a single bad trade. You profit is way less than it should be because you are getting killed on fees. Take a look at the ...
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  • 20.1k

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