What is maintenance excess? (2024)

FAQs

What is maintenance excess? ›

Maintenance excess is a realtime number that lets you know the amount of excess cash and equity outside of your maintenance requirement. In short, it can tell you how close you are to a required maintenance margin call. When maintenance excess is positive, then your account is in good standing.

Excess Margin Deposit Example

Assuming a 25% maintenance margin requirement, $12,500 of equity must be kept after opening the account. With $25,000 of equity, there is $12,500 of excess margin above the 25% maintenance margin requirement.

Margin maintenance is the minimum portfolio value (excluding any crypto positions) that you need to prevent a margin call. You always need to keep your portfolio above (i) $2,000 and (ii) your margin maintenance requirement to avoid these types of margin calls.

Excess Price means the difference between (x) the Fair Value on the relevant date and, (y) the exercise price, with respect to a Stock Option, or the base price, with respect to a SAR.

House Excess means in relation to a Service, that part of the Clearing Member Current Collateral Balance maintained by a Clearing Member with the Clearing House on a proprietary basis and for its own account which is in excess of the relevant Total Required Margin Amount.

Maintenance margin is the minimum equity an investor must hold in the margin account after the purchase has been made; it is currently set at 25% of the total value of the securities in a margin account as per Financial Industry Regulatory Authority (FINRA) requirements.

In futures trading, if the account falls below the specified maintenance margin level, then the broker sends the trader a margin call. This informs the trader that they must immediately deposit sufficient funds to bring the account back up to the initial margin level.

You have to determine whether margin investing is consistent with your investment strategy. You should consider your own investment experience, goals, and sensitivity to risk. By enabling margin investing for your brokerage account, Robinhood is not recommending the use of margin investing.

Costs: Robinhood is a true discount broker — although its offerings may not be as robust as some other brokerages, Robinhood has some of the lowest costs in the industry. This includes options trades, which don't carry a contract fee (although options are not currently available in Robinhood's IRAs).

Using borrowed funds to invest can give a major boost to your returns, but it's important to remember that leverage amplifies negative returns too. For most people, buying on margin won't make sense and carries too much risk of permanent losses. It's probably best to leave margin trading to the professionals.

Should I buy at bid or ask price? ›

The ask price is the lowest price that a seller will accept. The difference between the bid and ask prices is called the spread. The higher the spread, the lower the liquidity. A trade will only occur when someone is willing to sell the security at the bid price, or buy it at the ask price.

In addition to triggering capital gains taxes, too much trading activity often leads to returns that are far lower than the returns of a simple buy and hold strategy.

Excess margin is the value of an account—in either cash or securities—that is above the legal minimum required for a margin account or the maintenance requirement of the brokerage firm holding the account.

Many policies include an excess. This is the amount you have to pay if you decide to make a claim on your policy. It's a way of you accepting a small portion of the risk yourself. The amount of the excess is specified in your policy.

Whenever you make a claim on your insurance policy, there may be an additional upfront cost to pay if the provider accepts your claim. This payment is called an 'excess'.

A number of things can affect how much buying power you have, but the basic idea is that you might have cash you've already set aside for another purchase, you might have the ability to borrow money for trades, or you might have some of your buying power tied up in “Margin Requirements”.

The maintenance margin exists to protect brokerage firms from investors defaulting on their loans. Keeping a buffer between the amount of the loan and the value of the account lessens the firm's risk. The risk for brokerage firms is higher when stock prices plummet dramatically.

The initial margin is the amount of cash or collateral an investor must deposit with a broker when buying or selling an asset on margin. In contrast, the maintenance margin is the minimum amount of equity an investor must maintain in their account to keep the account open and avoid a margin call.

If the Margin Level is 100% or less, most trading platforms will not allow you to open new trades.

A failure to promptly meet these demands, known as a margin call, can result in the broker selling off the investor's positions without warning as well as charging any applicable commissions, fees, and interest.

Can you pay off margin loan without selling? ›

You can access cash without having to sell your investments. Pay back your loan by depositing cash or selling securities at any time.

How do I avoid paying Margin Interest? If you don't want to pay margin interest on your trades, you must completely pay for the trades prior to settlement. If you need to withdraw funds, make sure the cash is available for withdrawal without a margin loan to avoid interest.

As with any loan, when you buy securities on margin you have to pay back the money you borrow plus interest, which varies by brokerage firm and the amount of the loan. Margin interest rates are typically lower than those on credit cards and unsecured personal loans.

If you fail to meet your minimums, Robinhood Financial may be forced to sell some or all of your securities, with or without your prior approval. Robinhood Financial charges a standard margin interest rate of 11.75% and a margin interest rate of 7.75% for customers who subscribe to Gold.

Robinhood provides a bare-bones trading experience, making it a poor choice for investors seeking the best trading platform. Also, Robinhood's stock research tools are lacking when compared to $0 commission brokers such as E*TRADE, Charles Schwab, and Fidelity.

Robinhood is good for simple trades, while Fidelity's mobile offering is more comprehensive and a better platform when it comes to the complete mobile trade experience.

Do you actually own the stock on Robinhood? Investors do own the shares of stocks and ETFs purchased on the Robinhood platform. This is the same type of stock ownership you get when you purchase stocks through most other brokerage companies.

Margin accounts let you borrow money using assets in your account as collateral. Getting margin loans and using them to buy stocks won't impact your credit.

If you want to use regular broker margin don't forget those loans can theoretically be called at any time, potentially forcing you to become a forced seller at the exact wrong time. So if you choose that route, make sure to use a very modest amount of margin (like 10% to 20% of the value of your portfolio).

Is margin your profit? ›

The margin is the gross profit divided by the total revenue, which creates a ratio. You can then multiply by 100 to make a percentage. In this formula: Net sales can be used interchangeably with revenue for the sake of this formula — it is simply how much money was generated from selling products, goods, or services.

A trader who wants to buy a stock instantly must place a market order and pay the ask price. However, a buyer who is willing to be patient can place a limit order and set a specified price below the current ask price at which they are willing to buy the stock.

Some real estate professionals suggest offering 1% – 3% more than the asking price to make the offer competitive, while others suggest simply offering a few thousand dollars more than the current highest bid.

At these times, the bid-ask spread is much wider because market makers want to take advantage of—and profit from—it. When securities are increasing in value, investors are willing to pay more, giving market makers the opportunity to charge higher premiums.

Penny Stocks

The vast majority of penny stocks will instead provide you with substantial volatility, unpredictability, and big losses if you are not careful. Stocks that trade on OTC Pink market typically have little working capital and often provide scant information to investors about their financial condition.

There can be many reasons why you are not profitable. It could be discipline issues, psychological factors hurting your trading, or simply having no edge in the markets. Without a trading plan, you will never know what is the cause. But when you have a trading plan you follow religiously, there will only be 2 outcomes.

Margins can never be more than 100 percent, but markups can be 200 percent, 500 percent, or 10,000 percent, depending on the price and the total cost of the offer. The higher your price and the lower your cost, the higher your markup.

A higher gross margin means each $1 of revenue is more valuable to your business. Compare Company A with a 10% gross margin to their competitor Company B with an 80% gross margin. Company A will be able to reinvest 10 cents of every dollar of sales back into the company. Company B will have 80 cents on the dollar.

A margin level of 100% means that the amount of a portfolio's equity and used margin are equal. Equity is the cash available to trade, plus any unrealized profits and losses on open positions.

Who pays the excess? ›

Most policies require that you pay an excess unless the cost of the excess can be recouped from the other driver who caused the accident. So basically if it wasn't your fault and you got the driver who was at fault's details.

If your insurance company have dealt with the claim, they should claim the excess back for you. If you have a no fault accident, a credit hire company can also make a claim on your behalf.

The higher the amount of excess you can pay, the cheaper your premium will be. It suggests you're less likely to make low-value claims and reduces the amount an insurer will have to pay out should you make a claim. If you increase your excess, you must be sure you are able to pay this should you make a claim.

They were equipped with an excess of provisions. The tests found an excess of sodium in his blood. There was an excess of 10 bushels (over what was needed to fill the bin).

In excess of means more than a particular amount.

Why do you pay an excess? Insurers use excesses as a way to make sure that you do not claim for every small loss. They do so not only for their own benefit but for all policyholders to ensure that insurance does not become unaffordable. Insurance should be there for when you cannot afford to pay for a loss yourself.

Buying power, or purchasing power, also depends on the type of account the investor has. If the investor has a margin account, their purchasing power will almost always be greater than the cash value.

Consider investing or buying bonds for long-term savings

These bonds are basically like a certificate of deposit: You put your money in one for a year, and by the end of the year you have a guaranteed rate of return that hopefully stays higher than the current rate of inflation — so your money won't lose value.

After depositing $10,000, you can buy up to $20,000 worth of stock with the typical 50%/25% (initial/maintenance) requirement rates. Let's say you buy $18,000 worth of XYZ. You would need to spend all $10,000 in addition to borrowing $8,000 to make this trade. Your maintenance margin requirements would be $4,500 (25%).

What is a typical maintenance margin? ›

Maintenance Margin Definition

Currently the Financial Industry Regulatory Authority (FINRA) sets the maintenance margin at 25% of the total value of securities that a trader holds in their margin account. Specific brokerage firms also maintain their own requirements.

Trading margin excess refers to the funds remaining in a margin trading account that are available to trade with. In other words, they are the funds left over, presumably after a trader has taken out their positions for the day or the current trading session.

If the brokerage's maintenance margin is 25%, the formula for calculating the account balance that triggers the margin call is as follows: Margin Account Value = ($12,000 Margin Loan) / (1 – 0.25 Maintenance Margin %)

The initial margin is the amount of cash or collateral an investor must deposit with a broker when buying or selling an asset on margin. In contrast, the maintenance margin is the minimum amount of equity an investor must maintain in their account to keep the account open and avoid a margin call.

House maintenance requirement levels are based on the standards set out in Regulation T of the Federal Reserve.

The minimum maintenance for long accounts is 25% equity. Meaning, the equity percent cannot fall below 25% without the investor or broker-dealer moving to remedy the situation. There are three ways to fix a long margin account that falls below minimum maintenance: Investor deposits more money.

Yes, you can withdraw cash from a margin account.

However, it's important to keep in mind your maintenance margin and your interest fees. Some traders will use this in a similar way to take out cash on a credit card - using it to cover immediate costs and then paying it back.

Using a margin loan to amplify your investing power can be an effective way to build wealth, diversify your portfolio and could offer tax benefits as well. However, just as it has the potential to grow your wealth, if stocks go down in value your losses will be amplified as well.

A margin account allows you to have increased buying power. Leverage lets you trade bigger positions than the amount of cash in your account. Leverage and margin have an inverse relationship — the higher the margin requirement, the lower your leverage ratio will be.

What is 20% margin rule? ›

If you wish to buy a certain amount of shares, you must pay the complete margin on it. For instance, if you want to buy 10 shares of Rs. 100 each, and there is a 20% margin on these shares. The entire value of the transaction would be: 10*100 = Rs.

The 50% cash has to be maintained by the broker and not the client. Therefore, the clients need not worry about maintaining minimum 50% cash of the total margin required for the positions. They can easily create positions in F&O by using the collateral limits.