Margin buying power is the maximum value of margin-eligible securities you can purchase in a margin account using your own money plus funds borrowed from your broker.
Updated. If your brokerage account shows $20,000 in margin buying power, you may be able to place purchases totaling up to $20,000. The actual amount depends on your broker's requirements, the security's eligibility and your available account equity. Using that buying power can create a margin loan, which incurs interest and exposes you to margin calls.
Margin Buying Power at a Glance
| Term | Meaning |
|---|---|
| Margin buying power | The amount you can use to buy eligible securities while borrowing against your account |
| Cash buying power | The amount available without creating a margin loan |
| Margin loan | Money borrowed from your broker to help pay for securities |
| Maintenance margin | The minimum account equity you must maintain after buying on margin |
| Margin call | A demand for additional cash or securities when your account falls below required levels |
How Does Margin Buying Power Work?
A margin account lets a broker lend you money using securities in your account as collateral. Your margin buying power can reflect:
- Cash in the account
- The loan value of marginable securities
- Existing margin loans
- Open orders and unsettled transactions
- The broker's initial and maintenance margin requirements
- The security you want to purchase
The calculation varies by broker. Fidelity, for example, defines margin buying power as the amount available to purchase marginable securities using cash and margin. Fidelity also warns that the displayed amount may assume the broker's lowest applicable house requirement.
Example of Margin Buying Power
Suppose you deposit $10,000 into a margin account and want to buy a fully marginable stock.
Under the standard Regulation T framework, a broker may generally lend up to 50% of the purchase price for a new margin purchase:
| Item | Amount |
|---|---|
| Your cash contribution | $10,000 |
| Broker loan | $10,000 |
| Total purchase | $20,000 |
| Margin buying power | Approximately $20,000 |
The $10,000 borrowed from the broker becomes a margin loan. You pay interest on that loan, and the securities serve as collateral. Federal and FINRA rules establish baseline requirements, but brokers can impose stricter house requirements.
Is Margin Buying Power the Same as Cash?
No. Margin buying power is not the same as cash buying power.
Cash buying power is the amount you can use without borrowing. Margin buying power includes the amount you could spend by creating or increasing a margin loan.
For example:
- Cash available: $5,000
- Margin buying power: $10,000
- Potential margin loan: Approximately $5,000
If you spend the full $10,000, you may pay margin interest. The purchase can also reduce your available margin cushion and leave the account more exposed to a margin call.
A brokerage platform may show separate balances for:
- Cash available to trade
- Non-margin buying power
- Margin buying power
- Intraday buying power
- Buying power for options or other securities
These balances are not interchangeable. Their labels and calculations vary by broker.
What Happens When You Use Margin Buying Power?
When you use margin buying power:
- You purchase securities with your account equity and borrowed money.
- The broker records the borrowed amount as a margin debit.
- Interest accrues on the margin loan.
- Your account value changes as the securities rise or fall.
- The broker may require additional funds if your equity falls below the maintenance requirement.
A margin account can increase gains because you control more securities with less of your own capital. It also magnifies losses. The SEC warns that investors can lose more than they initially invested, may have to deposit additional funds and may have securities sold without advance notice if the account falls below required levels.
What Is Maintenance Margin?
Maintenance margin is the minimum percentage of account equity you must maintain after buying securities on margin.
FINRA rules require a maintenance level of at least 25% for applicable margin securities, although many brokerage firms impose higher requirements, commonly 30% to 40% or more. Brokers may also set higher requirements for volatile, concentrated, low-priced or otherwise risky securities.
Assume:
- Securities value: $20,000
- Margin loan: $10,000
- Account equity: $10,000
- Broker maintenance requirement: 30%
The account must maintain at least $6,000 in equity because 30% of $20,000 equals $6,000. If falling prices reduce equity below that amount, the broker may issue a margin call or sell securities to reduce the loan.
Can Margin Buying Power Change?
Yes. Margin buying power changes as account values, loans, open orders and broker requirements change.
Your buying power may decrease when:
- A security in your account falls in value
- You place or execute a purchase
- You increase your margin loan
- Your broker raises its house margin requirement
- You hold a security with a higher risk requirement
- An open order reserves part of your available buying power
Your buying power may increase when:
- You deposit cash or eligible securities
- You sell securities
- You repay a margin loan
- Securities in your account rise in value
Relying on market gains to increase buying power adds risk because those gains can disappear when prices fall.
Is Using All Your Margin Buying Power a Good Idea?
Usually, no. Using the full displayed amount leaves little protection against market declines, interest costs and changes to broker requirements.
Before using margin, check:
- The broker's current margin interest rate
- The security's margin requirement
- The maintenance margin requirement
- The size of the potential margin loan
- How much cash you could add if the investment declines
- Whether the broker can liquidate positions without contacting you first
Margin buying power is a borrowing limit, not free cash. Leave a buffer below the displayed maximum and avoid borrowing more than you could repay without selling investments at an unfavorable time. FINRA states that a margin call can result from trading beyond available buying power, a decline in account value or an increase in the broker's house requirements.
Treat the displayed figure as a ceiling, not a target.