## Margin Loans

Margin Buying Power is the amount of money an investor has available to buy securities in a margin account. It is the total cash held by the investor in a brokerage account plus the maximum margin available to him/her. At Firstrade, an investor’s margin buying power is usually twice as much as their own equity.

How is margin buying power calculated?

Example 1.) You have \$10,000 worth of cash in your account and you wish to purchase ABC stock on margin. ABC stock has a 50% initial margin requirement, therefore your margin buying power is as follows:

Example 2.) You have \$10,000 worth of ABC stock bought using \$7,000 in cash and \$3,000 on margin. Now you would like to buy XYZ stock (with a regular 50% initial margin requirement) on margin, how much is your margin buying power?

Although the initial margin requirement of ABC stock is 50%, the maintenance margin requirement of ABC is 30%.
\$10,000 * (100%-30%) = \$7,000 → the maximum amount you are eligible to borrow.

\$7,000 - \$3,000 = \$4,000
→ Now you have used \$3,000 of the available margin, your current available margin becomes \$4,000, which is also your cash buying power.

\$4,000 / 50% = \$8000 → the margin buying power for purchasing XYZ stock.

Example 3.) You have \$10,000 worth of ABC stock bought using \$7,000 in cash and \$3,000 on margin. Now you would like to buy XXX stock (with a 75% margin requirement) on margin, how much is your margin buying power?

Although the initial margin requirement of ABC stock is 50%, the maintenance margin requirement of ABC is 30%.
\$10,000 * (100%-30%) = \$7,000 → the maximum amount you are eligible to borrow.

\$7,000 - \$3,000 = \$4,000
→ Now you have used \$3,000 of the available margin, your current available margin becomes \$4,000 which is also your cash buying power.

\$4,000 / 75% = \$5,333.33 → the margin buying power for purchasing XXX stock.