Margin Loans

What is a Margin Account?
A Margin Account allows you to borrow cash from Firstrade to purchase securities. The loan in the account is collateralized by the securities you purchase. If the value of the stock drops sufficiently, the account holder will be required to deposit more cash or sell a portion of the securities.

What can I do with a Margin Account? Why do I need a Margin Account?
Certain trading behaviors are allowed only in Margin Accounts, such as Short-selling, Day Trading and the use of unsettled funds. A Margin Account provides you with more financial flexibility along with a low interest rate. Learn more about the benefits of having a Margin Account.

No extra interest or fees will be charged if you do not borrow money from Firstrade or exceed your cash buying power.

Are there any fees for applying for or maintaining a Margin Account?
No. Applying for and maintaining a Margin Account is completely free. You don't need to pay any fees or interest as long as you don’t borrow.

Some interest will be charged once you use your Margin Buying Power to purchase securities or withdraw cash. See our competitive margin interest rates.

How do I apply for Margin Privileges?

  • STEP 1: Make sure you understand the risks and benefits of using margin.
  • STEP 2: Have at least $2,000 in assets in your account.
  • STEP 3: Complete the Margin Application & Agreement Form and send it to Firstrade by fax (1-718-961-3919), email or mail (Firstrade Securities Inc., 30-50 Whitestone Expwy., Ste. A301, Flushing, NY 11354).
  • STEP 4: Once your Margin Account is approved, you can start enjoying the benefits and flexibility of margin borrowing. You can also refer to our Margin Education section for more information about margin trading.

What are Firstrade’s Margin interest rates? How is the interest calculated?
Firstrade offers margin interest rates as low as 5% APR. For detailed margin interest rates, please refer to our margin interest rates page.

Margin interest is calculated monthly and is posted to your account monthly.

Can I have a Margin Account without borrowing any money or paying interest?
Yes, you don’t have to pay any interest as long as you don’t borrow. You can enjoy more features without being charged extra when you utilize a Margin Account.

Why are my positions and cash in a Margin Account when I did not borrow any money? Will I get charged for this?
Once you have a Margin Account, your cash account balance will appear in your margin account. This does not mean that you have borrowed any money. As long as you do not exceed your Cash Buying Power, you won’t be charged any interest.

What is a Good Faith Violation?
Good Faith Violations occur when the purchase of a security is made using funds that have yet to settle in the account. Trades placed in a cash account require 2 business days for the funds to settle before they can be used again to buy and sell.

Each account is allowed to have up to 3 Good Faith Violations per 12 month rolling period before the account is placed on a 90-day restriction on the 4th strike. Each Good Faith Violation will automatically expire after 12 months from the violation date.

Why is my Cash Account restricted to “Viewing only” mode?
Cash accounts are placed on a 90-day Restriction when the account triggers a Good Faith Violation for the 4th time within 12 months.

Once the account is placed under a 90-day restriction, the account can only use settled funds to place a buy order.

How do I avoid a Good Faith Violation?
Trades placed using a Margin Account do not require 2 business days for the funds to settle, therefore you can avoid a Good Faith Violation simply by applying for a Margin Account.

What can I do to remove a 90-day Restriction on my account?
If funds are received on or before T+5 of the offending purchase, the restriction may be lifted.

What is my Margin Buying Power?
Your Margin Buying Power is automatically calculated and posted to your account. Just log in to your Firstrade account, go to "My Accounts" and then click on the "Balance" tab and you will be able to find your buying power on the right. If you would like to know more about how to calculate your Margin Buying Power, please click here for an illustration.

What is a Margin Call?
A Margin Call occurs when you fail to maintain the ratio of your own equity above the minimum margin requirements. You will have to deposit funds or sell part of your positions to cover the call within 3 business days.

What happens when I receive a Margin Call? What do I have to do?
When you receive a Margin Call, you will get an email from Firstrade informing you of the amount of your Call. You can also find Margin Call notifications under the Buying Power section of the Balance page when you log in to your account.

You will have to either deposit at least the exact amount of the Call to your account or sell stocks to cover the Call. If you choose to sell positions, the amount you need to sell has to be equal to or larger than the Call amount divided by the minimum maintenance margin requirement.

For example, if you have a $1,000 Margin Call and the minimum maintenance margin requirement of your position is 30%. You may either deposit $1,000 in cash or sell $1,000/30% = 3333.3 worth of stocks.

Why were my positions sold/liquidated without my permission?
Firstrade has the right to sell your positions to cover the call when you fail to cover the Margin Call within 3 business days.

What happens if I am not able to cover a Margin Call?
Once you receive a Margin Call, you will have to cover the call within 3 business days or Firstrade has the right to liquidate your positions to cover the call.

Why am I getting Margin Calls when the value of my positions did not drop?

Usually a Margin Call occurs when the market value of your marginable positions drop and you failed to keep your equity above the minimum maintenance requirement.

But there are cases wherein the value of your positions goes up and you still receive a Margin Call. The reason is that even though you have multiple positions in your account, your account becomes concentrated if the value of one of your positions is over 60% of the market value of your marginable securities. Please go to the Margin Call scenario page for a detailed illustration.

Why was I charged a $25 “mail gram” fee?
A $25 mail gram fee is charged when a Margin Call notice is sent to you by mail. When a Margin Call occurs in your account, you will be charged the $25 mail gram fee.

Why can’t I do Day Trades?
Once an investor is listed as a Pattern Day Trader, he/she can no longer day trade if the total assets in his/her Margin Account are under $25,000. You may log in to your Firstrade account, go to My Account > Profile > Account Status to check if you are listed as a Pattern Day Trader.

What is a Pattern Day Trader?
An investor is listed as a Pattern Day Trader when he/she executes 4 or more round-trip day trades in any 5 successive business days and these same-day trades make up at least 6% of his/her total trading activity for that period.

What happens if I am coded as a Pattern Day Trader?
Once an investor is listed as a Pattern Day Trader, he/she will need to maintain assets in the account above $25,000 in order to day trade. If the assets fall below $25,000, no day trades will be allowed in the account.


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