Question about Margin

F

Fate

I was looking at TD Ameritrade margin interest rate and it says 7.25% is the base and an extra 0.5% for the amount I plan to invest. so that would be 8.25%

Do they expect you to pay 8.25% on the amount that you borrowed? As in if your investment grew 10% you would only receive 1.75% of the extra profit?

Interactive Brokers says their rate is 1.58% for margin interest. Does that sound right?

If anyone knows about margin leverage and could clarify this for me I would appreciate it.

I'm thinking about investing some money and willing to accept the extra risk of leverage but am unclear about the percentage of interest charged.
 
The costs of trading are negligible.

Focus on making money with money.

IB can't make money, so they charge you a pittance for the use of their right to let you have margin.
 
Fate said:
I was looking at TD Ameritrade margin interest rate and it says 7.25% is the base and an extra 0.5% for the amount I plan to invest. so that would be 8.25%

Do they expect you to pay 8.25% on the amount that you borrowed? As in if your investment grew 10% you would only receive 1.75% of the extra profit?

Interactive Brokers says their rate is 1.58% for margin interest. Does that sound right?

If anyone knows about margin leverage and could clarify this for me I would appreciate it.

I'm thinking about investing some money and willing to accept the extra risk of leverage but am unclear about the percentage of interest charged.
More...

It is very simple. Let's say you have $250,000 in your account. then you go out and purchase up to $250,000 in stock. Even though you have a margin account, you are not borrowing any money. Then you go out and buy another $100,000 worth of stock. To make good delivery on the stock you bought, your broker will lend you the funds over your equity with your stock as security at the rate they charge. Now let's say the stock goes up in value but 10%. $350,000 + $35,000= $385,000. Now you have the $250,000 in cash plus the unrealized $35,000 in profit plus the borrowed $100,000. Your liquidating equity is now $285,000. Until you sell the stock, you are still borrowing $100,000 from your broker, but now you have more buying power from the profit. You don't pay interest on your profit. You can't use your profit to reduce your borrowing. You can only get rid of the borrowed money buy selling $100,000 worth of stock.

1245
 
jack hershey said:
The costs of trading are negligible.
More...

Yep.

Over 5 grand per year in trading costs in my case, piece of cake.

Some traders spend as much as 50 grand commissions per year or more day-trading/scalping stocks but who cares,

jack hershey said:
Focus on making money with money.
More...

Yep.

Forget about making money with no money, it does not work.

jack hershey said:
IB can't make money, so they charge you a pittance for the use of their right to let you have margin.
More...

Yep.

It's a well-known fact that IB make diddly squat with their brokerage business.

In fact, they are in the non-profit organization business, their brokerage business is just a front.
 
Fate said:
I was looking at TD Ameritrade margin interest rate and it says 7.25% is the base and an extra 0.5% for the amount I plan to invest. so that would be 8.25%

Do they expect you to pay 8.25% on the amount that you borrowed? As in if your investment grew 10% you would only receive 1.75% of the extra profit?

Interactive Brokers says their rate is 1.58% for margin interest. Does that sound right?

If anyone knows about margin leverage and could clarify this for me I would appreciate it.

I'm thinking about investing some money and willing to accept the extra risk of leverage but am unclear about the percentage of interest charged.
More...
Your understanding is correct. IB's margin rates are much much lower than any of the retail brokerages, and they drop for higher margin balances. For example, over $1M in margin balance, IB charges 0.58% on the marginal dollars borrowed. When I have a sufficiently good opportunity, I have made use of this and it has made me lots of money. The retail rates of 8% or whatever are ridiculous in an age of zero cost Fed money, but most retail day traders don't notice or care. I have spoken to several retail firms and they are willing to negotiate down to 2-4% if you're a good customer and intend to carry a large margin balance. The risk is almost nothing for them anyway, at least if their risk department is doing their job (since they can sell you out of your positions if you start to lose money).

Remember leverage cuts both ways - make sure you've got your risks under control before you start borrowing.
 
Does anyone know any regulated firm that represents"margin account" or "leverage" to CME future trading ? ( as far as i know only stock trading firms represents margin accounts)
if yes,how much s leverage in both futures and stocks ? is prop trading(those firms that need deposit) same as a highly leveraged margin account ?
 
Commodity_Trader said:
Does anyone know any regulated firm that represents"margin account" or "leverage" to CME future trading ? ( as far as i know only stock trading firms represents margin accounts)
if yes,how much s leverage in both futures and stocks ? is prop trading(those firms that need deposit) same as a highly leveraged margin account ?
More...

Some FCMs offer reduced margin for daytrading. Why would you want a prop account?
 
1245 said:
Some FCMs offer reduced margin for daytrading. Why would you want a prop account?
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i googled the expression "reduced margin" but i couldn't find any future trading.i want more buying power than i have right now because i'm intraday trend follower .
 
Commodity_Trader said:
i googled the expression "reduced margin" but i couldn't find any future trading.i want more buying power than i have right now because i'm intraday trend follower .
More...

Google will not tell you everything. Providing 50% of CME margin for daytrading futures is quite common. I have heard of some offering 25%. You will have to call and ask. FCMs prefer day traders because in addition to lower risk, they don't have to put up their own capital. When you trade with over night positions, they have to put up 8% of your SPAN margin out of their capital, for risk.
 
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