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Margin Trading

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What is margin trading?

Margin trading allows Axos Elite members to access funds without having to liquidate assets. Instead, you use your portfolio as collateral for a loan, as long as you have the required $2,000 minimum balance in account equity. This increased buying power lets you take advantage of potential market opportunities when they arise.

Margin loans can also be used to access cash from your account to pay another expense. Like any loan, you repay the amount borrowed with interest. While margin can provide increased purchasing power or cash out without selling securities, it is important to understand the risks before getting started.

What is margin trading, and is it right for you? To answer that, first consider this analogy. Margin trading is to self-directed investing as flying the space shuttle is to piloting a plane. In other words, the rewards can be out of this world, but the risks and necessary skill are also exponentially higher. Let's explore why. Margin trading essentially involves borrowing money to invest in stocks or ETFs using your cash or equities as collateral. The benefit is the ability to expand your buying power with the potential to increase your profits, assuming your stocks or ETFs appreciate. But the opposite can also be true if the market behaves unexpectedly. Then you're out not only the amount of your loan, but your own money as well. Here's a simple example. With stocks selling for $50 per share and $5,000 in your account, you could afford up to 100 shares with a straight stock purchase. But with a margin account, you could have up to $5,000 of additional buying power, $10,000 total, and by an additional 100 shares. Stocks increase, let's say to $60 per share. Your stock is now worth $12,000. Even with paying back the $5,000 plus interest, you're still ahead and leveraged extra buying power. Stocks decrease, let's say to $40 per share. It's now worth $8,000 and you still have to pay back the $5,000 in margin plus interest. As you can see, margin trading has potential for profit and losses. You will need to have more capacity for risk, more market research, additional resources in case your loan becomes due, and a commitment to keep your eyes on the market so you can quickly respond as things change. Still interested? Explore our resource on getting started with margin trading and then do your own research so you're fully informed of the risks and liabilities.

Margin trading gives Axos Elite members the opportunity to:

green checkmark Borrow at a competitive 5.5% rate*.
green checkmark Purchase more securities than your available cash balance.
green checkmark Secure a line of credit with the potential for repayment flexibility based on the required level of account equity.

* Subject to change without notice
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Greater power comes with greater responsibility.

Margin trading increases your potential investing power but has additional risks. Before starting with any margin trading service against your portfolio, you should take the time to understand your responsibilities.

dollar sign with arrow icon Covering Losses

Margin calls can require you to deposit additional cash or securities or liquidate securities in your portfolio as coverage.

exclamation mark icon Paying Interest

You will need to pay interest costs associated with using margin lending.

warning sign icon Loss Risk

Margin lending includes a risk of greater loss than return, which could include your entire investment – or more.

coin in hand icon Loan Repayment

Like any loan, margin must be repaid regardless of the value of the securities purchased with the funds.

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How margin trading works.

This margin trading example shows how to purchase 100 shares of a $50 stock on margin:

You invest $2,500 of your funds
You borrow $2,500 on margin
Total stock purchase $5,000
Gain example Loss example
Rises to $60 Falls to $40
New value for
$6,000 $4,000
($2,500) ($2,500)
Value remaining
after repayment
(Profit $1,000)
(Loss $1,000)
Stock Performance Rises to $60
New Value for 100 Shares $6,000
Repayment Amount* ($2,500)
Value Remaining After Repayment $3,500 (Profit $1,000)
Stock Performance Falls to $40
New Value for 100 Shares $4,000
Repayment Amount* ($2,500)
Value Remaining After Repayment $1,500 (Loss $1,000)

**Excluding interest and fees, amounts presented for purchase are based on initial purchase amounts. Market activity (gains or losses) are truly hypothetical in nature.

You can apply for margin lending on your account, but please note that margin lending is subject to approval.

Get margin trading with Axos Elite.

Want a hands-off approach? Check out Managed Portfolios.